Looking at this set of data, I can only say fighting for Hong Kong...

Author: C Labs Encryption Observation

Recently, Sun Ge's public rights protection has actually cast a shadow over the development of the Hong Kong encryption industry. This matter is actually very simple:

FDT has allocated the $456 million reserve of the stablecoin TUSD to high-risk and low-liquidity assets, such as manufacturing plants and mines, instead of holding cash or government bonds as is customary for stablecoins.

The exaggeration of this matter lies in the fact that TUSD claims to have audits, but these audits are of no use.

The audit report only verifies the account balance at a certain point in time, but does not check the flow of funds or the composition of investments.

FDT invested $456 million in mines and manufacturing plants, and this high-risk operation surprisingly went undetected; the audit clearly failed.

However, in Hong Kong, not only are there issues with the accounts of regulatory agencies, but there are also aspects of the Hong Kong government's financial data that deserve in-depth discussion:

This is the financial data of the Hong Kong government, which can be directly downloaded from the Hong Kong Financial Secretary's website. The link is provided at the bottom "click original text" for viewing.

Before explaining this set of data, let me show you a picture:

This is the financial forecast provided by the Hong Kong Financial Secretary, indicating that the Hong Kong government's deficit is decreasing and that it will start to have a surplus in three years.

It looks like the trend is good, right?

However, this chart also hides a little secret. Theoretically, Hong Kong's financial reports should follow the IMF's Government Finance Statistics Manual (GFSM) and local accounting standards. Under these standards, there is a clear distinction between the definitions of government revenue and expenditure:

• Revenue: Mainly includes taxes (such as profits tax, salaries tax, stamp duty), land transfer fees, utility charges, investment income, etc. These are the government's regular or non-debt income.
• Expenditure: Includes recurring expenses (such as salaries, benefits) and capital expenditures (such as infrastructure projects).
• Deficit: Usually refers to the part where total expenditures exceed total income, also known as "comprehensive deficit."
• Borrowing: Issuing government bonds (green bonds, infrastructure bonds, etc.) is considered a financing activity rather than traditional "income."

In other words, deficit = income - expenditure (including interest expenditure), and it should have nothing to do with borrowing.

But the deficit announced by the Hong Kong government = income + borrowing - expenditure

<span leaf="" para",{"tagname":"p","attributes":{},"namespaceuri":""}]'="">If you exclude borrowing, the Hong Kong government's deficit looks like this:

If it is drawn as a curve chart, it is:

Looking at this trend, the main means by which the Hong Kong government may turn the deficit into a surplus is likely to increase borrowing.

According to the budget for the fiscal year 25/26 announced by the Hong Kong government, the difference between income and expenditure is -162.9 billion HKD, while the deficit announced in the budget is only over 60 billion.

The hundred billion in between is estimated to rely on issuing bonds...

Before the pandemic, Hong Kong did not borrow much and often repaid some debts.

Because Hong Kong is different from the United States; the U.S. can just print money to pay back the U.S. Treasury bonds it issues.

As the Hong Kong dollar is a stablecoin pegged to the US dollar at a conversion rate of 7.8:1, the money borrowed by the Hong Kong government cannot be repaid by printing money.

As a center for encryption, Hong Kong feels a bit strange to supervise others without having its own accounts in order.