Hong Kong's Financial Secretary John Tsang attends a press conference after unveiling the budget proposal for the fiscal year 2012-2013 in Hong Kong, south China, Feb. 1, 2012. The city's economy is expected to expand 1 to 3 percent in 2012 and the underlying inflation rate to stand about 4 percent, Tsang said in his budget speech on Wednesday. (Xinhua/Lui Siu Wai)

SUPPORT BUSINESS, IMPROVE LIVELIHOOD

In order to better prepare Hong Kong people for the difficult time ahead, Tsang introduced measures worth nearly 80 billion HK dollars to support enterprises and people in meeting challenges. He said the strong package of measures would help stimulate the economy by 1.5 percentage points in 2012.

Tsang pledged the government will firstly lend support to small and medium enterprises which make up the vast majority of the enterprises in Hong Kong. The measures include increasing in loan guarantee ratio and reducing the annual guarantee fee for a loan for small and medium enterprises.

"In the face of the worsening external economic environment, we need to help our enterprises by reducing their operating costs and enhancing our competitiveness so as to protect employment," said Tsang.

To preserve employment, Tsang pledged to continue with the strategy which helped Hong Kong tackle the 2008 financial tsunami. He argued that apart from stabilizing the employment market through the supportive measures for enterprises, the government should provide suitable employment support and training directly targeted for working population.

Tsang also proposed to take effective measures to care for people's livelihood, with the priority of education, health and social welfare.

"We shall continue to allocate resources to recurrent items relating to people's livelihood. We shall, as in the past, adopt fiscal stimulus measures to help those in need by providing them with appropriate services and facilities," Tsang said.

Besides, to ease the tax burden of middle class, Tsang proposed seven tax measures for the coming fiscal year, including reducing salaries tax, raising the tax exemption allowance for tax payers, introducing electricity subsidy.

STRENGTHEN TIES WITH MAINLAND

In order to promote economic development, Tsang said Hong Kong must take advantage of existing competitive edge. He continued that the city should "actively take forward" the 36 supporting measures announced by Vice Premier Li Keqiang during his visit to Hong Kong last August.

The National 12th Five-Year Plan has unprecedentedly included a dedicated chapter on Hong Kong and Macao. Tsang said this spells out the functions and positioning of the Hong Kong and Macao Special Administrative Regions in the development strategy of China.

The continued liberalization of the Mainland economy has presented Hong Kong with an opportunity to further develop its economy, said Tsang. After more than two decades of development, the Mainland has gradually moved from seeking to attract capital inflows to encouraging its enterprises and funds to go global, a process that is accelerating. Hong Kong should brace itself for another restructuring of its capital market.

"Among other things, we should improve our market infrastructure, seek to enhance the market connectivity of the Mainland and Hong Kong and increase our market capacity," he said.

Tsang also suggested that Hong Kong should further expand its linkage to the world, pursuing participation in multilateral and regional economic co-operation.

"I believe that we should take full advantage of our relationship with the Mainland while enhancing our international outlook. This should continue to be our way forward. It will further reinforce Hong Kong's position as a global economic, financial and commercial center," said Tsang.

Besides, Tsang also emphasized the importance of promoting four traditional pillar industries, namely trading and logistics, financial services, business and professional services, and tourism, and six emerging industries, including cultural and creative industries, medical services, education services, innovation and technology, environmental industries, and testing and certification services.