Global Recession is Imminent, HK Government Launches Unorthodox Measures
David Lipton, First Vice President of the International Monetary Fund (IMF), warned during the annual meeting of the American Economic Association in January this year that “the recession is coming!”  On October 8, Kristalina Georgieva, the new president of the IMF, once again warned that the global economy is slowing down (a synchronized slowdown), and that economic growth is slowing in nearly 90% of the economies in the world . On October 16th, two top IMF officials, Tobias Adrian and Fabio Natalucci, released a new Global Financial Stability Report. It predicts if there is a shock that is half the impact strength of the 2008 international financial turmoil, the world’s eight largest economies will have up to $19 trillion high-risk corporate debt (that is, the company’s income cannot pay interest on debt), which accounts for about 40% of global corporate debt. 
The US Fed has started to reverse the normalization process, not only is now the interest rate being decreased, but also a so-called “organic process” (QE4) is taken at the end of Sep .
Hong Kong is in the midst of the “perfect storm” of the global recession, due to the trade war, currency war as well as the social unrest triggered by the extradition bill. The GDP in the 2nd quarter has shrunk by 0.4% QoQ, and the 3rd quarter one is almost certain to be negative. In fact, Bloomberg took the lead on October 10 to forecast an inevitable economic recession in Hong Kong .
The Financial Secretary of HK, at the beginning of the year, has already lowered the annual GDP growth forecast from the initial estimate of 2–3% to just 0–1%; JP Morgan estimates that it can have only 0.3%, and some analysts even predict that there will be negative annual growth. The situation can even be worse than that during the SARS in 2003.
If you are interested in taking a look at the decline in various economic sectors, including the value of imports and exports, the retail sales amount, the number of visitors to Hong Kong, and the number of property transactions, etc., you may leave a message to me for providing you the link to my forthcoming article.
The Hong Kong government is a fan of Keynesianism and fond of responding to the economic recession by pouring money to stimulate consumption and increasing expenditures on public works. However, in the past few months, the HK government has implemented some unorthodox and unusual stimulus measures, it may imply that the current recessionary situation is even worse than we expected.
First, there has been an HK$19 billion stimulus package announced by the Financial Secretary in August this year . Second, there is also an increase in the on-the-job allowance for low-income people and a regularization of the child study allowance proposed in the policy address by the Chief Executive. Third, at the beginning of October, the HKMA suddenly lowered the “counter-cyclical capital buffer” ratio (CCyB) of Hong Kong banks. It is equivalent to release up to HK$300 billion in additional lending quotas to support enterprises . It is unusually risky in view of the current excessive corporate debt in HK. Figure 1 shows the fact that the Hong Kong’s corporate debt to GDP ratio has risen to about 230%, which exceeds the international alarming threshold. Further pouring in more debts into the debt-ridden situation is worrying.
What is even more worrying is that the HKMA has introduced new measures to encourage the concealment of bad debts. This allows bankers not to make provision for SMEs’ short-term overdue payments.  Superficially, it can reduce the number of bad news in the market, but in fact it distorts market risk information.
But the most incomprehensible measure is the substantial easing in the mortgage policy when the current property prices are at a historically high level! The Chief Executive, together with the HKMA and the HKMC, announced that they would increase the ceiling on mortgage insurance, so that housing of HK$8 million and HK$10 million could also be mortgaged at 90% and 80% loan-to-value ratio. The most chilling measure is that even if housing unit buyers cannot pass the stress test, but as long as they are willing to pay more than a few hundred dollars per month, then they can still borrow up to 90% loan-to-value ratio. The risk of the banking system is ignored. 
The market generally believes that more aggressive stimulus packages will be continued, and since the Chairman of the Finance Committee, Legislative Council is still occupied by the pro-government member, I believe that the government expenditure on public works projects will inevitably be increasing to boost the GDP growth, or to resist the recession.
However, with the economic recession is imminent, property prices have been falling, land sales performance is expected to be unavoidably bad. When the expenditure on public works projects has entered the peak spending period in recent years, from HK$30 billion per year in the 1990s, to nearly HK$100 billion per year in the 2010s, is it still sensible to increase public works expenditure for saving the economy?
It is estimated that over the next five years, it will cost more than HK$100–120 billion per year in the expenditure of public works projects (Figure 2). Bering in mind that the income source of public works expenditures comes from the government’s land sales revenue which is directly transferred to the Capital Works Reserve Fund for funding public works projects. In other words, the results of land sales are directly related to the expenditure on public works.
According to the land sales information provided by the Lands Department, HKSAR Government, only 8 sites were successfully sold in 2019/2020, of which three were gas stations of smaller sums, four were residential and one was commercial/hotel. The total revenue so far is only HK$42.3 billion, which is just about 1/3 of the required amount of HK$120 billion for settling the public works expenditure. Yet, there are only 5 months left.
Worse still, there have already been two land bid failures (i.e. land sale tenders that could not be sold), both are of commercial/hotel land use and located at Kai Tak. One piece is at Kai Tak Road near the Sports Park, and another site is of the Kai Tak 4C District №4, which is the subject site that the buyer decided to let their deposit being forfeited by the Government in the wake of the proposed amendment to the Fugitive Offenders Ordinance. Interestingly, the CEO of the buyer’s company is one of the pro-government members in the Legislative Council, Hon Abraham Shek.
Once the long-term land sales revenue cannot be sufficient to settle the increasing expenditures of public works projects, it will inevitably lead to public fiscal deficits, and now the prospects are worrisome!
In fact, four years ago, I have made a warning on the above-mentioned “recession-overspent-deficit” scenario in Hong Kong. The first article in Chinese titled “From Gray to Green Keynesism” published on January 31, 2016. It says, “the economy has entered a recession. Once the unemployment rate increases, when the government wants to protect its own interests and to avoid being overthrown, it is imperative for the government to pour money into the markets to save the economy …』 The prophecy appears to be coming true!
After I entered the Legislative Council in 2016, during the discussion of my proposed Amendment to the Appropriation Bill 2017 opposing the Government’s request of transferring some of the surplus in the current account to the Capital Works Reserve Fund, I have voiced out the above concern once again.
The Government’s request of transfering from current account to the Capital Works Reserve Fund reflects the fact that when the land sales revenue was insufficient to cover the works project expenditures, then the reserved money for social welfare, education and medical funds would be sacrificed to pay the costs of public works projects. I elaborated in detail the logic to the public and the government officials to persuade them that a city should not be over-developed, inefficient infrastructures should be avoided, and it is stipulated in the Basic Law that the Government of Hong Kong shall make ends meet. It is a pity that my warning four years ago was not heard and the transfer was approved.
It might be unimaginable for the government officials to realize the imminence of a global recesssion in 2017 as the economy of Hong Kong at that time was booming, with an annual GDP growth rate of 6.8%, which is similar to China’s growth rate. When I told the public that the economy was about to decline, some people might perceive the warning as ridiculous at that particular moment of time. Yet, it can be too late to respond if there is no preparation for the storm. It reflects the importance of a politician to be able to equip with capabilities in doing research and analyses, forward-looking and accurate forecasting competence.
The recession forecast that I made four years ago is extracted as follows:
“It is important to note that in the next five years, there will be a recession crisis in Hong Kong. Once the economy declines, land sales revenue will decrease, but the expenditures from the Capital Works Reserve Fund on public works projects will not be able to suspend. There will be a big deficit. If we are not properly keeping our current account surplus, then when the tax revenue drops (the alarm rings)…” (for the full speech of mine, please refer to  below)
 中時新聞 (2 《國際經濟》IMF：經濟衰退來臨，全球各國都沒準備好應對，1月7日。https://www.chinatimes.com/realtimenews/20190107001315-260410?chdtv
 IANS (2019) IMF warns of economic slowdown in 90% countries, India to be hit hard, India Today, 9 Oct. https://www.indiatoday.in/business/story/imf-warns-of-economic-slowdown-in-90-countries-india-to-be-hit-harder-1607351-2019-10-09
 Elliott, Larry (2019) Global economy faces $19tn corporate debt timebomb, warns IMF, Guardian, 16 Oct. https://www.theguardian.com/business/2019/oct/16/global-economy-faces-19tn-corporate-debt-timebomb-warns-imf
 Cox, Jeff (2019) The Fed will be growing its balance sheet again, but don’t call it ‘QE4’, CNBC, Sep 25. https://www.cnbc.com/2019/09/25/the-fed-will-be-growing-its-balance-sheet-again-but-dont-call-it-qe4.html
 Lam, Eric (2019) Hong Kong Is Sinking Into a Recession With No Recovery in Sight, Bloomberg, 10 Oct. https://www.bloomberg.com/news/articles/2019-10-09/hong-kong-is-sinking-into-a-recession-with-no-recovery-in-sight
 Thompson, Mark (2019) Hong Kong spends billions to avert recession as protests hit the economy, 15 Oct. https://edition.cnn.com/2019/08/15/economy/hong-kong-economy-stimulus/index.html
 但以理 (2019) 林鄭施政報告市場暫收貨 刺激經濟措施待補白，經濟日報，10月18日。https://inews.hket.com/article/2477402/%E6%9E%97%E9%84%AD%E6%96%BD%E6%94%BF%E5%A0%B1%E5%91%8A%E5%B8%82%E5%A0%B4%E6%9A%AB%E6%94%B6%E8%B2%A8%20%20%20%E5%88%BA%E6%BF%80%E7%B6%93%E6%BF%9F%E6%8E%AA%E6%96%BD%E5%BE%85%E8%A3%9C%E7%99%BD
 IMF (2019) PEOPLE’S REPUBLIC OF CHINA — HONG KONG SPECIAL ADMINISTRATIVE REGION, IMF Country Report №19/20, Jan. https://www.imf.org/en/Publications/CR/Issues/2019/01/25/People-s-Republic-of-China-Hong-Kong-Special-Administrative-Region-2018-Article-IV-46539
 李曉佳 (2019) 當「逆周期」變「順周期」，明報，10月17日。https://www.mpfinance.com/fin/instantf2.php?node=1571302519500&issue=20191017&fbclid=IwAR1Uco89OpeQnjYXhzY0OgI8mtQp-_cmPZDGxRwf6TkHOg1571j8qJMIyfU
 姚松炎 (2016) 《從灰色到綠色凱恩斯經濟政策》，1月31日。https://news.mingpao.com/ins/%E6%96%87%E6%91%98/article/20160131/s00022/1454205911292/%E5%BE%9E%E7%81%B0%E8%89%B2%E5%88%B0%E7%B6%A0%E8%89%B2%E5%87%B1%E6%81%A9%E6%96%AF%E7%B6%93%E6%BF%9F%E6%94%BF%E7%AD%96-%EF%BC%88%E6%96%87-%E5%A7%9A%E6%9D%BE%E7%82%8E%EF%BC%89
 Yiu, Chung Yim (2017) Amendments to the Appropriation Bill 2017, OFFICIAL RECORD OF PROCEEDINGS Thursday, 11 May. https://www.legco.gov.hk/yr16-17/english/counmtg/hansard/cm20170511-translate-e.pdf
DR YIU CHUNG-YIM (in Cantonese): Chairman, I would like to speak on Amendment №178. This amendment concerns “Head 184―Transfers to Funds” and seeks to resolve that head 184 be reduced by $4.5 billion in respect of subhead 984. First of all, we see that in head 184 the Government proposes this year to transfer a $4.5 billion surplus from the current account to the Capital Works Reserve Fund. But I must point out that this is in breach of the stipulation of Article 107 of the Basic Law. According to Article 107 of the Basic Law, “The Hong Kong Special Administrative Region shall follow the principle of keeping the expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product.” However, when looking at the account of the Capital Works Reserve Fund, we see deficit which grows year after year, in the next four consecutive years. Looking back at the expenditure of the Capital Works Reserve Fund in the previous years, say, in 1997–1998, the expenditure at that time was just about $30 billion. But the figure increased two times to $90.8 billion in 2016–2017. According to the estimates and projections provided by the Government, the expenditure of the Capital Works Reserve Fund will continue to rise in the next five years, amounting to $91.6 billion in 2017–2018, $104.2 billion in 2018–2019, $108.9 billion in 2019–2020, $125.3 billion in 2020–2021 and $130.8 billion in 2021–2022. Expenditure in the Capital Works Reserve Fund in Hong Kong will overshoot $100 billion and then $130 billion, as it keeps growing at almost $10 billion a year. On the revenue side, according to the data provided by the Government, proceeds from land sale is a major source of income for the Capital Works Reserve Fund. As a matter of fact, a prime lot has been sold this year at a record-breaking price. The Government keeps increasing its land sale but the total revenue stands only at $119.8 billion. In the next five years, the revenue is estimated to stand at $101 billion in 2017–2018, $89.2 billion in 2018–2019, $92.8 billion in 2019–2020, $97.4 billion in 2020–2021 and $102.3 billion in 2021–2022. That is to say, even under the optimistic forecast made by the Government, future revenue can only maintain at a below-$100 billion level approximately. On the contrary, expenditure will keep increasing to overshoot $130 billion. Based on the Government’s data, it is predicted that we will see deficit for four consecutive years in the five years to come. Let me read out the following figures to you: a meager surplus of $9.3 billion in 2017–2018, to be followed by a series of deficits, at -$14.9 billion in 2018–2019, -$16.1 billion in 2019–2020, -$27.8 billion in 2020–2021 and -$28.5 billion in 2021–2022. The Capital Works Reserve Fund is going to experience increasingly heavy deficit, even under the most optimistic forecast made by the Government. This is an obvious breach of the principles of exercising financial prudence and keeping expenditure within the limits of revenues as laid down in Article 107 of the Basic Law. But what we see is that the public works and infrastructure works under the Capital Works Reserve Fund have been launched and their contracts signed. Having no way to reduce its expenditures, the Government resorts to increasing land supply at the expense of the environment, in a bid to pay for the escalating expenditure in infrastructure works. They also have the economic incentive to push land prices upwards, so that the revenue of the Capital Works Reserve Fund will reach the level optimistically forecast by the Government, as mentioned just now. We have to note in retrospection that the Capital Works Reserve Fund was set up as an account for capital cost of public works and infrastructure works, so as to stay clear of the account for recurrent revenue and prevent the cost of infrastructure works from affecting people’s livelihood. The notion is thus clearly established: infrastructure works are paid by land sale and should be kept away from the current account which concerns people’s livelihood. However, the Budget this year proposes to transfer the $4.5 billion surplus from the current account which concerns people’s livelihood, to the Capital Works Reserve Fund to pay for expenditure on infrastructure works. This is in direct contradiction to the original intent of establishing the Capital Works Reserve Fund. If we keep on transferring the current account surplus to pay for infrastructure works, the money intended for livelihood items, such as health care, welfare, education and so on, will be depleted and become inadequate. Many people hold a misconception about land sale. They thought a bigger volume of land sale at higher prices will increase government revenue, so that the government treasury will have more money for improvement of livelihood. I have to state solemnly here that all the revenue from land sale will actually go to the account for Capital Works Reserve Fund, it is utterly irrelevant to the improvement of people’s livelihood. The Capital Works Reserve Fund serves only as a revolving door from land sale to infrastructure works: the higher the revenue from land sale, the more money we have for public works and infrastructure works. But this Budget is even more ridiculous. On top of not using the proceeds from land sale to boost people’s livelihood, it withdraws from the livelihood account, as the $4.5 billion of current account surplus is transferred to pay for infrastructure works. Such an arrangement, when implemented, will generate more incentives for launching more infrastructure works in the future, so that the works expenditure will continue to swell from $130 billion to $150 billion and then to $200 billion. Even if the proceeds from land sale are inadequate, the shortfall can be compensated by transferring funds from the current account. This approach which contravenes Article 107 of the Basic Law will lead Hong Kong to a financial crisis. Let us review the wordings of the Budgets. I have revisited the Budgets in 2015, 2016 and 2017 and they all said infrastructure works were at their peaks. The Government knows it well that with the signing and launch of so many public works and infrastructure works, expenditures are soaring high and out of control. Therefore, this year they would like to exploit the current account surplus and appropriate the rare surplus of $4.5 billion, which is originally meant for the livelihood, for transferring into the Capital Works Reserve Fund. I hope members of the public and Members in this Council can carefully consider the amendment I make this time. This amendment seeks to prevent the Government from transferring current account surplus to the Capital Works Reserve Fund. Please note that the current account is meant for items important to people’s livelihood, such as health care, welfare and education, which are already seriously underfunded. We are always short on money as this Government is a penny-pincher in almost every respect, such that some patients are denied of subsidized medicines and the elderly are deprived of sufficient or appropriate resources. Under the circumstances where resources for various livelihood items are inadequate, making good use of the current account surplus to help improve the livelihood is the only proper solution. However, the Government not only ignores livelihood demands but also transfer the rarely available current account surplus to the Capital Works Reserve Fund to pay for those works which, according to people in the community, are “white elephant” works. We, as Members, must join hands to prevent the Government from using livelihood surplus to meet the ever-increasing expenditure on infrastructure works. Indeed, I would like to ask taxpayers whether they agree to let the Government transfer the tax they pay, specifically the surplus leftover in the current account after spending on livelihood items, for the construction of “white elephant” works which are overspending habitually? Citing an international research report, Arcadis International Construction Costs 2017, I indicated clearly in my speech yesterday that launching too many public works by the Government was a major reason for overspending in public works in recent years. This leads to an inadequate supply in manpower, materials and machines within a short period of time, resulting in a sudden surge in the cost of public works. This international report has in fact indicated that such is a vicious circle created by the Government. Hence, the Government should recognize its responsibility in keeping the ever-increasing expenditure in Capital Works Reserve Fund under control, instead of eyeing up the current account surplus with the intention of misappropriating the livelihood funds to meet the expenditure on these “white elephant” works. Last but not least, I must point out that when I recently asked the Government about the overspending of a large number of public works, a government official replied, “No. Upon completion of a good number of small-scale public works, we have surpluses rather than deficits.” The Government indicated that the surpluses amounted to tens of billions of dollars but they would not be transferred to the current account. This means that the Government has exaggerated the amount needed when applying for funding from the Finance Committee of the Legislative Council. The remaining surplus, instead of being surrendered is kept in the Capital Works Reserve Fund to pay for the expenditures on the “white elephant” works projects. So, the logic is now clear to us: when there is surplus in the Capital Works Reserve Fund, it will not be transferred to the current account for the benefit of the livelihood. In that case, why is the surplus in the current account transferred to the Capital Works Reserve Fund to pay for those overspending “white elephant” works, whose overspending problem is created by the Government itself? We must note that Hong Kong may run into the risk of economic recession in the next five years. In case of an economic downturn, the proceeds from land sale will plummet. But as we cannot refuse to pay for expenditures on the Capital Works Reserve Fund, an even more severe deficit will be resulted. If we do not properly safeguard our current account surplus now, when there is a decrease in tax revenue (The buzzer sounded) …
DR YIU CHUNG-YIM (in Cantonese): First, I would like to thank the Secretary for replying to Amendment №178 proposed by me just now. Indeed, the validity of my argument is recognized by the Secretary. In his reply, he has at least pointed out a mutually-agreed fact. As he has admitted it personally, there is a need to transfer the $4.5 billion surplus in current account to the Capital Works Reserve Fund (“CWRF”) because the estimated expenditure of CWRF for 2017–2018 cannot be fully covered by the proceeds from land sales. In other words, he has admitted himself that the account of CWRF will run into a deficit, which is a breach of the principle of keeping expenditure within the limits of revenues and the exercise of fiscal prudence under Article 107 of the Basic Law. (THE CHAIRMAN resumed the Chair) While the Secretary has personally admitted such fact, I still call on Members to more carefully study Amendment №178 as proposed by me. A detailed review of the three Resolutions in 1982 and 1983 relating to the setting up of CWRF reveals that among various proceeds to be injected into CWRF, only two of them require approval from the Legislative Council. For the rest, such as the land sales proceeds, will be automatically injected into CWRF without the need to go to the Legislative Council. Still, the transfer of current account surplus to CWRF is one of the two items requires Legislative Council approval under the Resolutions. In the light of this, I hope that Members can treasure their votes to guard the gate for the people. This time, Members can see clearly that the account of CWRF will run into a deficit, a fact which the Secretary has admitted personally. It is why the Secretary needs authorization from the Legislative Council to make the transfer again, and to transfer the $4.5 billion surplus in current account to CWRF to make up for the expenditure shortfall which they think cannot be covered by the proceeds from land sales in the next few years. Mr Holden CHOW has just talked about the importance of infrastructure spending. He can still recall when he studied in the United Kingdom, his teacher taught him that infrastructure spending could boost the economy. Perhaps this can exactly prove that Mr Holden CHOW has already left college for a long period of time. Indeed, a number of recent studies have pointed out and confirmed that in Economics, the Keynesian Theory of boosting the economy through the increase in government spending is less effective. There are a lot of empirical evidence and scientific studies to prove this. Perhaps let me cite two relatively important papers. The first one is “The Impact of Government Spending on Economic Growth” by the Heritage Foundation, written by MITCHELL D. J. in 2005. In the paper, a number of recent literature and empirical scientific studies are highlighted to draw a clear conclusion that in deploying their resources, governments are actually competing with the private market for the same resource. As a result, the less efficient investment behaviour of governments will render the private market impossible to bolster the economy in a higher efficient way. Actually, this analysis does not come from me. The Government has admitted itself. It came to the Legislative Council yesterday, telling us that the Kai Tak Sports Park should be delivered in the Design-Build-and-Operate (“DBO”) approach. Why? The Government has admitted that the project is unable to make money if it is taking forward by the Government. So, it has to rely on the private market to generate economic benefits. The Government has admitted its less effective way of operation, a rebuttal of the Keynesian Theory that governments’ commitment in public works projects is more effective that the private market in boosting the economy. A more recent paper is the “Economic Growth and Government Spending Nexus: Empirical Evidence from Lesotho”, written by THABANE K. and LEBINA S. in 2016. Unlike previous studies which mainly look into the effectiveness of governments’ public works spending in boosting the economy in the short-run, this paper applies an Autoregressive Distribution Lag approach to examine the long-run and causal relationship through an empirical quantitative analysis. The conclusion is governments’ spending on public works cannot prove to be effective in boosting the economy. Actually, I wrote an article entitled “Keynesian Economic Policies: From Grey to Green” in Ming Pao on 31 January 2016. In the article, I called attention to the fact that the starting point of the Keynesian Theory was the 30s of the last century when the world economy was hard hit by the Great Depression. The Theory was applicable when the economy was at its lowest ebb with no other way out. Hence, by the application of the Keynesian Theory, governments allocated funds to stimulate the economy, including the development of infrastructure through loans, in a bid to directly increase the economic growth rate. However, the Hong Kong economy is overheated now, with the city under the negative real interest rates for 10 years. Surprisingly, some Members have suggested at this time that the Government should increase its infrastructure investment to boost the economy. This is a complete violation of the Keynesian Theory. Indeed, I have clearly shown you the relevant figures. In 1997, the amount of CWRF was less than HK$30 billion per year. The amount is set to exceed HK$130 billion annually in the future. Please take a look at the magnitude of increase. If Hong Kong really needs to substantially and incessantly increase its CWRF expenditure in order to maintain its economy, it can be easy to imagine that such growth is not sustainable. A look back at China’s economy will find that there are now numerous “ghost towns” in the country due to over-investment in railways, industries, and mechanical devices. This phenomenon exactly demonstrates governments’ indiscriminate investment in infrastructure is less efficient, generating low returns. Such investment, which is a waste of resources and a ruin of the environment, is way inferior to the investment by the private market in the highly-efficient economy. For example, we can instead invest in the green Keynesian, such as a switch to renewable energy consumption which can improve the environment and also bring about new job opportunities. Besides, a “brownfield first” policy can be introduced to accord priority to the development of the environmental-unfriendly brownfield sites for the building of residential housing and public housing. This is a three-win solution, which gives our society sufficient and renewed economic impetus, help restore the degraded environment, and prevent the further rising of the cost of infrastructure works. In the article, I mentioned that the Hong Kong Government has all along been applying the Keynesian mode of infrastructure development. As a result, infrastructure works has the highest share of public spending. To sustain the ever-increasing infrastructure expenditure, land sales proceeds are directly injected into CWRF. In the words of the Government, this is conducive to society and the creation of job opportunities. However, I would like to ask how can the incessant increase in expenditure, from an annual $30 billion to $130 billion, be sustainable? Until how many hundreds of billions of dollars are spent will we consider such expenditure increase should come to an end? Is it possible for the land sales proceeds to catch up with the non-stop rapid growth in CWRF expenditure. This year, it is only through the use of the green belt areas and the sale of prime land sites that we manage to meet the less than $100 billion CWRF expenditure. I would like to ask if we have to carry out full-scale reclamation and utilize all the country parks in order to chase after such never-ending expenditure increase. Yesterday, we experienced serious air pollution at a magnitude that we could no longer afford to ignore. Under the imminent threat of global warming and adverse weather condition, if we continue to embrace the Keynesian form of construction spree by destroying mountains and forests … indeed, in the United States and Europe, realizing the overwhelmingly concrete construction inadaptable to the present circumstances, the countries have made a U-turn, retreating from the grey development mode for the green, renewable and sustainable development mode of the future. Hong Kong is left to be the only place which still worships the grey Keynesian. The ever-lasting expansion and the dumping of concrete and gravel into the sea is an attempt to “quench a thirst with poison”, pushing all human beings into extinction. Actually, only when the economy is declining and the private market is fretting by a complete pessimism, governments will have no alternative but to provide funding itself. It was what had happened during the Great Depression in the 30s of the last century. Even though governments clearly realized that the direct injection of funds would be less efficient and would not be as effective as investments by the private market, they still had to take the lead to do so as the global economic depression had caused private investment to halt. For Hong Kong, it would still be conceivable if we requested the Government to take the lead in the provision of funding during the SARS outbreak. However, in today’s Hong Kong, the infrastructure expenditure has already reached $100 billion. Regarding the employment figure, the Government has already claimed credit for almost reaching the natural unemployment rate. What’s more, the construction industry has been complaining for the shortage of labour. The insufficient supply of marine sand has forced the industry to switch to mechanical sand. From these we can see that instead of continuing with the expansion indiscriminately, it is time for us to reduce or adjust the volume of and spending on construction works. Therefore, in my speech yesterday, I already pointed out that instead of continuing to request us to transfer the $4.5 billion surplus in the meagre current account to fund these works projects, it was indeed necessary for the Government to get back to the practice of keeping expenditure within the limits of revenues and achieving a fiscal balance in respect of CWRF. Therefore, I hope that today, Members can prudently use your votes. The Secretary has already recognized the validity of my argument, so I call on all of you to seriously (The buzzer sounded) use your vote. Thank you.