The politics of budget surpluses: the case of China’s Hong Kong SAR

Abstract

In recent years when many Western economies are facing serious public debt crises and undergoing massive fiscal austerity, China’s Hong Kong Special Administrative Region (HKSAR)’s experience is quite different as it has achieved successive years of huge budget surpluses and has accumulated an unprecedented level of fiscal reserves. Ironically, the strong budgetary position does not help the Hong Kong government formulate a well-received budget. Despite the huge budget surpluses in recent years the Hong Kong government remains conservative in increasing recurrent expenditure items and chooses to spend billions of dollars on various one-off relief measures and set aside the remaining surpluses in fiscal reserves. However, such a budgetary strategy fails to accommodate rising public demands, and public resentment of the budget has boiled over into waves of social protests. Currently, much of the existing budgetary literature is focused on the politics of budget deficits in Western democracies. This article will make a contribution to the literature by offering an illustrative case study of the politics of budget surpluses. Points for practitioners This article uses the case of Hong Kong to illustrate the political challenges facing policy-makers in a time of huge budget surpluses. For policy-makers, the lesson from the case of Hong Kong is that consistent budget surpluses, similar to recurring budget deficits, will give rise to continuous budget battles. More policy learning is necessary for policy-makers to share the experiences of handling political challenges arising from budget surpluses.