World

HK leader says city faces 'grave' challenges

HONG KONG: In her maiden policy speech, Hong Kong Chief Executive Carrie Lam yesterday warned that the city faces "grave" challenges and must develop a diversified and high-value economy.

She unveiled a mix of housing and tax relief policies to raise competitiveness.

Hong Kong, now among the world's costliest cities, has battled rising income inequality, the slow implementation of marquee public projects, political tensions with mainland China and a slide in regional competitiveness.

Mrs Lam said she will bolster support for small and medium enterprises by cutting company profit tax to 8.25 per cent from 16.5 per cent for the first HK$2 million (S$347,000) of earnings.

On combating soaring housing prices, Mrs Lam pledged to increase land supply where possible and launch a new subsidised "starter homes" scheme to help families not eligible for cheap-rental public housing.

Hong Kong is the world's most expensive city for flats, according to a recent report.

Some observers felt that Mrs Lam's housing initiatives were not bold enough.

"Property shares are down because of the lack of mention of farmland conversion to build first homes. But the chief executive cannot be too specific, so the sell-off does not reflect the real picture," said CLSA property analyst Nicole Wong.

Mrs Lam also said Hong Kong will aim to double expenditure on research and development over the next five years to 1.5 per cent of annual gross domestic product from 0.73 per cent, in a bid to bolster its sputtering technological prospects, with neighbouring Chinese city Shenzhen having galloped ahead in recent years.

Income inequality in Hong Kong is at its highest level in over four decades, stoking discontent that has seen recent large-scale protests over calls for more affordable housing and democracy.

Mrs Lam has sought to heal social divisions amid growing tensions with China and to forge a softer and more socially engaged leadership style than her predecessor, the staunchly pro-Beijing Leung Chun Ying.- REUTERS

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