Fiscal and Financial Systems

Abstract

The Basic Law sets out the way in which the Hong Kong Special Administrative Region (HKSAR) is to be administered for 50 years beyond 1997. It promises that the socialist system and policies in the People’s Republic of China (PRC) will not apply to the HKSAR under the doctrine of 'One Country, Two Systems'. Under the Basic Law, matters related to foreign affairs and defence fall within the ambit of the Central People’s Government (CPG) of the PRC but Hong Kong has full management responsibility over many other matters. In particular, the HKSAR shall: maintain its status as an international financial centre; have no foreign exchange controls; formulate policies to support a wide range of trading activities; maintain its status of a free port; pursue a free trade policy; remain a separate [from the Mainland PRC] customs territory (and may, as 'Hong Kong, China' participate in relevant international trade negotiations); issue its own certificates of origin for given products; formulate its own monetary and financial policies; issue Hong Kong currency, backed by a 100 per cent reserve fund; retain its own tax (revenue) regime; use its finances only for its own purposes (and they shall not be handed over to the CPG and the CPG shall levy no taxes in the HKSAR); and strive to achieve a fiscal balance and avoid deficits.

The above provisions are all set out in Part 1 (Public Finance, Monetary Affairs, Trade, Industry and Commerce) of Chapter V (Economy) of the Basic Law. Various of these provisions are discussed in detail in this Chapter under the following headings:The Budget and Appropriation Process in Hong Kong; The Hong Kong Revenue Regime; Financial Law and Regulation in Hong Kong, Hong Kong’s Future as an Internatioanal Financial Centre; and The Justiciability of Articles (apart from Article 105) in Part 1 of Chapter 5 of the Basic Law.

Article 105, which stipulates that the HKSAR shall protect individual and legal-person property rights (and requires just compensation to be paid for lawful deprivation of property) is also included in Part 1 of Chapter V (above). Article 105 is dealt with in other Chapters of this book.