No Exchange Fund transfers planned in next 5 years, Hong Kong’s Paul Chan says

Hong Kong's Financial Secretary, Paul Chan Mo-po, has provided crucial clarification following his recent budget announcement, stating definitively that no further transfers from the city's massive Exchange Fund are planned for the next five years. This assurance directly addresses concerns sparked by the unprecedented decision to withdraw HK$150 billion (US$19.2 billion) from the government's main investment arm over the coming two years. Chan explained the move was justified by the fund's record-high investment income of HK$330 billion in 2025 and is intended to top up the Capital Works Reserve Fund, specifically to finance major infrastructure initiatives including the Northern Metropolis project. He stressed that this withdrawal represents a unique circumstance and "will not be made a normal practice," relying on a new medium-range forecast to support this fiscal stance.

Technically, Chan argued that with the Exchange Fund's total assets exceeding HK$4.1 trillion, the two-year transfer constitutes only about half of the fund's investment gains from the previous year and therefore does not threaten the city's core financial stability. The primary implication is a concerted effort to calm markets and the public regarding the health of Hong Kong's fiscal reserves and its continued capacity to defend the long-standing Hong Kong dollar peg to the US dollar. By locking in a five-year moratorium on similar withdrawals, the government aims to signal disciplined long-term fiscal management. Looking ahead, the allocated funds are earmarked for capital works, suggesting a strategic pivot towards stimulating economic growth through infrastructure investment, while the commitment seeks to preserve the Exchange Fund's role as the bedrock of monetary and financial stability.