Hong Kong’s finance chief has defended the government’s plan to dip into a fund that ensures the stability of its currency peg to help finance a technology hub by the city’s border with mainland China, calling the move an “investment” rather than expenditure.
Speaking on a radio show on Thursday, the day after presenting the city’s budget for the coming fiscal year, he said the Exchange Fund – which maintains the Hong Kong dollar’s peg to the US dollar – posted record earnings last year.
It recorded HK$331 billion in income in 2025 and has HK$4.1 trillion in reserves, according to official figures.
A ‘prudent move’
His comments came after he announced during the budget address that authorities were proposing transferring HK$75 billion for the coming two financial years – totalling HK$150 billion – from the Exchange Fund to the Capital Works Reserve Fund “in support of the Northern Metropolis and other infrastructure projects.”
Chan said at a press conference after delivering the budget that the HK$150 billion sum amounts to about half of last year’s surplus.
“Considering that we are just taking half of the income earned last year… for investment purposes, we do think this is a considered, prudent move,” Chan said, adding that the surplus could still act as a “buffer” for financial stability.
The last time authorities tapped the Exchange Fund was 1984, government sources told local media.
The fund, which generates part of its income from global investments, is the city’s de facto sovereign wealth fund. The planned withdrawal must be greenlit by a dedicated committee that oversees the fund, as well as the chief executive and the Executive Council, the government’s advisory body.
On the Thursday radio programme, Chan said that half of the 2025 gains could be allocated into the Northern Metropolis and other infrastructure projects. “That’s also an investment, an investment in our future,” he said in Cantonese.
“The tax revenue, the jobs, the commercialisation – these will be ours, with Hong Kong serving as a platform to reach both mainland [Chinese] and global markets,” he added.
The Northern Metropolis megaproject, which will be home to a flagship tech hub and the city’s third medical school, has been touted as an economic driver set to create 650,000 jobs and help tackle the city’s housing crisis by providing housing for 2.5 million people..
Long-term investment
Former Liberal Party lawmaker Felix Chung, whose suggestion five years ago to stimulate the Covid-hit economy by dipping into the fund was shot down by the government, told Commercial Radio on Friday that funding the Northern Metropolis was a long-term investment, as opposed to the annual investment earnings from the Exchange Fund.
The government said in May 2021 that using the Exchange Fund as government expenditure “will severely undermine its ability to perform its main function, which is to safeguard Hong Kong’s monetary and financial stability.”
“Last year there was more than HK$300 billion in income, which is a substantial return, whereas it will take eight to 10 years before we can see the return on investment for the Northern Metropolis,” Chung said on the show.
Noting that the megaproject will need a substantial amount of funding, Chung wondered whether the earnings from the fund would be used in the same way in the years to come. “The government has to complete the infrastructure before developers start to invest,” he added.
Secretary for Financial Services and the Treasury, Christopher Hui, said on another Commercial Radio programme that making transfers out of the Exchange Fund will not be a “regularised” practice.