Hong Kong is facing its toughest fiscal test in three decades following a painful run of mammoth deficits. The deficits were caused by 'multiple internal and external challenges' and a new budget will tightly control public spending. The challenge for Hong Kong is not just to balance its books, but to find fiscal sustainability amid US-China tensions and a slowdown in the world's second-largest economy. Hong Kong is suffering an exodus of companies and high-paid workers after Beijing imposed a sweeping national security law in 2020. The deficits could prompt Hong Kong to rethink how it makes money and seek untapped growth potential in the Middle East and Southeast Asia.