nHong Kong’s sudden wealth is an illusion. Over the past three fiscal years, deficits have been clearly recorded. In the 2022/23 fiscal year, the deficit was HKD 122.3 billion, followed by approximately HKD 100.2 billion in 2023/24, and still HKD 48.1 billion in 2024/25. Land revenues have declined, stamp duties have shrunk, yet recurrent expenditures continue to rise annually. This is not a cyclical fluctuation but a structural issue. Reserves are dwindling, and the gap is widening.n
nThen a miracle occurred. The books turned to show a surplus. The method was simple: classify debt issuance as income. Borrowed money was counted as earned money, and thus the deficit vanished. Suddenly, the fiscal health appeared robust. If economics could be this flexible, it would indeed be worthy of applause.n
nThe definition of a deficit is inherently straightforward. When expenditure exceeds income, the difference is the deficit. The amount of borrowing should match this shortfall. Borrowing is merely a tool to fill the gap. Now, the logic has been inverted. Previously, borrowing was necessary due to deficits; now, because money is borrowed, there is no deficit. This is not fiscal improvement; it is a rewriting of language. Using borrowing to negate the necessity of borrowing is a beautifully circular argument, yet utterly hollow.n
nProponents might argue that issuing bonds is normal financing, so why fuss over categorization? The issue is not with borrowing but with honesty. Financing involves advancing future resources, while income is the creation of resources in the present. If these are conflated, the deficit becomes a decorative term. The more borrowed today, the greater the apparent surplus. Such logic is not only safe but also aggressive.n
nLooking at the UK makes this clearer. In the 2025/26 fiscal year, the UK public sector net borrowing is about GBP 140 billion, with a daily budget deficit of approximately GBP 94.9 billion, accounting for about 4.6% of GDP. This indicates that expenditures far exceed tax revenues, necessitating market financing to fill the gap. If the UK adopted the same principle, treating this GBP 140 billion borrowing as income, the annual deficit would immediately approach zero. Fiscal discipline would not need reform, nor would economic structures require adjustment; only the classification would need rewriting. The deficit would no longer exist, only a definitional issue would remain.n
nThe brilliance of this approach lies in its self-contained logic. A deficit equals the need to borrow money, borrowing money equals increased income, and increased income equals no deficit. The logical loop is seamless. Outsiders see the numbers; insiders see the definitions. Change the definition, and reality complies.n
nIf this principle were widely applied, most countries with long-term deficits could transform overnight. The United States, Japan, the United Kingdom would no longer need to debate deficits. The more borrowed, the more surplus. The fiscal conundrum would be effortlessly resolved. This is indeed a breakthrough. It does not increase productivity or reduce spending but successfully eliminates the deficit. Economists have studied for decades and may not have conceived such a direct solution.n
nTherefore, if the Nobel Prize in Economics rewards innovative thinking, Paul Chan should be a contender. He has demonstrated a shortcut: by treating borrowed money as earned money, fiscal deficits become a thing of the past. Whether the debt remains, interest accumulates, or repayment is inevitable, those are problems for tomorrow. Today, the books have already triumphed.n
