Elisha M. SonthraandAlex He Jingwei

Opinion | Why Hong Kong’s demographic dilemma need not mean doom

The government’s list of incentives for Hongkongers to have more children is well-intentioned but insufficient to reverse the city’s demographic decline

Instead, it should look for a blend of tax allowances, means-tested credits for child-raising expenses, subsidised childcare and family-friendly workplaces

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Parents walk with their child at The Peak on December 16. Efforts to make Hong Kong a more family-friendly city have been hampered by resistance to flexible working from employers, budgetary concerns and more. Photo: Dickson Lee

Elisha M. SonthraandAlex He Jingwei

Published: 9:30am, 20 Dec 2023Updated: 1:16pm, 20 Dec 2023

In the face of a persistently low total fertility rate of 0.8 births per woman – currently the lowest in the world – Hong Kong has reached a demographic crossroads. The experience of Japan and South Korea has taught us enough about how inevitable and irreversible the decline is. The absence of a magic bullet, however, should not become the reason for policy inertia because a passive stance would simply exacerbate an already grave situation.

The Hong Kong government has implemented a suite of incentives in a series of recent policy measures. They include a one-off baby bonus of HK$20,000 (US$2,600), increased accommodation-related tax deductions, prioritised allocation of public rental housing flats and reinforced support for assisted reproductive services.

These policies, while commendable in their intent, might not be sufficient in even significantly mitigating Hong Kong’s demographic downturn. Instead, an incremental and innovative policy approach that balances ambition with feasibility is required to make a tangible difference.

To alleviate the financial strain on families, a balanced enhancement of tax allowances for child-rearing is necessary. A large increase to match the full cost of raising a child – an estimated HK$6 million to support a child until they are 22 years old, according to a bank’s survey of people with assets of more than HK$1 million – might be beyond reach, but a meaningful uplift from the current levels can provide significant financial relief without straining the public coffers.

For lower-income families who might not reap the benefits of tax deductions, we suggest implementing designated credits that cater specifically to child-related expenses rather than a simple cash allowance. These credits would be specifically applied to child-related expenses such as education, healthcare and childcare services. The implementation would be through a controlled electronic platform, ensuring the credits are used for their intended purpose.

The value of the credits must be balanced to be substantial enough to make a real difference yet maintain fiscal affordability. For example, the credits could cover a significant portion of the average annual cost for childcare and education until a certain age.