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= Consumption Voucher Scheme (Hong Kong) = The Consumption Voucher Scheme (CVS) is a monetary incentive proposed by Paul Chan, the current Financial Secretary of the Hong Kong Special Administrative Region, to distribute electronic consumption vouchers to eligible Hong Kong residents in that financial year to promote local consumption. First proposed in 2021, CVS has been executed thrice in 2021, 2022 and 2023.

Motivation behind CVS
The main motivation of CVS as put forward by the HKSAR Government is to “stimulate and revive the economy”, as Hong Kong’s economy has been suffering under and after the 2019 protests and COVID-19 pandemic. The economy was in need of a boost and CVS came into place to encourage local consumption.

By the end of 2019, private consumption accounted for 69% of Hong Kong’s GDP, according to the data from the Census and Statistics Department of the Government.

In 2019, the Hong Kong economy recorded negative growth of 1.2% in 2019, respectively in Q3 and Q4, it contracted by 2.8% and 2.9%. In the 2019-20 Protests, there were eleven consecutive months of decline in retail sales from February 2019 to December 2019, with a year-on-year percentage drop of 11.1%. In October, November and December 2019, the sales falls were recorded at 24.4%, 23.7% and 19.4% (year-on-year of the same period), when Hong Kong endured the most violent protests citywide during those particular months. In particular, sales of jewellery, watches, clocks had fallen by 47.4% in August 2019 and medicine and cosmetics had fallen by 30%. Besides, the tourism industry had been hugely affected, with the Hong Kong Tourism Board commented as the biggest decline in tourism that Hong Kong has seen since the May 2003 outbreak of SARS.

The economic downturn continued in 2020. The GDP in Hong Kong in Q1 and Q2 recorded a negative percentage change, with private consumption expenditure decreasing by 9.1% and 3.9% respectively in Q1 and Q2. The food and catering industry was heavily affected by the social distancing rules and catering restrictions set by the HKSAR Government under the COVID-19 Pandemic. According to Census and Statistics figures, the value of restaurant receipts dropped 22.7% from 2019 to 2022. The retailing industry was also affected due to the border restrictions that barred mainland tourists from Hong Kong, with the export of goods and services dropping by 8.5% and 16.2% in Q1 of 2020.

Introductions in Budget
Before CVS was officially proposed in the Budget, a similar mode of issue in hope to encourage spending was proposed. In the 2020-2021 Budget, in hope to “relieve burden”, “stimulate the economy” and “smoothen livelihoods”, the Cash Payout was proposed by the Financial Secretary Mr Paul Chan. HKD10,000 cash payout was made to all Hong Kong permanent residents aged 18 or above through bank transfer. In the 2021-2022 Budget, in hope to “revive the economy” amidst the COVID-19 pandemic, CVS was proposed by Paul Chan. HKD5,000 electronic consumption vouchers in instalments to each eligible Hong Kong permanent resident and new arrival aged 18 or above to facilitate and stimulate local consumption (details on implementation of instalments and eligibility please see below). (“CVS 2021”)

In the 2022-2023 Budget, under the continuous influence of the COVID-19 pandemic, Paul Chan proposed a second round of issue of electronic consumption vouchers. HKD10,000 electronics consumption vouchers would be issued to each eligible Hong Kong permanent residents and new arrivals aged 18 or above. (“CVS 2022”)

In the 2023-2024 Budget, to aid financial “recovery” in Hong Kong, Paul Chan proposed a third round of issuing electronic consumption vouchers. HKD5,000 electronic consumption vouchers will be issued to each eligible Hong Kong permanent resident and new arrival aged 18 or above in two instalments. (“CVS 2023”)

Implementation
The table below gives an overview of four important things about each CVS round, namely the amount distributed each time, the important dates, the eligibility criteria and the online platforms. Each year has some similarities with the conditions of the year before, but some criteria differ.

CVS 2021
#: Only applicable to recipients who had chosen to collect CVS 2021 via Octopus card

CVS 2022
@: Only applicable to newly eligible persons fulling item (B)(i) or (B)(ii) of the eliligibility criteria

Economic Effects
The HKSAR Government estimated that the scheme would have a stimulus effect of 0.7% of GDP in 2021 and 1.2% in 2022. The scheme has injected around HKD31.5 billion and over HKD60 billion of purchasing power into the local market for CVS 2021 and 2022, respectively. As a result, private consumption expenditure increased by 5.9% year-on-year in real terms in the second half of 2021. It remained relatively unchanged compared to the previous year in Q2 and Q3 of 2022, despite financial conditions tightening. It increased by 8.0% and 1.1% on a seasonally adjusted quarter-to-quarter basis. Consumer price inflation remained moderate, with underlying composite consumer price inflation rates at 1.2% in the second half of 2021 and 1.7% between January and October 2022.

CVS had a positive impact on consumer spending, benefiting specific groups such as females and individuals with higher education or income levels. Additionally, the quality of life for recipients improved as a result of the scheme. Furthermore, optimism regarding the Hong Kong economy in 2023 increased among the population.

Overall, CVS successfully achieved its goal of stimulating the economy by increasing consumption. Recipients directed a significant portion of the voucher amount towards non-durable goods and services, providing support to local businesses. The program had a substantial positive impact on aggregate consumption.

However, the voucher may not live to the standard given that it might only benefit popular brands and shops, which can attract more customers. Given that most small businesses still only take cash, the distribution of vouchers through digital service providers has drawn criticism from these businesses. Only 30–40% of neighbourhood eateries have electronic payment systems, according to Simon Wong Ka-wo, head of the Hong Kong Federation of Eateries & Related Trades. In this way, the voucher system may not be effective in benefiting small businesses which lack the necessary technology.

CVS 2022 received around 80,000 claim requests for early withdrawal of the Mandatory Provident Fund (MPF) or benefits under occupational retirement schemes on the grounds of "permanent departure from Hong Kong." However, these requests were ruled unsuccessful for not meeting the eligibility criteria. Approximately 1,690 complaints were received by the Government about CVS, with the majority (approximately 93%) received during the early stage of implementation of CVS 2021. Complaints mainly involved eligibility criteria, registration procedures and progress, disbursement, and usage of consumption vouchers.

Non-economic Effects
CVS has led to a significant increase in the usage of electronic payment systems in the region, as seen by the establishment of over 2.2 million new accounts. Paul Chan even highlights the consumption voucher program's accomplishments in boosting the local economy and advancing the city's digital transformation in his weekly blog. There has been a 48,000 increase in the number of retailers taking digital payments.

In particular, significant spending has been shifted to AlipayHK. CVS increased the spending on AlipayHK by 109% of the value of the voucher. Thus, CVS has had a significant impact on the spending habits of Hong Kong.

High administration costs
When CVS was first announced in February 2021, the HKSAR Government estimated the administration costs at around HKD 610 million. This was quickly criticised by scholars and Legislative Councillors as being too high. , A survey conducted among 425 citizens showed that most respondents believed the high administration costs to be a waste of taxpayers’ money (36%) and that they reflected the Government’s lack of long-term strategies and vision (33%).

It should be noted however that the government’s estimate turned out to be a conservative one, as the actual costs spent on administration in CVS 2021 was subsequently revealed to be only HKD 250 million, less than half of what had been estimated. CVS 2022 cost about HKD 300 million in administration, again falling lower than the government’s initial estimation (HKD 400 million). And for the latest CVS 2023, Paul Chan said the costs were expected to be further reduced.

Overestimated effects in boosting the economy
CVS was expected to create multiplier effects, stimulating consumption sentiment, and benefiting citizens and businesses. However, many economists said the projection is too optimistic. Interviews show that many voucher holders tend to use the vouchers on daily necessities instead of extra spending in the later round of the voucher scheme, which does not create as much increase in consumption as the government predicted.

Delivering vouchers through digital services providers also draws criticism from merchants accepting cash only. Said Simon Wong Ka-wo, only 30-40% of local restaurants have e-payment systems. The e-vouchers do not cover as many businesses as cash does, limiting the beneficiaries to businesses that offer e-payment.

Eligibility requirement of “not having permanently departed from Hong Kong or having such intention”
From CVS 2022 (2nd instalment) onwards, the Government imposed an additional requirement that registrants must not have permanently departed from Hong Kong or have such intention. The Government listed the following factors which are used to help determine whether one has permanently departed from Hong Kong or has such intention:


 * Whether the individual has been consistently away from Hong Kong for the immediate 36 months prior to the eligibility date;
 * Whether the individual has submitted any request for early withdrawal of their MPF on the grounds of permanent departure from Hong Kong, on or before the eligibility date;
 * Whether the individual holds a locally issued Hong Kong Permanent Identity Card; and
 * Whether there is any evidence that suggests that the individual has no intention of returning to Hong Kong in the foreseeable future.

As of the end of November 2022, around 80,000 residents were disqualified from CVS for having declared permanent departure from Hong Kong in their applications for MPF withdrawal.

There were considerable controversies as to how the government could ascertain whether one has permanently left Hong Kong, and the legitimacy of the above criteria has been questioned. For example, certain residents who have returned to live in Hong Kong after relocating overseas were deemed ineligible according to the government’s definition. Many such affected citizens said that they had received text messages from the government informing them that they were not eligible for CVS 2022, to which the government responded by saying that they could submit a written statement within fourteen days of receiving the message and that the government will review the arguments and evidence presented.

It has also been questioned whether there should be such a requirement at all. Stephen Chan Chi-wan, a radio host at CRHK, commented that since the vouchers could only be used in Hong Kong, citizens who did not intend to return to Hong Kong would not be able to benefit from the vouchers anyway; and if they passed the vouchers on to family or relatives, then the objective of stimulating consumer expenditure could still be met. As such, it was not worth the costs of identifying the individuals who had left Hong Kong. Former RTHK host Sam Ng Chi-sum opined that this was an act of “double standard” of the government, as the small house concessionary rights of the indigenous inhabitants in the New Territories were not affected even if those inhabitants migrated overseas, and yet relocated citizens were treated differently under CVS.

In favour of the requirement, CUHK economist Simon Lee Siu-po remarked that it was reasonable for the government to exclude emigrants from CVS under pressure from certain legislative councillors and the media as the purpose of the scheme is to encourage consumption within Hong Kong.

Failure to cater to the elderly group
Two ways to register for CVS are submitting paper registration forms and electronic registration. The result of CVS registration will be received by the SMS notification. Though the collection of vouchers provided the Octopus card as a choice to cater to people who do not have mobile phones, the announcement of the result failed to cater to the group who do not have a phone to receive SMS.

The mandate requirement of having a mobile number to receive SMS results aroused critics of the Government’s failure to cater to the elderly group. The elderly who submitted the paper registration form failed to receive the vouchers on time because of missing the SMS notification which notified them of the result. Unsuccessful elderly applicants’ confusion over CVS registration leads to the long queue outside the Secretariat of CVS in Mong Kok on the first day of September 2021.

Said DAB legislator Elizabeth Quat, some elderly do not know how to check SMS messages, while some do not even have a mobile number to receive an SMS message. Said DAB Legislative Councilor Ben Chan Hang-pan, the Government underestimated the elderly’s unfamiliarity with electronic technology, and the complexity of the application form led to the mass unsuccessful registration of e-vouchers. Former Wong Tai Sin District Councilor and former chairman of the Hong Kong Association for Democracy and People's Livelihood Sze Tak-loy suggested that since more than 200 district councillors were "forced" to resign, many former district councillors have been unable to maintain their services to help the residents tackle the complicated administration process, causing the long-queue of people seeking help outside the government office.