Hong Kong to hand out $1200 each to 7 million residents; here's why

Hong Kong has decided to put cash in its citizens' hands to save its recession-hit economy that is strained from violent protests and the coronavirus outbreak. The decision came as the Asian financial hub reported its first budget deficit in 15 years on the back of recession that started in the third quarter of 2019.

Under a HK$120 billion ($15.4 billion) stimulus package, HK$10,000, or $1280, will be given to all permanent residents of the city aged 18 years or more, a CNN report said. Around seven million people will benefit from the scheme.

On top of this, the Hong Kong government will slash income tax for some residents, the report added. The government is also planning to waive off a month's rent for low-income residents of public housing, as well as provide a one-off allowance to 200,000 underprivileged households.

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A portion of the relief package will be financed by a special fund that has been established considering the deteriorating economic and employment situation in the wake of coronavirus outbreak, CNN reported.

On Wednesday, Hong Kong reported a budget deficit of HK$37.8 billion ($4.85 billion) for 2019-20, its first in the past 15 years. During his budget speech, Finance Secretary Paul Chan warned about budget deficits for the next five years.

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Hong Kong's economy has been in recession for at least three quarters. Tourism and retail firms are having a hard time as a partial closure of the border has stymied the influx of mainland visitors and is keeping residents away from public areas.

"No one could have predicted that social incidents would break out in the middle of the year, which not only hit our economy but also broke our hearts. Before we could sort things out, there was an unexpected outbreak of the novel coronavirus disease. Preventing and fighting against the epidemic... are our top priority," Chan said in his budget presentation.

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