The city’s 2026 budget breaks new ground with its first national manufacturing hub outside mainland China
A Budget Built Around Technology
Hong Kong Financial Secretary Paul Chan Mo-po used his 2026-27 budget address to signal a decisive pivot toward science, technology, and artificial intelligence as the city seeks to reposition itself as an innovation powerhouse in the region. The announcement that received the most attention was confirmation that Hong Kong would establish the first national manufacturing innovation centre to be located outside mainland China. The move is framed as part of Hong Kong’s integration into Beijing’s 15th Five-Year Plan, which runs from 2026 to 2030.
What the Innovation Centre Means
Manufacturing innovation centres in China are typically dedicated facilities focused on advancing specific industrial technologies, bringing together research institutions, enterprises, and government investment to accelerate commercialization. Establishing one in Hong Kong rather than on the mainland is significant symbolically, suggesting Beijing is willing to recognize the city’s distinct research ecosystem and institutional strengths as assets worth leveraging rather than absorbing. Chan announced the city would seek HK$20 billion in funding for a cross-border innovation and technology hub and the San Tin Technopole development zone near the border with Shenzhen. The Hetao Shenzhen-Hong Kong Science and Technology Innovation Cooperation Zone is also positioned as key infrastructure for the new industrial push.
RISC-V and Open-Source Chip Strategy
One of the more technically specific announcements concerned chip architecture. Chan said the government’s investment arm, the Hong Kong Investment Corporation, would take a major step forward in establishing a Hong Kong RISC-V Alliance with private enterprises. RISC-V is an open-source chip architecture that represents an alternative to proprietary instruction sets dominated by U.S. companies such as ARM and Intel. For China, which faces sweeping U.S. semiconductor export restrictions, developing capabilities around RISC-V is not merely a technology choice but a geopolitical necessity. For Hong Kong, positioning itself as a hub for RISC-V development offers a role in a global supply chain that Beijing urgently wants to build. Critics will note that participating in this strategy means Hong Kong is increasingly subordinating its technology policy to mainland industrial priorities rather than developing an independent innovation identity. The Brookings Institution has documented how Hong Kong sits at a uniquely fraught crossroads in the U.S.-China technology rivalry, making every policy decision carry outsized geopolitical weight.
Artificial Intelligence at the Center
Chan announced he would personally chair a new Committee on AI+ and Industry Development Strategy, with initial focus on life and health technology and what he called embodied AI, a term for AI systems that interact physically with the world through robotics. A HK$3 billion AI Subsidy Scheme has already approved around 30 research and development applications covering large language models, new materials, and biomedicine. The Hong Kong Artificial Intelligence Research and Development Institute Company Limited is set to begin operations in the second half of 2026. A major data facility cluster at Sandy Ridge, offering 250,000 square meters of gross floor area, will expand the city’s computing capacity. Chan framed this as a push toward universal AI literacy, with the stated ambition that all Hong Kong residents would ultimately adopt and become conversant with the technology.
Finance-Plus as a Strategic Framework
Beyond manufacturing and AI, Chan introduced a Finance-Plus framework meant to mobilize Hong Kong’s financial sector to better serve the real economy. The city would advance renminbi internationalization, continuously reform its securities market, and legislate this year to enhance tax regimes for family offices and funds. Licensing regimes for digital asset dealing and custodian service providers would also be established. The InnoHK Research Cluster has funded 16 laboratories specializing in AI and robotics. The city’s world-class universities, including the University of Hong Kong and Hong Kong University of Science and Technology, remain credible anchors for this ambition.
Innovation Without Freedom: The Core Tension
Observers who care about Hong Kong’s long-term future must weigh these technology announcements against a deeper political reality. The research and innovation environment that made Hong Kong genuinely competitive for decades was inseparable from its open society: free information flows, independent institutions, academic freedom, and rule of law. The erosion of those pillars since 2020 has driven away many of the scientists, academics, and entrepreneurs who were the human infrastructure of the city’s innovation ecosystem. Nature magazine reported on the academic brain drain that followed the national security law, noting that universities struggled to retain international faculty and researchers in the new political climate. A manufacturing innovation centre is a facility. It cannot replace a culture of free inquiry. The best innovation economies in the world — from Silicon Valley to Singapore — are built on the ability to question, debate, publish, and dissent. Hong Kong’s budget allocates money for the buildings. The political leadership has not yet shown willingness to restore what made those buildings worth building in.
A Budget That Points Both Ways
For ordinary Hongkongers, the budget offered some relief. An earlier-than-expected return to operating surplus, driven by a booming stock market and recovering tax revenues, allowed Chan to announce tax sweeteners and earmark HK$4 billion to support residents of Wang Fuk Court who lost their homes in a deadly fire last November. Fiscal reserves are expected to grow toward 700 billion Hong Kong dollars by 2030. The underlying economic picture is broadly improving. Growth of 2.5 to 3.5 percent is forecast for 2026, and the medium-term outlook of around 3 percent annual growth through 2030 reflects genuine optimism. Whether Hong Kong can convert that economic momentum into the kind of open, dynamic innovation hub it once was — and could be again — remains the defining question of this era.
Senior Journalist & Editor, Apple Daily UK
Contact: athena.lai@appledaily.uk
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