The Hong Kong Financial Secretary, Paul MP Chan, has delivered a speech on the Hong Kong Budget, themed Driving High-quality, Inclusive Growth with Innovation and Finance.
Chan said that Hong Kong plans to develop into an international innovation and technology (I&T) centre as well as an international hub for high-calibre talents.
"With strong basic research capabilities, Hong Kong possesses unique edge in AI, life and health technology, fintech, as well as new materials and new energy. Being an international financial centre, Hong Kong will drive 'Finance+', capitalising on our financial sector to better serve the real economy and industries with competitive edge, and pressing ahead towards mutual empowerment of finance and I&T. In so doing, we can leverage our strengths to serve the country’s needs," Chan said.
"Hong Kong’s strengths in innovative scientific research and commercialisation of research outcomes lie in our internationalised qualities, strong research capabilities, support of financial sector and a rich pool of high-calibre talents. We are stepping up support measures such as computing power, land and capital, together with GBA cities’ well-developed advanced manufacturing, to enhance our influence as a global source of original innovation," he added. GBA stands for the Greater Bay Area.
AI is a clear priority for 2026. "We are pressing ahead with the industrialisation of AI and deepening its integration across various industries, while encouraging wider AI application, thereby achieving the target of adoption and utilisation by all," Chan said. He shared that:
- The InnoHK Research Cluster had funded 16 laboratories specialising in AI and robotics technologies to date. "Their research focuses on technologies like AI-driven robotics which could widely apply to industries such as healthcare, logistics, smart manufacturing and construction," he said.
- The HK$3 B AI Subsidy Scheme launched by the government has approved around 30 R&D applications in the fields of large language models, new materials and biomedicine, to enhance local AI research standards and applications.
- The Hong Kong Monetary Authority (HKMA) and Cyberport have started trials for the second sandbox cohort, focusing on AI vs. AI strategies for promoting secure and responsible AI application in the banking sector.
- The Hong Kong Artificial Intelligence Research and Development Institute Company will begin operations in 2H26. "The company aims to promote AI+ development and transformation of R&D outcomes. It will also advise on matters such as the governance framework and regulatory regime for AI development," Chan disclosed.
- Hong Kong’s overall computing power has reached 5 000 petaFLOPS. "The data facility cluster at Sandy Ridge, which can provide a gross floor area of 250,000 sq m, will further enhance Hong Kong’s overall computing power. The tender result of the site will be announced shortly. The cluster will render crucial support for data and computing power required by the use of AI," Chan said.
New committee on AI+ and industry development
Chan will establish and chair a Committee on AI+ and Industry Development Strategy to formulate strategies and create favourable conditions for AI to empower the transformation and development of industries, he said. The committee is to comprise experts, academics, enterprises and industry park companies with an initial focus on life and health technology and embodied AI*.
James Lee, PwC China AI Consulting Leader said: “This Budget is embedding AI at the heart of Hong Kong’s economy. It advances the goal of establishing the city as a pivotal hub for global AI development. The alignment with the nation’s 15th Five-Year Plan and the newly created Committee on AI+ and Industry Development Strategy, coupled with the AI supercomputing centre and concrete funding mechanisms such as AI Subsidy Scheme and Innovation and Technology Industry‑Oriented Fund, provide the ‘golden triangle’ of compute, capital, and policies to promote the Industries for AI and AI for Industries initiative.
"We are glad to see that this budget moves beyond rhetoric by investing in AI training and bridging upstream research with downstream commercial applications. This will position Hong Kong as a premier testbed for ‘AI+’ solutions, leveraging our unique connectivity to attract AI talent and capital to drive regional innovation.”
"This Budget sets out a clear vision for technology-driven growth, particularly through the active promotion of AI research into practical productivity gains through collaborative R&D. Supported by Hong Kong’s well-established financial system, greater use of AI will help businesses modernise and improve operational efficiency," said John Timpany, Head of Tax, Hong Kong SAR, KPMG China.AI skills acquisition
- The government will invite public organisations to organise, in collaboration with technology enterprises and tertiary institutions, AI application courses, seminars and competitions targeting students, young people and members of the public for enhancing their AI awareness and application skills, and to be responsible AI users. HK$50 M will be allocated to this initiative.
- In the 2025/26 to 2027/28 triennium, the University Grants Committee (UGC)-funded universities will introduce 27 undergraduate programmes related to STEAM, including AI, creative industries and data science. "As regards self-financing post-secondary institutions, AI-related programmes will be given priority to be included in the Study Subsidy Scheme for Designated Professions/Sectors starting from 2027/28 academic year," Chan revealed.
"Meanwhile, the Vocational Training Council (VTC) also includes AI applications in the compulsory modules on information technology for all of its Higher Diploma programmes."
- The Employees Retraining Board (ERB) will be upgraded as Upskill Hong Kong, providing various types of skill-based training courses, including AI.
- The Quality Education Fund has earmarked HK$2 B to take forward digital education in primary and secondary schools by offering school-based AI education programmes and subsidising students to participate in related activities. AI training for teachers will also be provided.
Public sector technology deployments
To further enhance the utilisation of data within the public sector, additional resources will be allocated to the Census and Statistics Department (C&SD) to "expand its consulting and analysis services on data science for bureaux and departments, with a view to identifying pain points in operations and proposing corresponding solutions", Chan said.
The C&SD will launch a new online platform for interactive data dissemination service in March, Chan added. "Through integrating different types of statistical data, this platform enables enterprises and the public to conduct cross-subject analysis. A natural language data query feature will be introduced into the platform in the third quarter."
An AI Efficacy Enhancement Team will coordinate and steer government departments to apply AI, conduct process re-engineering and enhance efficiency. "We will allocate HK$100 million for introducing leading technologies from the industry so as to accelerate digital intelligence transformation of the government," Chan said.
Meanwhile, the Civil Service College will collaborate with the Digital Policy Office to provide AI training for civil servants.
Talent hub
Chan further noted that Hong Kong’s world-class universities and internationalised environment are "conducive to attracting and bringing in top global talents in various sectors, particularly leading experts in the scientific research field from around the world". "We will keep nurturing local talents, aligning with the integrated development of Education, Technology and Talent of our country," he said.
Manufacturing
"We actively steer local manufacturers towards smart manufacturing, which leverages technologies such as Internet of Things, real‑time data, application of data analytics, advanced human‑machine interfaces and robotics. The New Industrialisation Funding Scheme has supported over 120 new smart production lines, drawing in private investment of over HK$1 billion," Chan said.
"Moreover, the New Industrialisation Acceleration Scheme aims to encourage enterprises to establish high‑end smart production facilities in Hong Kong. Four projects have been supported so far, involving a total investment of about HK$2.5 billion, of which more than 70% is private investment."
Chan said the New Industrialisation Acceleration Scheme has supported two enterprises developing semiconductor chip technology and equipment, with total investment of over HK$1.5 B.
"The pilot lines for R&D and trial production of third‑generation semiconductors of the Hong Kong Microelectronics Research and Development Institute will commence operation this year to facilitate local semiconductor R&D and upgrading of industries," he added.
A New Industrialisation Elite Enterprises Nurturing Scheme will be launched in 2026, supporting targeted high-growth enterprises contributing to the development of new industrialisation. HK$220 million will be allocated for establishing the first national manufacturing innovation centre outside the Mainland, Chan said.
"We are conducting a study on the medium- to long‑term development of new industrialisation in Hong Kong, including emerging and future industries. Our objective is to accelerate new industrialisation and the development of new quality productive forces in the city, enabling us to integrate into our country's overall planning of new industrialisation and inject new impetus into the economy," Chan noted.
In a press conference, Chan elaborated on the manufacturing centre: "The National 15th Five-Year Plan is still at a recommendation stage, but high-quality development is the underlying tone. For high-quality development, there are two major underlying guiding principles. One is green development. The other is technological innovation and technology self-reliance. Hong Kong plays a unique role in this respect. Thanks to the 'one country, two systems' arrangement, we are in the best position to attract top talent from all over the world so that they could use Hong Kong as a base to do research, to collaborate and to look for application scenarios.
"That is why we set up this centre. The positioning is to look at frontier technology, particularly AI, healthtech, and attract both international as well as Mainland top scientists, engineers and researchers to come to Hong Kong," he said.
Low-altitude devices
Chan spoke of drones and drone taxis as part of a low-altitude economy (LAE) that will drive smart city
development and regional integration. "The government has completed the first-stage legislative amendment exercise, and will refine the legislation and regulatory framework on civil aviation to lay the foundation for the development of LAE standardisation in the long run, building a competitive LAE ecosystem," he said.
Under the first cohort of the Regulatory Sandbox, 32 projects have conducted trials along designated routes. Some
application scenarios of unmanned aircraft such as building management and inspection have already been implemented, Chan disclosed.
"Trial projects, such as unmanned aircraft system traffic management system, multiple applications/users shared-platforms, cross-boundary routes and passenger-carrying flying aircraft, will be rolled out in phases from the first half of this year. We are also actively exploring with the Mainland to commence trial flights on cross-boundary low-altitude logistics."
Aerospace
Hong Kong aims to become an aerospace power, Chan noted, pointing out that the special administrative region (SAR) can help connect the Mainland aerospace industry with the global market, and provide professional services in areas such as R&D, financing, risk management and law. "OASES will take the lead to identify aerospace enterprises to develop in Hong Kong," he said.
"We have already requested the Hong Kong Exchanges and Clearing Limited (HKEX) to review the relevant listing requirements so as to facilitate and attract the listing of aerospace enterprises in Hong Kong."
Chan also revealed that the Hong Kong Space Robotics and Energy Centre, established under InnoHK, has a lunar surface operation robot that is now in the spacecraft prototype testing phase.
"In addition, the Innovation and Technology Fund (ITF) has allocated over HK$100 million to support six R&D projects from universities. Recently, the CUHKSat-1 satellite, developed by the Chinese University of Hong Kong and supported by the ITF, was successfully launched and entered into the planned orbit," he noted.
"Low earth orbit satellites can support the development of high-end industries," Chan added.
"We will proactively expand telecommunications infrastructure, streamline the relevant licensing regime and promote future 6G applications."
Autonomous driving
To ensure road safety, the government is accelerating the development of autonomous driving into driverless mode. Operations are being scaled up with the dual goals of expediting the transition to commercial operations and encouraging the industry to leverage Hong Kong as a platform to tap into overseas markets, Chan said.
"The Airportcity Link autonomous transport system, scheduled for operation this year, will become the first commercially-operated project in Hong Kong," he added.
Semiconductors
Chan also said that the Hong Kong Investment Corporation (HKIC) has been actively promoting R&D and industrialisation of RISC‑V technology through investments and collaboration with leading enterprises. Initiatives include the establishment of the Hong Kong RISC‑V Alliance, which aims at bringing together industries, academia and the investment sector for cross‑industry co‑operation in the GBA, and international collaboration.
"RISC‑V is the underlying technology of a new generation of chips. Its open‑source nature has overcome the limitations of the closed nature of traditional technology, thereby spearheading a transformative wave of change in chip design and application on a global scale," he noted.
The government will actively promote an ecosystem for embodied AI and related products as well as basic research and applications for quantum technology, Chan said.
Quantum computing
"Quantum technology can propel an exponential leap in computing power, communication security and sensing accuracy. Such technological breakthroughs will lead to more innovative applications.
"A number of studies are being conducted by the tertiary institutions on various areas, such as developing the AI-based Quantum Simulation Platform and advancing the convergence of AI and quantum computing, through various platforms including InnoHK. Two state key laboratories relevant to quantum technology have also been established in Hong Kong," he said.
Funding
Fund managers are being selected for the HK$10 B Innovation and Technology Industry Oriented Fund, which channels market capital to invest in emerging fields of strategic importance, such as life and health technology, AI and robotics, as well as future industries, Chan said.
"We aim at commencing the operation of the Fund within this year," he said.
Chan also said that 49 projects have been approved to draw funds from the HK$10 B RAISe+ Scheme. The projects cover fields such as health and medical sciences, new materials and new energy, AI and advanced manufacturing. RAISe+ funds research teams from universities on a matching basis to transform and commercialise R&D outcomes.
Cross-border research and development (R&D)
"Close economic integration of Hong Kong with the GBA brings about opportunities for cross-boundary scientific collaboration, technology transfer and the development of emerging and future industries. The government will review and enhance tax arrangements for R&D expenditures," Chan said.
Kenneth Wong, PwC Hong Kong Tax Controversy Services Leader said: “We welcome the proposed enhancement to the R&D tax deduction rules to provide stronger support for cross-border R&D activities in this year’s Budget. This is something we have long advocated for, in addition to the current review of IP deductions.
"In line with the government’s strategic focus on AI, the government should consider our recommendation of introducing enhanced deductions for AI-related expenses to support the digital transformation of businesses, particularly SMEs. This has become more pressing since Singapore recently announced a 400% tax deduction, capped at S$50,000, for qualifying AI adoption expenditures, for the years of assessment 2027 and 2028.”
Digital assets
Chan said a bill will be introduced this year to establish licensing regimes for, among others, digital asset dealing and custodian service providers. "Hong Kong has implemented the licensing regime for issuers of fiat‑referenced stablecoins. The first batch of licences will be issued next month. The government and financial regulators will continue facilitating licensed issuers in Hong Kong to explore different application scenarios in a compliant and risk-controlled manner," he said.
"On the premise that sufficient investor protection is in place, the SFC will further enhance the liquidity of Hong Kong's digital asset market and facilitate the offering of more products and services to professional investors."
The Securities and Futures Commission (SFC) will also set up an accelerator to expedite market innovation, Chan said.
Guidelines are to be provided to support the application of tokenisation technology in bond issuance and transactions, specifically to clarify that registers of debenture holders can be kept in the form of a distributed ledger. "We will also explore the adoption of electronic signature for bond issuance documents and the digitalisation of bearer bonds," Chan added.
Crypto‑Asset Reporting Framework
Chan said the Inland Revenue Ordinance for implementing the Crypto-Asset Reporting Framework will be amended, as well as the amended Common Reporting Standard by the Organisation for Economic Co‑operation and Development (OECD) in the coming two years. "This will contribute to international efforts in enhancing tax transparency and combating cross‑border tax evasion. We will introduce an amendment bill in the first half of this year," Chan said.
Chan also provided updates for Project Ensemble, which enables participants to make real value transactions involving tokenised deposits and digital assets within a controlled pilot environment, and Project Cargox, which was established to enhance the digital ecosystem for trade finance. He said the HKMA will continually upgrade the pilot for Project Ensemble, EnsembleTX, to support settlement on a 24x7 basis and develop local standards to strengthen Hong Kong's interoperability with other markets. The Government is following up on recommendations from the Expert Panel on Cargox with a view to promoting Hong Kong as a leading trade financing centre and supply chain hub.
To promote the application of fintech and enhance the efficiency of the asset management market, the CMU OmniClear will establish a digital asset platform in 2026, Chan added. "It will support the issuance and settlement of digital bonds. The platform will also be gradually extended to other digital assets and linked with other tokenisation platforms in the region, consolidating Hong Kong's leading role in the realm of digital assets," he said.
Peter Brewin, PwC Hong Kong Digital Assets Leader said: “For asset tokenisation to reach its full potential, data, ownership and settlement must be recorded natively on interoperable distributed networks, and Hong Kong must develop the market infrastructure to support liquid markets in these assets. Trust also needs to be embedded through strong investor protection and appropriate regulatory oversight.
"This Budget sets out a clear roadmap for the new digital financial ecosystem, including
- The follow-up after the launch of Project Ensemble and the licensing of the first batch of HKMA-regulated stablecoin issuers which solve for settlement
- Allowing debenture registers to be kept on distributed ledgers which moves ownership ‘on chain’
- The regulation of digital asset dealing and custody providers, together with the CMU Omniclear digital assets platform. With these building blocks in place, Hong Kong will be well positioned to capture investment and transaction flows in the new digital economy.”
Chi Man Kwan, Group CEO of Raffles Family Office, welcomed the government’s inclusion of digital assets within the scope of qualifying investments eligible for tax concessions applicable to family offices and funds, as well as the establishment of licensing regimes for digital asset dealing and custodian service providers.
Kwan noted that Raffles Family Office is one of the earliest multi-family offices to expand into the digital asset space, while its subsidiary Revo Digital Family Office recently obtained the relevant licenses from the Securities and Futures Commission.
"As the digital asset ecosystem continues to mature, and as market volatility drives investors to place greater emphasis on diversification, we are seeing growing interest in digital asset investments from ultra-high-net-worth individuals and families," he said.
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*Embodied AI refers to AI in physical devices as well as virtual agents operating in 3D simulations. STEAM is an acronym for science, technology, engineering, and mathematics.
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