UBS Tang Weishen: The key to Hong Kong's “five-year plan” is to increase potential output, Beijing focuses on long-term returns rather than the size of the deficit

The Zhitong Finance App learned that the HKSAR Government will announce the first “Five-Year Plan” on September 16 (Wednesday). Deng Weishen, senior Asian and Chinese economic analyst at UBS, pointed out that this plan plays a key role in improving Hong Kong's medium- to long-term potential growth rate and competitiveness. If properly planned and effectively implemented, it will help Hong Kong maintain steady growth in various economic cycles.

Tang Weishen anticipates that the main line of the plan will revolve around increasing potential output. He believes that cyclical fluctuations are unavoidable, but the value of medium- to long-term planning is to allow public investment and policy arrangements to continue to be implemented across a single cycle to avoid frequent policy shifts with the short-term environment, thereby stabilizing resources to areas of improving productivity and providing support for growth under different business cycles.

Since Hong Kong's “Five-Year Plan” and the country's “15th Five-Year Plan” are progressing simultaneously, Tang Wai-shen believes that this will better connect Hong Kong's development direction with the national strategy. He anticipates that the plan will focus on the northern metropolitan area as a new growth engine and cover areas such as infrastructure, innovation and technology, education and talent development, and Greater Bay Area connectivity. These are all long-term investments that directly increase productivity, rather than short-term incentives.

As for the impact of the northern metropolitan area, Duncan divides it into two levels: short-term and medium- to long-term. In the short term, infrastructure and related investment in Beidu itself is an important component of fixed asset investment, and the implementation of investment can directly drive economic growth. However, he emphasized that what is more noteworthy is the medium- to long-term effects.

From a cross-cycle perspective, Tang Wai-shen pointed out that the significance of Beidu is not about how many percentage points of growth it can contribute in a given year, but rather to build a new growth engine for Hong Kong, expand the past growth model that mainly relied on finance and trade to fields such as innovation and technology, high-end manufacturing, and high value-added services, thereby increasing Hong Kong's medium- to long-term potential growth rate. Therefore, in the process of advancing investment and construction in Beidu, the key indicators for observation should not be the size of the deficit, but rather the efficiency of capital expenditure, long-term return, and actual speed of progress.

In response to market concerns about the balance between large-scale infrastructure spending and fiscal deficits, Tang Wai-shen said that Hong Kong's fiscal situation has improved markedly compared to a year ago. A comprehensive surplus was recorded in 2025/26, and there is no pressure on fiscal sustainability in the short term. In his view, the key to defusing the deficit is to increase economic growth rather than reduce investments that contribute to long-term growth; Beidu falls into the latter category.

In terms of financing arrangements, Tang Wai-shen believes that Hong Kong's net balance sheet is strong, and there is sufficient room to support capital expenditure through debt issuance, and the maturity of bonds can be extended to match the characteristics of infrastructure projects, and at the same time increase the share of RMB bonds to match the procurement and expenditure denominated in RMB.