HONG KONG SAR - On February 26, 2025, Financial Secretary Paul Chan presented the 2025-26 Budget, detailing strategic initiatives aimed at transforming Hong Kong’s economy and reinforcing its position as a global financial and innovation hub.
Economically, Chan acknowledged the prevailing global uncertainties but urged the need for Hong Kong to leverage technological advancements and innovation for its growth. "The geopolitical situation may pose risks, but technology reform and artificial intelligence (AI) development are reshaping the global narrative, paving the way for new industries and services," he noted.
Chan's budget emphasizes the importance of innovation and technology (I&T), presenting plans to establish Hong Kong as an international hub for the AI industry. This includes launching the Hong Kong AI Research and Development Institute, which aims to catalyze research and industrial application of AI, empowering traditional industries to modernize.
Among the notable measures outlined, the government will launch the Pilot Manufacturing and Production Line Upgrade Support Scheme (Manufacturing+) to aid existing businesses in adopting advanced technologies. The scheme is expected to help local manufacturers improve productivity and competitiveness.
Significantly, the budget addresses the insurance sector as well. The Hong Kong Insurance Authority has welcomed measures such as the extension of the Pilot Insurance-linked Securities (ILS) Grant Scheme. Since its inception, six catastrophe bonds have been issued, bolstering alternative risk transfer solutions and enhancing the city's status as a global risk management hub. Chan emphasized collaborating with overseas insurers to help their return to Hong Kong's market, supporting their re-domiciliation efforts through streamlined regulatory frameworks.
Chan made notable remarks on Hong Kong's future tourism initiatives, emphasizing the importance of the Development Blueprint for Hong Kong's Tourism Industry 2.0. Plans are set for comprehensive studies to redevelop waterfront areas, potentially adding recreational facilities such as yacht clubs, which aim to revitalize the tourism sector.
Recognizing the high commercial property vacancy rates, Chan announced the government would not conduct new commercial land sales during the coming year. He explained the decision was taken to allow existing supply to be absorbed by the market. Some commercial sites may also be rezoned for residential use, providing flexibility to adapt to changing economic conditions.
On the fiscal side, the budget proposed stringent measures to control government expenditure, aiming for a 7% reduction by 2027-28. Alongside this aim, the government seeks to freeze public sector salaries and eliminate approximately 10,000 civil service positions to streamline spending. Chan also highlighted additional revenue measures, including adjustments to public transport subsidies, increasing the air passenger departure tax, and reviewing fees for government-owned tunnels and roads.
To maintain public finances and continue infrastructure development, the government plans to expand bond issuance steadily. Chan assured residents, "We remain committed to fiscal discipline, ensuring we invest wisely and create value for society. Our goal is to restore fiscal balance progressively within this term of government."
Another highlighted project is the Northern Metropolis development, proposed as part of the long-term strategy to provide land dedicated to innovation and technology. Chan mentioned facilitating the establishment of data facility clusters at Sandy Ridge and identifying locations for new conference and exhibition venues.
The budget also reflects the government's determination to fast-track Hong Kong's development by embracing digital transformation within public services. By streamlining processes and utilizing technology, the administration aims to deliver more efficient services to citizens.
Chan's 2025-26 Budget not only addresses immediate challenges but also sets ambitious plans for the territory’s economic advancement. With AI and technology at its core, the budget aspires to guide Hong Kong through its next phase of development, positioning it at the forefront of innovation and competitive business practices globally.