Chief Executive of the Hong Kong Special Administrative Region John Lee Ka-chiu delivered his third Policy Address on Oct 16 in a banner year for China. The People’s Republic of China celebrated its 75th anniversary on Oct 1. The HKSAR completed local legislation to implement Article 23 of the Basic Law in March. With the necessary legislation and enforcement mechanism to safeguard national security firmly in place, Hong Kong is well positioned to recharge its economy.

Lee deserves full credit for working hard to consult diverse groups before finalizing his Policy Address. The wide array of livelihood and growth-enhancing measures that he announced illustrates that he has listened and taken on board many ideas.

Hong Kong now needs to concentrate on three areas to revitalize the economy — finance, property and small and medium-sized enterprises (SMEs).

Hong Kong’s strong fundamentals in business environment, human capital, reputation and infrastructure, plus strengths in various financial service sectors, enabled the city to recapture the third position in the Global Financial Centres Index (GFCI) 36 Report.

Riding on Hong Kong’s well-established financial strengths, Lee delighted markets by announcing ambitious plans to build Hong Kong into a major international gold trading, storage and settlement center. The focus on gold makes eminent sense. Geopolitical uncertainty is driving up the price of gold, and Hong Kong will benefit from diversification into new classes of assets for trading, storage, hedging and investment. Hong Kong has rich experience in trading in gold dating back more than a century. Its gold jewelry has an excellent reputation worldwide. Reinforcing Hong Kong as a gold trading center would benefit the city’s maritime trade, drawing more vessels to the city for the gold trade, and sit well with its longstanding ambition to diversify into commodity trading.

Hong Kong’s aspirations to build a commodity exchange have long been frustrated by the city’s inherent lack of commodities, and shortage of storage capacity. But its “commodity” moment has arrived. Having acquired the London Metal Exchange (LME) in 2012, the Hong Kong Stock Exchange has finally clinched an agreement with the LME for Hong Kong to be included in the LME’s distribution network for industrial metals.

The Airport Authority Hong Kong has announced plans to vastly expand its gold storage capacity to 1,000 tonnes in stages. With the downturn of Hong Kong’s throughput in container traffic, subject to satisfactory negotiations with the container terminal operators, the vacant port lands can be turned into more storage space for gold, silver and other commodities. Diversification will undoubtedly add to Hong Kong’s strengths as a financial center.

Hong Kong people have longstanding misgivings about the city’s sky-high property prices, and previous administrations had been faulted for not reining in the property barons. Yet the reality is pending a substantial restructuring of Hong Kong’s economy, the well-being of the property sector matters a great deal.

Over-sanguine expectations of strong demand from cash-rich Chinese mainland investors and local home buyers caused many developers to over-borrow and over-invest. The sudden uptick in interest rates since March 2022, owing to an abrupt rise of inflation in the United States, caused many developers to be caught out by slow demand and a high debt-servicing burden. The sharp decline in fortunes of New World Development Co Ltd, a major local developer, is a case in point.

The downturn of the property sector has had vast repercussions for the economy. The construction and related engineering sectors, real estate and advertising agencies, legal and other professional and business sectors all declined in tandem. The government’s HK$2.7 billion ($347 million) revenue from land sales so far this year — in contrast to the financial secretary’s estimate of HK$33 billion for 2024-25 — is set to gravely aggravate the government’s fiscal deficit. Property developers simply won’t buy land from public auctions unless home prices stabilize.

Grasping the severity of the situation, Lee responded by allowing entrants under the New Capital Investment Entrant Scheme to spend up to HK$10 million on property valued not below HK$50 million as part of their required investments.

The Hong Kong Monetary Authority (HKMA) followed suit by raising the maximum loan-to-value ratio for the purchase of all residential properties to 70 percent, and adjusting the maximum debt servicing ratio to 50 percent. The government’s willingness to lease vacant hotel rooms and convert them into additional accommodation for youth hostels would also help hoteliers facing weak demand.

While firing on all cylinders to build Hong Kong into an innovation and technology hub, Lee recognized the need to support SMEs and threw them a much-needed lifeline. The HKMA enhanced the SME financing guarantee scheme by allowing a principal moratorium for up to 12 months, and extended the repayment periods of 80 percent and 90 percent loans. The HKMA further released bank capital to facilitate financing of SMEs; launched more credit products and services to assist SMEs, and required 16 banks servicing SME clients to set aside dedicated funds for SMEs. In sum, a substantial quantity of liquidity is being injected into the SME sector. The quantitative easing would no doubt go a long way toward keeping SMEs afloat pending a full recovery.

The government has pulled out all stops to stimulate the economy in a balanced and pragmatic way. But as Lee said recently, a full recovery requires the whole community to make an effort. The government has done its part to improve market conditions, but every employee, every business person, and every enterprise must do their part to grasp the opportunity and raise the bar. Otherwise, Hong Kong people could risk “missing the boat”, as President Xi Jinping has warned.

The author is convener of the Executive Council and a legislator.

The views do not necessarily reflect those of China Daily.