Dear Friends of Hong Kong,

 

The Financial Secretary of the Hong Kong Special Administrative Region Government, Mr Paul Chan, delivered his 2026-27 Budget today (February 25). Themed “Driving High-quality, Inclusive Growth with Innovation and Finance”, the Budget outlines a range of initiatives to support and diversify Hong Kong’s economic growth, boost innovation and technology, speed up development of the Northern Metropolis and proactively align with China’s National 15th Five-Year Plan. 


Here are some of the highlights:
 

Hong Kong’s Economic Performance and Outlook


Sustained Economic Growth

  • GDP grew by 3.5% in 2025, marking the third consecutive year of expansion despite global political and economic uncertainties
  • The economy is forecast to grow by 2.5% to 3.5% in real terms this year

 

Strengthened Public Finances

  • Rising tax revenues supported by a resilient economy and vibrant capital markets
  • Reinforced fiscal consolidation improved public finances earlier than expected
  • The Operating Account for 2025–26 is projected to record a surplus of US$6.5 billion (HK$51.3 billion)

 

Record-Breaking Exchange Fund Performance

  • Investment income reached US$42.3 billion (HK$330 billion)
  • Total assets exceeded US$525 billion (HK$4.1 trillion)
  • Proposed transfer of US$19.2 billion (HK$150 billion) to the Capital Works Reserve Fund to support major infrastructure projects, including the Northern Metropolis


Medium-Term Global Outlook

  • Continued challenges from protectionism and global economic fragmentation
  • Emerging opportunities from the rise of the “Global South” and evolving global trade and investment patterns, opening new markets and growth areas

 

Strategic National and Regional Alignment

  • Alignment with the 15th Five-Year Plan, supporting national modernised industrial systems and technological advancement
  • Active participation in high-level opening up and attraction of global talent.
  • Deepened integration with the Guangdong-Hong Kong-Macao Greater Bay Area
  • Formulation of Hong Kong’s first own five-year development plan

Key Initiatives in 2026-27 Budget


Finance 

  • Reduce transaction costs for RMB and other currency conversions; attract more RMB-denominated bond issuances in Hong Kong; explore formation of offshore RMB yield curve 
  • Expedite launch of Chinese Government Bond futures in Hong Kong; inclusion of real estate investment trusts (REITs) in mutual market access; and inclusion of RMB trading counter under Southbound Stock Connect 
  • Consider revised requirements for weighted voting right structures; facilitate secondary listing of overseas issuers and implementing T+1 settlement cycles; enhance structured product-listing framework and regulatory regime for listed companies  
  • Enhance family offices and fund tax regime; enable REITs privatisation; provide stamp duty waiver for transferring non-residential properties into REITs seeking to list 
  • Establish digital asset platform to support the issuance and settlement of digital bonds; establish licensing regime for providers of digital-asset dealing and custodian services
  • Explore tax concessions for eligible institutions conducting gold trading and settlement in Hong Kong 
 
 

Trade

  • Preferential policy packages to attract strategic enterprises including land grant arrangements, financial subsidies and tax incentives
  • Cross-sectoral professional services platform to support enterprises go global
  • Inject US$12.8 million (HK$100 million) to attract international, large-scale exhibitions with new elements 
  • Tax deduction for capital expenditure in purchasing IP 
  • Inject US$6.6 million (HK$52 million) for Intellectual Property Academy on two-year pilot 

Emerging Industries

  • Aerospace: Office for Attracting Strategic Enterprises to attract aerospace enterprises; Hong Kong Exchanges and Clearing to review listing requirements for aerospace enterprises
  • Microelectronics: Hong Kong Investment Corporation (HKIC) and enterprises to establish Hong Kong RISC-V Alliance, forging collaboration among industries, academia and the investment sector
  • R&D: Push for R&D and applications in embodied AI, quantum technology and new materials
  • US$1.28 billion (HK$10 billion) I&T Industry-Oriented Fund to begin operating this year
  • Review and enhance tax arrangements for R&D expenditures 
 
 

AI, Life and Health Technology

  • Hong Kong Artificial Intelligence Research and Development Institute to support R&D and transformation of outcomes
  • Take forward Sandy Ridge data-facility cluster project
  • Enhance AI Literacy and empower public services
  • International Clinical Trial Academy to be established in 2027
  • US$64 million (HK$500 million) injection for Chinese Medicine Development Fund to support strategic research, training and international publicity 

Northern Metropolis

  • Public-Private Partnership to channel land and corporate resources for industrial development and unleash land potential
  • Hetao Co-operation Zone Hong Kong Park: US$1.28 billion (HK$10 billion) to accelerate land development, provide infrastructure, establish venture fund
  • San Tin Technopole: establish dedicated company and inject US$1.28 billion (HK$10 billion) as initial capital
  • Inject US$1.28 billion (HK$10 billion) to support initial operation of Hung Shui Kiu Industry Park Company Limited, beginning operation this year
  • Inject US$1.28 billion (HK$10 billion) loan to support campus development in the Northern Metropolis University Town
 

New Industrialisation

  • New Industrialisation Elite Enterprises Nurturing Scheme to be launched this year, supporting high-growth enterprises
  • Inject US$28 million (HK$220 million) to establish the first national manufacturing innovation centre outside the Chinese Mainland

Aviation, Shipping, Logistics

  • Future Innovative Logistics Acceleration Scheme to be launched this year
  • Enhance tax-concession measures for maritime services industry
  • Provide half-rate tax concession to eligible physical commodity traders
  • Provide port dues concessions for green vessels and offer incentives for green vessels registered in Hong Kong
 

Culture, Sports, Tourism

  • Inject US$212 million (HK$1.66 billion) to enhance Hong Kong’s tourist appeal
  • Inject US$153 million (HK$1.2 billion) into the sports portion of the Arts and Sport Development Fund
  • Secure five-year collaboration with Art Basel 

Land and Housing

  • Make available land for about 22,000 units in the next year, including 9 residential sites from the 2026-27 Land Sale Programme 
  • HKIC to collaborate with regional and international long-term capital to direct capital flow towards quality commercial property projects
  • Three post-secondary student hostel sites to be made available for land sale, subject to market response
  • Public Housing: Total housing supply at 196,000 units in the coming 5 years
  • Private housing: Completion of about 17,000 private residential units annually in the coming 5 years
  • Expected first-hand, private residential unit supply to be about 104,000 units over the next 3 to 4 years
 
 

Caring for the Community

  • Elderly Health Care Voucher Pilot Reward Scheme to be extended to end-2028
  • Residential Care Service Vouchers for the Elderly increased to 7,000
  • Community Care Service Vouchers for the Elderly increased to 16,000
  • 3,600 short-term internship placements in government departments and public bodies for tertiary students
  • US$512 million (HK$4 billion) to support long-term housing arrangements for those affected by the Tai Po fire 

The full text of the Budget is available at

https://www.budget.gov.hk/2026/eng/index.html

 

If you have any questions or would like to learn more about the initiatives announced in the 2025-26 Budget, please feel free to contact my colleagues or me at hketony@hketony.gov.hk.


 

Yours sincerely,

 

Maisie Ho

Director

Hong Kong Economic and Trade Office, New York

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