Role of the Government

190.     Over the years, we have been administering Hong Kong under the core principle of “Big Market, Small Government”, giving precedence to a free market with the Government assuming a subsidiary role.  This has formed the basis of our financial management philosophy of maintaining a low tax regime, keeping expenditure within the limits of revenue, and strictly controlling recurrent government expenditure.  The economic restructuring of Hong Kong in the past three decades was a response to the changing global economic trend, rather than centrally planned.  It was driven by the market and entrepreneurs, and actively supported by the Government.  However, this approach is being challenged.

191.     First, the wealth gap has given rise to the demand for income redistribution.  Economic globalisation and job polarisation have led to competition for local well-paid jobs among people from around the world, while the income of low-skilled workers remains stagnant.  Furthermore, technological development and the migration of local industrial operations to the Mainland have resulted in the gradual loss of certain blue-collar jobs and middle management jobs.  People in such posts need to upgrade their skills to cope with the demands of a knowledge-based economy if they are to keep their jobs.  The widening wealth gap resulting from all these changes has prompted the public to call for government intervention to redistribute income and narrow the gap between the rich and the poor through public policies and fiscal measures.  People are having higher and higher expectations of the Government's role.

192.     The wealth gap has become a structural cause of social tension.  Those working in globalised and high-end economic sectors, such as the financial sector, have seen their pay rising continuously.  On the contrary, those in low-end service sectors have had to live with a consistently low income.  In addition, the disappearance of middle-level positions has removed a rung on the ladder for upward mobility.  The wealth gap generated by globalisation is all the more acute in a city economy like Hong Kong.  I believe that it is difficult to solve the problem completely.  However, we will ease the resulting tensions through various policy measures.

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