The 2026-27 budget posts a HK$2.9 billion surplus driven by stock market gains, but the spending priorities reveal a city being systematically reoriented toward mainland Chinese economic directives
Hong Kong Records First Budget Surplus Since 2021
Financial Secretary Paul Chan delivered the 2026-27 Hong Kong budget on February 25, 2026, announcing an expected consolidated surplus of HK$2.9 billion for the 2025-26 fiscal year. It was the city’s first surplus since 2021-22, reversing a previously projected deficit of HK$67 billion. The turnaround was driven largely by stamp duties and profits taxes generated by the booming stock market. Fiscal reserves are forecast at HK$657.2 billion as of March 31, 2026. The budget included major investment commitments: HK$10 billion for Northern Metropolis development near the mainland border, a HK$10 billion Innovation and Technology Industry-Oriented Fund, HK$1.66 billion for the Tourism Board, HK$50 million for AI education programs, and HK$100 million for government digital transformation.
Reading Between the Budget Lines
KPMG’s assessment praised the budget for proposing “a clear vision for technology-driven growth” and noted positively that the government had adopted recommendations to enhance fund and family office tax incentives, recognize digital assets as eligible investments, and strengthen corporate treasury centre frameworks. These are genuine improvements to Hong Kong’s financial policy toolkit. But the budget’s most revealing quality is its investment geography. Virtually every major infrastructure commitment points north, toward the mainland border and into the Greater Bay Area integration framework. The Northern Metropolis development is not merely a Hong Kong housing project — it is explicitly designed as a manufacturing, technology, and research corridor linking Hong Kong to Shenzhen and the broader mainland economy. The HK$10 billion San Tin Technopole, the Hung Shui Kiu Industry Park, the Hetao Co-operation Zone — these are projects designed by Beijing’s planners as much as by Hong Kong’s.
Tax Incentives: Genuine Reform or Competitive Necessity?
The budget enhances tax incentives for research and development, expands the categories of assets eligible for fund management concessions, and proposes new support for corporate treasury centres. These are substantive measures. They are also, in significant part, defensive responses to competition from Singapore, which has been aggressively attracting the international financial talent and institutional money that has left Hong Kong since 2020. The question KPMG and other advisers do not ask publicly is whether tax incentives can substitute for the rule of law, judicial independence, and press freedom that historically gave Hong Kong its international premium over other Asian financial centres. Singapore competes by offering a genuinely neutral legal environment. Hong Kong’s competitive offer has narrowed to financial incentives in a system where regulatory intervention by Beijing-aligned authorities is an acknowledged risk.
What the Budget Ignores Entirely
There is no line item in the 2026-27 budget for rebuilding civil society. There is no allocation for supporting independent journalism. There is no mention of the mass emigration that has removed tens of thousands of Hong Kong’s most internationally mobile, educated, and entrepreneurially ambitious citizens since 2020. The budget’s housing section projects annual private residential completions of 17,000 units and plans 196,000 public housing units over five years. These are supply numbers that in a normal environment would address affordability challenges. In the current environment, they also reflect a city whose population dynamics have been transformed by political emigration at a scale the government has never publicly acknowledged or addressed. The IMF Hong Kong economic assessment provides independent analysis of fiscal trends. The World Bank Hong Kong data portal tracks key economic indicators over time. The KPMG budget summary offers a detailed breakdown of all key proposals. A budget surplus is a sign of fiscal health. It is not a sign of political health. Hong Kong can run surpluses while running down the institutional foundations of the open society that generated its prosperity in the first place. That is the contradiction the 2026-27 budget embodies.
The Emigration Elephant in the Room
No honest analysis of Hong Kong’s budget can avoid the emigration question. Tens of thousands of Hong Kong residents, many of them professionals, business owners, and young families, departed for the United Kingdom, Canada, Australia, and the United States between 2020 and 2025. The British National Overseas passport scheme alone saw hundreds of thousands of applications. This population movement has reduced Hong Kong’s tax base, thinned its professional labor supply, and changed the demographic character of communities across the territory. The budget’s fiscal surplus, driven by a stock market boom, temporarily masks the longer-term revenue implications of a shrinking, aging, and less internationally mobile resident population. A truly honest budget speech would reckon with that reality. The 2026-27 budget does not. The 2026-27 budget presents a government generating revenue from financial market activity while remaining structurally dependent on political decisions made in Beijing. That is not fiscal independence. For the hundreds of thousands who left Hong Kong since 2020, the budget confirms what they concluded: the city they built their lives in no longer exists, and no surplus figure can restore what has been lost.
Jessica Lam
Politics & Diaspora Affairs Journalist, Apple Daily UK
Contact: jessica.lam@appledaily.uk
Jessica Lam is a politics and diaspora affairs journalist with specialized expertise in Hong Kong governance, overseas Chinese communities, and democratic movements. Educated at a leading UK journalism institution, she received advanced training in political reporting, international law basics, and source protection, equipping her for complex cross-border coverage.
Jessica has worked with Apple Daily and other liberal Chinese publications, reporting on electoral systems, civic participation, protest movements, and policy developments affecting the Chinese diaspora. Her work demonstrates strong command of political context and an ability to translate complex issues into accessible, fact-driven journalism.
She brings real-world newsroom experience in covering time-sensitive political developments while maintaining strict verification standards. Jessica regularly works with primary documents, expert interviews, and multiple independent sources to ensure balanced and accurate reporting.
Her authority is reinforced by consistent publication within established news organizations and by adherence to editorial review processes. She is known for transparent attribution and for distinguishing clearly between reporting and analysis.
Jessica Lam’s journalism reflects professional experience, subject-matter expertise, and a strong ethical foundation. At Apple Daily UK, she contributes trusted political coverage that serves readers seeking independent and credible information.
