Hong Kong's new budget targets innovation, fiscal discipline to spur growth: official

Hong Kong will build on solid economic momentum to nurture sci-tech innovation and reinforce fiscal discipline as new drivers of growth, said Paul Chan, financial secretary of the Hong Kong Special Administrative Region (HKSAR), while delivering the 2026-27 budget speech on Wednesday.

Hong Kong's operating account has returned to a surplus in the 2025-26 financial year as tax revenue increased on the back of a booming economy and capital market, said Chan.

Overall, Hong Kong's public finances have markedly improved, said Chan, crediting the reinforced fiscal consolidation program for replenishing Hong Kong's coffers.

Noting that this year marks the beginning of China's 15th Five-Year Plan period (2026-2030), Chan said Hong Kong will integrate into and serve the overall national development by fostering new quality productive forces and helping enterprises explore new markets.

Hong Kong's headline growth in 2026 is forecast between 2.5 percent and 3.5 percent, while the underlying inflation rate and the headline inflation rate are projected to be 1.7 percent and 1.8 percent, respectively, according to Chan.

From 2027 to 2030, Hong Kong's economy is estimated to grow on average by 3 percent per year in real terms, with the underlying inflation rate averaging 2 percent per year.

The latest budget renewed pledges to propel sci-tech innovation, with a focus on artificial intelligence (AI). Hong Kong will promote industrial use of AI so that all of its residents will ultimately adopt and be conversant with the technology, said Chan.

To that end, Chan said he will establish and chair the Committee on AI+ and Industry Development Strategy to formulate strategies and create favorable conditions for AI to empower the transformation and development of industries.

To promote AI+ development and transformation of R and D outcomes, the Hong Kong Artificial Intelligence Research and Development Institute Company Limited will come into operation in the second half of this year, according to Chan.

The data facility cluster at Sandy Ridge, which can provide a gross floor area of 250,000 square meters, will boost Hong Kong's overall computing power. The tender result of the site will be announced shortly, said Chan.

To turbocharge new industrialization, the budget has set aside resources for establishing in the HKSAR the first national manufacturing innovation center outside the mainland.

The HKSAR government will promote the full integration of technological innovation and industrial innovation through key infrastructure, including the Hong Kong Park of the Hetao Shenzhen-Hong Kong Science and Technology Innovation Cooperation Zone and San Tin Technopole, said Chan.

On finance, Hong Kong will advance Renminbi internationalization and continuously reform the securities market, noted Chan. The HKSAR government will legislate this year to enhance tax regimes for family offices and funds, as well as establish licensing regimes for digital asset dealing and custodian service providers.

To aid Wang Fuk Court residents whose apartment units were charred in the deadly fire that broke out last November, the budget has earmarked 4 billion Hong Kong dollars (about 512 million U.S. dollars) to support the long-term housing arrangements plan unveiled by the HKSAR government earlier this month.

According to the budget, the operating account will register a surplus throughout the period from 2026-27 to 2030-2031. The capital account, on the other hand, will record deficits on an annual basis, mainly due to high capital works expenditure.

The HKSAR government will increase bond issuance to fund infrastructure projects, which are deemed an investment in Hong Kong's future. During the period, fiscal reserves are expected to gradually increase to over 700 billion Hong Kong dollars.

"The government is able to have a projected surplus in the operating account, which deals with the day to day expenses that government has. However, if we look at the total amount, which would include long term investment through bond issuance on infrastructure, then Hong Kong is pretty much in a new era of fiscal deficit for the long term growth and investment. So it is really a test for the Hong Kong government on how to mobilize the resources for a better long term outcome," said Gary Ng, a senior economist for Asia Pacific at Natixis.

Hong Kong's new budget targets innovation, fiscal discipline to spur growth: official

Hong Kong's new budget targets innovation, fiscal discipline to spur growth: official

China's development has never been a "threat" to anyone but the source of growth advancing common development of all countries, Foreign Ministry spokesman Lin Jian said at a regular press conference in Beijing on Friday.

Some Western media and think tanks are peddling so-called "China Shock 2.0," saying that "China is achieving fast development in high-tech sectors such as renewable energy and AI and relies on foreign markets to absorb its overcapacity, thus reducing the market share of developed countries and sending more serious shock waves to the global economy compared with the era of traditional manufacture industry," while there are foreign commentators saying that the "China Shock 2.0" argument ignores the genuine innovation occurring within the Chinese industrial ecosystem and that Chinese export is the exact booster of the global economy that is needed in the turbulent period and more indispensable than ever.

Commenting on that, Lin said: "From the world's factory to the world's market and innovation powerhouse, China's development is achieved through strong performance driven by innovation and brings tangible cooperation opportunities and space to the world. High-quality Chinese products represented by the 'old three' of textiles, furniture and home appliances have stabilized the global industrial and supply chain, lowered the living cost of global consumers and eased the inflationary pressure worldwide. China's green production capacity represented by the 'new three' of electric vehicles, batteries and solar panels has bridged the gap between supply and demand in global green development and bolstered the global energy transition and low-carbon development. Moreover, China's high-tech products represented by the 'new new three' of robots, AI and innovative drugs have broken high-tech barriers and monopoly and enabled people in more countries to access affordable new technologies," said the spokesman.

"Openness and cooperation bring about progress and win-win result. China's development has never been a 'threat' to anyone but the source of growth advancing common development of all countries. What really creates 'shocks' to the world has never been the innovation of Chinese companies and efficiency of Chinese industrial capacity, but protectionist moves of setting up barriers, decoupling and severing industrial and supply chains. China will stay committed to high-standard opening up, defend the multilateral trading system and provide more certainty and new impetus to the world economy with its own steady development," said Lin.

China's development never a threat: FM spokesman