Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue has provided insights into the 2025-26 Budget, focusing on government bond issuance and supply chain financing, aligning with Hong Kong's strategic economic objectives.

To ensure timely execution of strategic infrastructure projects like the Northern Metropolis, the Hong Kong government plans to issue approximately HK$150-195 billion in bonds annually over the next five years under the Government Sustainable Bond Programme and the Infrastructure Bond Programme. This approach leverages market resources to support economic transformation and development, with debt financing serving as a common method for funding long-term investments.

The HKMA, acting as the government's execution agent for bond programmes, has been actively involved in regular bond issuances, maintaining close engagement with investors and market participants. Market feedback indicates that Hong Kong's projected debt-to-GDP ratio of 12%-16.5% over the next five years is considered relatively low and manageable. Investors are particularly attentive to the allocation of bond proceeds and the government's overall fiscal health. In this context, the Financial Secretary has emphasized that bond proceeds will be dedicated to infrastructure investments, not recurrent government expenditures. Additionally, a reinforced fiscal consolidation programme aims to control operating expenses and enhance revenue, bolstering market confidence.

Historically, the government has favored shorter-maturity bonds, leading to refinancing needs. Approximately 56% of bonds issued in the next five years will refinance maturing short-term debt, while 44% will fund new infrastructure projects. Aligning bond maturities with the long-term nature of infrastructure projects is under consideration. The HKMA plans to explore issuing longer-tenor bonds, considering market conditions, demand, and costs. This strategy aims to provide additional investment options for long-term investors, such as insurance companies and pension funds.

Global shifts in trade and corporate supply chains, influenced by factors like the COVID-19 pandemic and geopolitical tensions, present both challenges and opportunities for Hong Kong. Recognizing the integral role of financial services in supply chain operations, the HKMA collaborates with the banking industry and stakeholders to bolster Hong Kong's competitiveness. Initiatives include promoting technological innovation to improve efficiency and introducing an offshore RMB trade financing liquidity facility in collaboration with the People's Bank of China.

The HKMA established a working group comprising representatives from banks and corporations to enhance the competitiveness of Hong Kong's financial industry in light of the evolving supply chain landscape. Preliminary recommendations from this group include embracing digital trade, exploring green supply chain opportunities, encouraging the establishment of corporate treasury centers in Hong Kong, and enhancing the banking industry's regional capabilities to meet clients' development needs.

Eddie Yue's perspectives underscore Hong Kong's proactive approach to maintaining its status as an international financial center. By strategically issuing government bonds to fund infrastructure and enhancing supply chain financing, Hong Kong aims to navigate global economic shifts effectively. These initiatives reflect a commitment to innovation, sustainability, and fiscal prudence, ensuring the city's continued economic resilience and growth.