Financial Secretary Paul Chan took questions on the 2025-26 Budget this morning as he engaged with members of the public on a radio phone-in programme.

Mr Chan responded to questions about trade, cuts in government expenditure and investment in the development of artificial intelligence (AI), besides explaining the overall objectives and rationale of his Budget.

With the city's deficit projected to fall to $67 billion in the next fiscal year, Mr Chan said he believes the worst is over for Hong Kong, but stressed the need to take proactive steps to achieve balance.

Referring to the Government's fiscal plan, he said: “I would call it a fiscal consolidation plan, meaning that we have to reduce the expenditure growth, but at the same time increase our revenue, with the focus on the former, meaning that cutting expenditure growth is the primary tool to return us to balance.”

This, he added, would include rationalising and improving some services to make their delivery efficient.

In terms of the overall outlook, he expressed optimism that Hong Kong can seize on new opportunities and realign itself as a high value-added supply chain management centre, even amid external challenges.

“Of course, there are uncertainties and external complexities, given the geopolitics, but on the other hand, the Mainland’s economy is growing. It is our hinterland.”

Specifically on measures to reduce expenditure, Mr Chan sought to allay callers' concerns.

Regarding the abolition of a grant for secondary day-school, primary school and kindergarten students, he said: “The Education Bureau considered that this allowance, $2,500 at the moment, is regardless of means. It is really not very targeted to help those in need. And for those in need, we do have subsidies in other schemes to provide them with the needed support.

“The budget allocation to education continues to exceed $100 billion a year, so it is a very substantial investment."

The finance chief also extolled the city's competitive strengths as a super connector and super value-adder, as he was asked about the announcement in the Budget that $1 billion will be set aside to establish an AI research and development institute in the city.

“Compared to Singapore, our advantage is that we have a vast Mainland market,” he said. “This will provide the user case for many of these AI companies. And compared to companies on the Mainland, in Shenzhen, we have the convenience of gathering talent, data, and also going global.

“Particularly for those companies in different stages of development, we have a full chain of funding options, financing options.

“And for talent, we do think here is the very convenient place of gathering not just Chinese talent, but also international talent.”