The Remarks by the Financial Secretary on the 2026-27 Budget at the Press Conference

Remarks by FS at Budget press conference

The Financial Secretary, Mr Paul Chan; the Secretary for Financial Services and the Treasury, Mr Christopher Hui; the Permanent Secretary for Financial Services and the Treasury (Treasury), Mr Andrew Lai; and the Government Economist, Ms Irina Fan, held a press conference on the Budget at Central Government Offices, Tamar, today (February 25). Following are the remarks by Mr Chan:

Reporter: Good afternoon, Mr Chan, some English questions. Firstly, the Government has ruled out using the Exchange Fund in 2021, warning of severe consequences at the time. Could you explain why the Government thinks it's okay to use the Exchange Fund now? And also, what are the potential risks you see in making this move, and could you also explain the Government's motivation in streamlining the Government's various funds in this Budget? Secondly, on tax policy, the Government said they will set up a committee chaired by you to review Hong Kong's tax policy. What is the Government's direction in this committee? And are you planning to increase the tax base? And if so, could you give some specifics on how you're going to go about it? Thank you.

Financial Secretary: Thank you. The main purpose of the Exchange Fund is to defend Hong Kong's financial stability and our financial system. Last year, the Exchange Fund made an investment income of over $300 billion. Now we are transferring from the Exchange Fund about half of it, $150 billion, in two instalments commencing from 2026-27. Having regard to the current size of the Exchange Fund, which is over $4,100 billion, and considering that we are just taking half of their income earned last year back to the Government, while also for investment purposes, we think this is a considered and prudent move. We are very confident that, given our various measures in place and the strong buffer of the Exchange Fund, we would be able to weather volatility or even attacks on our financial system.

In terms of tax policy, what I have proposed is to set up a group of advisors comprising mainly people from the business and professional sectors. The purpose of this advisory committee is to look at the tax competitiveness of Hong Kong. Over the years, various jurisdictions rolled out different incentives and tax measures, seeking to compete for investments and businesses. Globally, under the OECD (Organisation for Economic Co-operation and Development), there are also certain global requirements on minimum tax known as BEPS (Base Erosion and Profit Shifting) 2.0. Taking this into consideration, we think we should set up an advisory committee with a focus on how to use tax policy as a competitive tool, so as to attract businesses and investment to grow our economy. It is not going to touch our current tax system to widen the tax base. Therefore, things like GST (goods and services tax) and VAT (value-added tax) would not be included in the ambit of this committee.

Reporter: The Budget earmarks $220 million to establish the first national manufacturing innovation centre outside the Chinese Mainland. So could you please clarify the centre's positioning, proposed location, operational model and the expected timeline for implementation? Which advanced manufacturing sectors or new quality productive forces, will it prioritise? And given that this will be the first such centre outside the Chinese Mainland, what is different from existing national manufacturing innovation centres within the Mainland? Will it focus, in particular, on strengthening international co-operation? Thank you.

Financial Secretary: The National 15th Five-Year Plan is still at a recommendation stage, but high-quality development is the underlying tone. For high-quality development, there are two major underlying guiding principles. One is green development. The other is technological innovation and technology self-reliance.

Hong Kong plays a unique role in this respect. Thanks to the "one country, two systems" arrangement, we are in the best position to attract top talent from all over the world so that they could use Hong Kong as a base to do research, to collaborate and to look for application scenarios. That is why we set up this centre. The positioning is to look at frontier technology, particularly AI, healthtech, and attract both international as well as Mainland top scientists, engineers and researchers to come to Hong Kong. Thank you.

(Please also refer to the Chinese portion of the remarks.)

The Financial Secretary, Mr Paul Chan, holds a press conference on the 2026-27 Budget this afternoon (February 25) at the Central Government Offices in Tamar and responds to questions. Source: HKSAR Government Press Releases

The Financial Secretary, Mr Paul Chan (second left), holds a press conference on the 2026-27 Budget this afternoon (February 25) at the Central Government Offices in Tamar and responds to questions. Source: HKSAR Government Press Releases

The Financial Secretary, Mr Paul Chan (second left), holds a press conference on the 2026-27 Budget this afternoon (February 25) at the Central Government Offices in Tamar and responds to questions. Source: HKSAR Government Press Releases

The Financial Secretary, Mr Paul Chan, holds a press conference on the 2026-27 Budget this afternoon (February 25) at the Central Government Offices in Tamar to elaborate on the Budget. Source: HKSAR Government Press Releases

The Financial Secretary, Mr Paul Chan (second left), holds a press conference on the 2026-27 Budget this afternoon (February 25) at the Central Government Offices in Tamar. Also in attendance are the Secretary for Financial Services and the Treasury, Mr Christopher Hui (second right); the Permanent Secretary for Financial Services and the Treasury (Treasury), Mr Andrew Lai (first left); and the Government Economist, Ms Irina Fan (first right). Source: HKSAR Government Press Releases

Hong Kong Customs seizes suspected heroin worth about $1.1 million at airport

Hong Kong Customs today (May 25) detected a drug trafficking case at Hong Kong International Airport. About 1.9 kilograms of suspected heroin, with an estimated market value of about $1.1 million, and one duty-not-paid cigarette were seized.

A 46-year-old male passenger arrived in Hong Kong from Kuala Lumpur, Malaysia today. During customs clearance, Customs officer found the batch of suspected heroin concealed in a wooden box, and the duty-not-paid cigarette in his carry-on baggage. The man was subsequently arrested.

The arrested person has been charged with one count of trafficking in a dangerous drug, one count of possession of dutiable goods and one count of failing to declare to a member of the Customs and Excise Service the possession of dutiable goods. The case will be brought up at the West Kowloon Magistrates' Court tomorrow (May 26).

Customs will continue to step up enforcement against drug trafficking activities through intelligence analysis. The department also reminds members of the public to stay alert and not participate in drug trafficking activities for monetary return. They must not accept hiring or delegation from another party to carry controlled items into and out of Hong Kong. They are also reminded not to carry unknown items for other people.

Customs will continue to apply a risk assessment approach and focus on selecting passengers from high-risk regions for clearance to combat transnational drug trafficking activities.

Under the Dangerous Drugs Ordinance, trafficking in a dangerous drug is a serious offence. The maximum penalty upon conviction is a fine of $5 million and life imprisonment.

Under the Dutiable Commodities Ordinance, cigarettes are dutiable goods to which the DCO applies. Any person who imports, deals with, possesses, sells or buys illicit cigarettes commits an offence. The maximum penalty upon conviction is a fine of $2 million and imprisonment for seven years.

Members of the public may report any suspected drug trafficking activities to Customs' 24-hour hotline 182 8080 or its dedicated crime-reporting email account (crimereport@customs.gov.hk) or online form (eform.cefs.gov.hk/form/ced002).

Hong Kong Customs seizes suspected heroin worth about $1.1 million at airport Source: HKSAR Government Press Releases

Hong Kong Customs seizes suspected heroin worth about $1.1 million at airport Source: HKSAR Government Press Releases