Staff Reporter

Hong Kong is set to reduce spending by eliminating 10,000 civil service positions in a bid to manage its growing deficit. In addition, the city plans to ramp up its focus on artificial intelligence (AI) as it faces challenges from global economic uncertainty, geopolitical tensions, and a sluggish property market.

Financial Secretary Paul Chan outlined the plan during the announcement of the city’s annual budget, stating, “This provides us with a clear pathway to restore fiscal balance in a planned and progressive manner.”

The job cuts, which represent a 2% reduction in the civil service over the next two years, are expected to take effect by April 2027. Additionally, public sector salaries will be frozen for the current year.

Chan emphasized that the enhanced fiscal consolidation program aims for a cumulative reduction in public spending of 7% by the end of the fiscal year on March 31, 2028.

Financial Secretary Paul Chan stated that the planned spending cuts would create a “sustainable fiscal foundation for future development.”

This announcement follows a significant drop in revenue from land sales, which has pushed the deficit to HK$87.2 billion—almost double the earlier estimate of HK$48.1 billion.

In addition, Chan highlighted Hong Kong’s commitment to enhancing its role as an international hub for the artificial intelligence (AI) sector, in alignment with China’s broader push for self-reliance in high-tech industries, including robotics. The city has allocated HK$1 billion for an AI research and development institute.

“Hong Kong is navigating a complex international landscape amid unprecedented global changes,” Chan noted. “The rise of protectionism and unilateralism has led to a fragmented political and economic environment worldwide.”

Over the past three years, Hong Kong’s finances have suffered due to a sharp decline in revenues from land premiums—fees developers pay for land use—as home prices plummeted by nearly 30%.

In response, the government has decided not to auction any commercial sites in the coming year, citing high office vacancy rates and an ample future supply of properties. Officials are also considering rezoning certain commercial areas for residential use.

Historically, land sales have been a crucial revenue source for the government, contributing over 20% to its income. That figure has now dropped to around 5%. Currently, Hong Kong’s fiscal reserves stand at approximately HK$647.3 billion.