Hong Kong's leader promised on Wednesday to reform and rejuvenate the economy and financial markets, including reducing liquor taxes, while aiming to enhance the poor living conditions of the city's most vulnerable residents.

In his third annual policy address, John Lee stressed the need to “deepen our reforms and explore new growth areas” in accordance with China's national priorities and recent directives from Beijing urging all sectors to collaborate in fostering development and economic growth.

Hong Kong's small and open economy has been impacted by the slowdown in the Chinese economy and ongoing political tensions, including a prolonged national security crackdown, Reuters reports.

It experienced a growth of 3.3% in Q2 compared to the previous year and is projected to grow between 2.5% and 3.5% for the entire year.

Despite a recovery in tourism since the pandemic, with 46 million visitors anticipated this year, consumption and retail spending continue to be weak. 

In addition, stock listings have decreased, and capital flight remains a significant issue. 

In a bid to boost the spirits trade, Lee informed Hong Kong's legislature that liquor duties would be reduced from 100% to 10% for drinks containing over 30% alcohol. These lower duties will only apply to spirits priced above HK$200 ($26), specifically on the portion that exceeds that price.

The initiative would “promote liquor trade and boost development of high value added industries including logistics and storage, tourism as well as high end food and beverage consumption,” Lee stated.

Furthermore, Lee announced that the listing procedures for companies wishing to trade on the Hong Kong Stock Exchange would be simplified to attract more international listings. 

According to Dealogic data, the value of Hong Kong IPOs in 2024 is at its lowest level in 21 years, excluding recent deals by China Resources Beverage and Horizon Robotics, which launched this week to raise up to $1.34 billion. Additionally, China’s Midea raised $4 billion through a secondary listing in the city in September.

The government also stated its intention to establish Hong Kong as a gold trading hub by developing “world-class” gold storage facilities. It aims to create a commodity trading ecosystem and a fuel bunkering centre, as well as explore opportunities in green shipping, aviation, and tourism.

“Amidst the increasingly complicated geopolitics, our city’s security and stability gives us a clear edge as an attractive place for physical gold storage ... and potentially propelling Hong Kong into a gold trading centre,” Lee added.