Hong Kong Financial Secretary Paul Chan Mo-po doubled down on support for the innovation and technology sector in his budget speech on Wednesday as a key part of efforts to reform and jumpstart the city’s growth engine following years of deficit and economic slowdown.

In a televised speech on Wednesday the finance chief, addressing the city’s lawmakers, said that Hong Kong “has to stay bold in reform, dare to break new ground and innovate continuously, and unleash the innovative and economic potential through institutional reform”.  

Chan’s remarks came as the city grapples with cultivating new growth drivers amid lackluster consumption, a sluggish property market, and rising geopolitical tensions.

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Hong Kong’s economy is forecast to grow at an average annual rate of 2.9 percent from 2026 to 2029, up from 2.5 percent last year but below the 3.2 percent recorded in 2023.

Chan stressed that technological innovation could serve as a catalyst for economic transformation, fostering new industries while upgrading traditional ones.

“At the same time, we must nurture and attract talent by better means to promote the integrated development of education, technology, and talent, which in turn provides staunch support for reform and innovation,” he said.

One of the budget’s key proposals is to develop artificial intelligence (AI) as a “core industry” to empower traditional industries in their upgrading and transformation.

To that end, HK$1 billion ($128.6 million) has been allocated to establish the Hong Kong AI Research and Development Institute, which will spearhead cutting-edge research and industrial applications of AI, Chan announced.

Other measures include the expansion of Cyberport's AI Supercomputing Centre, the development of the microelectronics research and development institute, and increased funding for technology-related programs. The Hong Kong Special Administrative Region government will also host international events to attract AI talent and showcase robotics advancements.  

Lawmaker Duncan Chiu noted that the financial secretary devoted a substantial portion of his budget speech to AI, underscoring its importance as a global development trend.

“AI is a crucial element in enhancing future competitiveness, and Hong Kong cannot afford to be absent from this trend,” Chiu said.

The government is also set to expand its technology infrastructure by developing designated tech-focused zones, including the Hetao Shenzhen-Hong Kong Science and Technology Innovation Cooperation Zone. Spanning nearly 4 square kilometers across the Shenzhen-Hong Kong boundary, the zone aims to strengthen cross-border collaboration in technology.

Some experts believe more needs to be done to ensure the long-term success of Hong Kong’s AI and tech ambitions.

Xie Haoran, acting associate dean of the School of Data Science at Lingnan University, said these efforts mark progress toward building a “software-hardware integrated AI ecosystem” in Hong Kong. However, he noted that the city must move beyond infrastructure expansion to focus on exporting technology standards.

“For example, Hong Kong could explore cross-border computing power trading mechanisms while promoting AI ethics certification standards at international events,” Xie said.

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Hong Kong officials have increasingly steered support for high-tech manufacturing and investment in innovation. The Hong Kong Investment Corporation (HKIC), a government fund managing HK$62 billion, has already invested in more than 90 technology enterprises. These businesses are primarily engaged in areas such as hard and core technology, life sciences, new energy, and green technology. According to the government, every HK$1 invested by the HKIC attracts HK$4 in long-term co-investment.

Kenny Shui, vice-president of Our Hong Kong Foundation and executive director of the Public Policy Institute, highlighted the need for a broader approach. He suggested the government should draw inspiration from global examples of AI integration into public services to enhance efficiency and cut long-term costs.

For instance, the Portuguese government uses AI chatbots to guide citizens in applying for government programs, the United States leverages AI to predict extreme weather events, and Singapore optimizes urban planning through AI, Shui said.