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On Wednesday, 26 February, the Hong Kong government presented its new budget, an ambitious plan to cut spending, boost the technology sector, and revitalise a slowing economy. Hong Kong’s GDP grew by 2.5% last year, a decrease from 2023’s 3.2%, and is forecasted to grow by a similar amount this year.
Global challenges, political instability, and technological advances have changed the city’s economy in the past few years. The new budget represents a clear effort by the government to place Hong Kong in a strategic position in the global economy, stay resilient in the face of shocks, and remain fiscally responsible. On the trade side, “[the budget] is a clear intention to support speed, efficiency and traceability for these supply chains, which are the building blocks for supply chain competitiveness,” said Pamela Mar, Managing Director of the Digital Standards Initiative of the International Chamber of Commerce and member of the TFG Editorial Board.
The budget has a strong technological direction, with £101 million allocated to an AI research and development institute and a new, streamlined regulatory process to make it easier for tech companies to get started and raise funds. A significant reduction in government spending, estimated to reach a total of 7% by 2028, will be financed by cutting up to 10,000 civil servant jobs. Minor tax increases, including the implementation of a global minimum tax, will be counterbalanced by tax incentives intended to boost key industries like technology, finance, and real estate.
The tax cuts included in the new budget will also strengthen Hong Kong’s position as a global trade hub, including the world’s top air cargo airport and some of the busiest seaports in Asia. A proposed half-tax concession for some commodity traders is expected to boost the shipping sector, while tax reductions in the purchase of container ships could also strengthen the city’s maritime trade.
In introducing the budget, Hong Kong Financial Secretary Paul Chan highlighted the importance of the trade finance sector in the city, which grew to £38.4 billion in 2024 and finances much of the international trade passing through its ports and airports. To further boost trade, the Hong Kong Export Credit Insurance Corporation will offer credit insurance for exporters operating multinational supply chains, on top of the recently introduced RMB Trade Finance Liquidity Facility, intended to facilitate trade financing and cooperation with Mainland China.
The budget also includes a commitment to digitalise trade documents, with a proposal to LegCo—the city’s legislative chamber—by early 2026. “Committing to MLETR [the UN framework to digitize trade documents] is a significant step forward for Hong Kong – not just for the half of the economy that relies on trade or finance, but also for the many regional and global supply chains orchestrated from the territory,” says Mar. As one of many initiatives to boost domestic small and medium-sized enterprises (SMEs), the Government has increased loan guarantees for small businesses and will expand the initiative to encourage e-commerce and international expansion of SMEs.
Hong Kong’s shipping and aviation hubs are also set to benefit from the new budget, confirming the city’s position at the centre of international supply chains. The Government has plans to establish logistics sites near major container terminals to streamline maritime trade, while a £22 million investment in a port management system, due to be approved by LegCo this year, will facilitate data collection and increase efficiency in the city’s busiest ports. Cooperation between Hong Kong and Dongguan, a trade hub in Mainland China, could see the two cities become transhipment partners, making trade between Hong Kong and the Mainland even easier and faster.
The news was well-received in the Hong Kong stock market: the Hang Seng Tech index rose 5.3% after the budget’s announcement, and the city’s equity market rallied similarly. The plans to position Hong Kong as a global AI hub could save it from economic stagnancy as the financial and real estate sectors, which have fueled the island’s economy for years, have been faltering.
The budget’s strong initiatives to boost technological advancements and trade are set to solidify the city’s status as not just having one of the world’s best Ease of Doing Business scores, but also as a hub of stability and innovation in the face of global turmoil.
