Hong Kong’s government plans to move HK$150 billion (US$19.2 billion) out of the Exchange Fund to finance Northern Metropolis, a 20-year urban development project planned as the city’s second economic hub.
The Exchange Fund acts as Hong Kong’s foreign reserves to defend the value of the local dollar. It earned a record HK$331 million investment income last year and is currently valued at over HK$4 trillion.
Paul Chan, Hong Kong’s financial secretary, announced the planned transfer from the Exchange Fund to support the Northern Metropolis project and its infrastructure development in his budget speech this week.
According to Chan, the transfer, which will occur over the next two years, is a “safe play” as the fund’s main purpose is to defend Hong Kong’s financial stability.
“Having regard to the current size of the Exchange Fund, which is over HK$4.1 trillion, and considering that we are just taking half of their income earned last year, back to the government, also for investment purposes, we do think this is a considered, prudent move,” Chan said in the speech on February 25.
“We are very confident that given our various measures in place and the strong buffer of the Exchange Fund, we would be able to weather any volatility or even attack to our financial system,” he added.
