德银-香港新经济蓝图-Hong Kongs New Economic Blueprint-20260921

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DeutscheBankResearch

Economics

ChinaMacro

HongKong’sNewEconomicBlueprint

•HongKong’sFirstFive-YearPlanisaparadigmshift.ItshiftsHongKongfroma"smallgovernment,bigmarket"modeltoa"capablegovernment"approach.Bytakingtheleadinstrategicplanning,infrastructureinvestment,andtalentattraction,theGovernmentisshiftingitsfocustoresolvelong-termstructuralsupplybottlenecksandsociallivelihooddemands,ensuringlong-termpolicycontinuitythatalignscloselywithnationaldevelopmentplans.

•Expandinganddiversifyingthefinancialsector.Buildingonitsstrengthintheequitycapitalmarket,HongKongisdiversifyingintoamulti-assetfinancialecosystem,expandingintowealthmanagement,fixedincome,andtradefinance.Crucially,thecityisleveragingRMBinternationalizationtoconsolidateitsdominant,highlydefensiblemarketshareinoffshoreRMBservices,whileestablishingadedicatedphysicaltradinghubforgoldandothercommodities.

•NorthernMetropolistofacilitateGreaterBayAreaintegration.Thisprojectrepresentsastructuraltransformationinspatialeconomics,shiftingdevelopmentnorthwardtophysicallyandeconomicallymergewiththeGBA.Byunlockinglandbottlenecksandestablishinghigh-techandeducationalclusters,itlinksHongKong'sresearchcapabilitiestoGBA-widemanufacturingsupplychains.Thisissupportedbydeep"softconnectivity"throughcross-boundaryrulealignment,simplifiedborderclearance,andexpandedmutualcapitalaccess.

•Innovationandmanufacturing.HongKongisrebuildingitsindustrialbackbonebydriving"newindustrialization"andadvancedmanufacturing,focusingonlifesciences,microelectronics,andAI.TheGovernmentiscoordinatingcoreresearchinstitutions,dedicatingpatientcapitaltostrategicstart-ups,andleveragingtheHetaoCooperationZonetointegrateHongKongwithShenzhen’sworld-leadingtechsector.

•Medium-termgrowthandfiscalimplications.Proactiveinfrastructureinvestment,housingexpansion,andtalentadmissionareprojectedtomateriallyaccelerateHongKong’saveragemedium-termeconomicandpopulationgrowth.ThisdevelopmentplanwillalsoshiftHongKongintoapersistentmedium-termfiscaldeficitduetohighcapitalexpenditure,relyingonlargerbondissuance.

Date

21September2026

YiXiong,Ph.D.

ChiefEconomist+852-2203-6139

DeyunOu

Economist

+852-2203-6166

DeutscheBankAG/HongKong

IMPORTANTRESEARCHDISCLOSURESANDANALYSTCERTIFICATIONSLOCATEDINAPPENDIX1.UNTIL19thMARCH2021INCOMPLETEDISCLOSUREINFORMATIONMAYHAVEBEENDISPLAYED,PLEASESEEAPPENDIX1FORFURTHERDETAILS.

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Introduction

ThereleaseoftheHongKongSAR’sFirstFive-YearPlan(FYP)isakeypolicymilestone.ItmarksHongKong’sdeparturefromthe"smallgovernment,bigmarket"paradigm,shiftingtowardapolicymodelthatcombineseffectivemarketforceswitha"capablegovernment".Inotherwords,HongKongisreturningtoadevelopmentmodelthatiscommonlyseeninEastAsianeconomies.

Governmentpolicywillplayagreaterroleinseveralareas,suchasstrategicguidance,stimulatinginnovation,investingininfrastructure,mobilizingfunding,andattractingtalent.Notably,itwillplacegreateremphasisonpeople’slivelihooddemands,suchashousing,healthcare,education,andelderlycare.

TheFYPprovidesaninstitutionalframeworkforHongKongtoformulateandimplementlonger-termpolicies,whilehelpingHongKongalignwiththeNational15thFive-YearPlantoseekmoredevelopmentopportunitieswithinChina'seconomicgrowth.Atthesametime,theFirstFYPestablishesclearaccountabilityfortheChiefExecutiveandtheHKSARGovernment.TheexecutionperiodoftheFYPexceedsthetermsofprincipalofficials,whichsupportspolicycontinuityandpredictability.

ItisthuscrucialforbusinessesinHongKongtostudytheFirstFYPandidentifyopportunities.Inthisnote,wehighlightourreadingsofHongKongSARGovernment’skeyobjectivesfor2026-30,discussitskeypolicyinitiativestoachievethosegoals,andassesstheimpactofthesepolicymeasuresonHongKong’seconomy.

HongKong’sKeyObjectivesfor2026-30

TheFYPdedicatesachaptertodiscussingHongKong’sopportunities,advantages,andkeyobjectivesforthenextfiveyears,whichinclude22quantifiableindicators.Welistafewobjectivesandrelevantindicatorsthatwebelievedeservethemostattention:

1.StrengtheningHongKong’spositionasaninternationalfinancialcenter.

ThefinancialsectorisacorestrengthofHongKong’seconomy.However,itsover-relianceontheequitycapitalmarketcanbeablessingduringgoodtimesandashortcomingduringbearmarkets.Thegovernmentaimstoexpandanddiversifythecity’sfinancialmarkettootherareas,includingtradefinancing,fixedincomeandcurrencies,commodities,andwealthmanagement,amongothers.Notably,expandingHongKong’sdominantmarketshareinoffshoreRMBmarketrepresentsahighlydefensible,long-termseculargrowthdriverasRMBinternationalizationgainsglobaltraction.

2.DevelopingtheNorthernMetropolis.TheNorthernMetropolisrepresentsastructuralshiftinHongKong’sspatialeconomics,servingastheprimaryengineforitstransitionintoahigh-techandindustrialhub.Thismegaprojectaddressescriticalsupply-sidebottlenecksinlandandinfrastructure,easingdemographicpressures.Furthermore,itdeepenseconomicandphysicalintegrationwithintheGreaterBayArea.Overthe

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mediumterm,thesubstantialcapitalexpenditureallocatedtothisprojectwillserveasapowerfulmultiplierforeconomicgrowth.

3.Acceleratingtechnologicalinnovationandrebuildingmanufacturingsector.Globaltechnologicalandindustrialchangesareadvancingrapidly,andHongKongneedstoseizetheopportunities.TheFYPsetstwokeytargetsfor2030:raisingtheshareofindustrialvalueaddedto5.5%andincreasingR&Dexpenditureto3%ofGDP.Themainsectorsidentifiedarelifeandhealthtechnology,artificialintelligence,microelectronics,andadvancedmanufacturing.

4.Strengtheningconnectivity.UndertheframeworkoftheNational15thFive-YearPlan,HongKongispositionedtooptimizeitsdual-circulationconnectivity.Domestically,themandateistoenhanceallocativeefficiencyandcapturesynergiesthroughdeeperintegrationwiththeGreaterBayArea.Internationally,HongKongwillsolidifyitsroleasthepremieroffshorecorporatetreasury,legal,andcapital-raisinghubforChineseenterprisesexecutingoutboundexpansionstrategies.

5.Attractingtalentandenhancingsocialwell-being.Thegovernmentaimstoscalethenon-localtertiarystudentpopulationfrom79,800to

100,000by2030,alongsidetargetedtalent-attractionschemes.Itwillalsoenhancepeople’slivelihoodbyprovidingbetterhousingandimprovingpublicservicesacrosshealthcare,education,elderlycare,andotherareas.

PolicyHighlightsfromtheFive-YearPlan

Toachievethesepolicygoals,theFYPlaidoutacomprehensivesetofpoliciesinsixdetailedchapters.Itisnotthepurposeofthisshortnotetoreviewallthesepolicies.Instead,wehighlightbelowpolicymeasuresinafewareasthatwethinkaremostimportantforHongKong’sdevelopmentinthenextfewyears.

1.FinancialSectorPolicies

ExpandingtheoffshoreRenminbimarket.

•TheFYPproposesmultiplemeasurestofurtherstrengthenHongKongastheworld’slargestoffshoreRMBhub.ThegovernmentwillimproveprovisionofoffshoreRMBliquidity;expandandbroadenthesupplyofoffshoreRMBproducts(e.g.bonds);supporttheinclusionofRMBcountersinthestockmarket;promotetheuseofRMBforsettlinggovernmentexpenditure;andexplorethedevelopmentofRMB_denominatedgoldandcommoditymarkets.

•The2026PolicyAddressprovidesmoredetailsonnear-termpolicyinitiatives:1)theHKMAwillintroducea7-dayoffshoreRMBliquidityfacilitytoincreaseshort-termliquidity;2)thegovernmentwillstudytheissuanceofshort-termoffshoreRMBdebtinstruments;3)itwillissuemoreDimsumbonds,whileoptimizingthematuritystructure,andseekingmoresovereignbondsandpolicybankbondstobeissued;and4)itwillexploreexpandingthescopeofSouthboundBondConnectproductstoincludederivativeslinkedtoRMBbonds.

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DevelopingaWorld-ClassGoldTradingCenter.Usinggoldastheentrypointtobuildathrivingcommoditytradingecosystem,HongKongplanstolaunchacentralizedclearingandsettlementsystemforgoldinQ12027.TheGovernmentwillupgradetradinginfrastructure,expandlocalstoragecapacityandrefiningcapabilities,andoffercomprehensivesupporttoattractinternationaltradersandfinancialinstitutions.ThisinitiativewillbesupportedbyexploringRMB-denominatedgoldmarketsanddeepeningmutualmarketaccesswiththeMainland—collaboratingwiththeShanghaiGoldExchangeandtheShanghaiFuturesExchange—toestablishapremier,one-stopgoldstorage,trading,andclearinghub.

BuildingaDiversifiedCommoditiesTradingEcosystem.Toestablishahigh-liquidity,low-costtradingplatform,theGovernmentwillimplementahalf-ratetaxconcessionforcommoditytradingtoattractMainlandandinternationaltraderstosetupregionalheadquartersinHongKong,whilehelpingshippingenterprisesdiversifytheirfinancingchannels.Additionally,HongKongwillleverageitsroleasanapprovedLMEdeliverypointtoexpandcommodities-relatedriskmanagementandfinancing,andenrichRMB-denominatedcommodityfuturesandspottransactionsettlements.

2.TheNorthernMetropolis

AbindingtargetonincreasinglandsupplyfortheNorthernMetropolis.Thegovernmentsetsabindingtargetthatitwillincreasethesupplyoflandsitesby7.5timescomparedtothepreviousfive-yearperiod.Italsoaimstodeliverover70,000residentialunitsand1millionsquaremetersofeconomicfloorspaceinthenextfiveyears.

InnovativeDevelopmentMechanisms.Tostreamlinecontrolsandacceleratedevelopment,theGovernmentwillenacttheNorthernMetropolisDevelopmentOrdinance,establishindustryparkcompanies,andadoptflexibleland-useplanning.Itwillalsoimplementmarket-incentivetools,includingthe"PayforWhatYouBuild"PilotSchemeanda"two-envelope"approachfortenderingtodriveintegrateddevelopment.

SupportingtheEducationCluster.TheGovernmentwilladvancethedevelopmentofthreeuniversitytownsbyfacilitatingcapacityexpansioninpost-secondaryeducationandprovidingkeyfinancialsupport—suchaslandpremiumexemptionsandloans—toestablishinginstitutions.

IntegratingHardandSoftInfrastructure.TheGovernmentisadvancingmajortransportnetworksunderthe"EightVerticalandEightHorizontalCorridors,"includingthecommissioningoftheNorthernLinkRailwayandtheNorthernMetropolisHighway.Concurrently,"soft"digitalinfrastructurewillbebolsteredbytheSandyRidgeDataFacilityCluster,settooperateby2029toprovideupto180,000peta-FLOPSofAIcomputingpowerby2032,alongsidethedevelopmentofalandmark30-hectareDigitalTechnologyHubinLauFauShan.

3.InnovationandManufacturing

AcceleratingNewIndustrialisationandManufacturingUpgrades.TheGovernmentwilldrivehigh-end,smart,andgreenupgradesfortraditionalsectorsandestablishaCentreofExcellenceonGlobalAdvancedManufacturingfocusingonAI+manufacturing,robotics,andindustrialdesign.Tobuilddedicated,highvalue-addedindustrialzones,smartproductionwillbeacceleratedattheHung

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ShuiKiuIndustryPark,whileforward-lookingpilotzoneswillbeestablishedtodevelopemergingnext-generationsectorssuchasquantumtechnology,aerospacetechnology,andembodiedintelligence.

StrengtheningKeyR&DInstitutions.PublicresearchandtechnologytranslationcapabilitieswillbebolsteredbyadvancingfivecoreR&Dinstitutionsfocusingonenterpriseupgrading,smartcitytech,semiconductors,AI,andlifesciences.AlandmarkgoalistoestablishHongKong'sfirstNationalManufacturingInnovationCentreby2027undertheMicroelectronicsResearchandDevelopmentInstitute(MRDI)todevelopnext-generationpowersemiconductorprocesses,backedbya7,500-square-meterexpansionofthelocalMicroelectronicsCentre.

MobilizingR&DFunding.Tosustainlong-termindustrialbreakthroughs,theGovernmentisstrivingtoraisetheratioofTotalDomesticExpenditureonInnovationActivitiestoGDPto3%after2030.Fundingchannelsarebeingsignificantlyexpandedbylaunchingthe$10billionInnovationandTechnologyIndustry-OrientedFund(expectedtoleveragemarketmatchingtoreachatleast$40billion)andenhancingthe$2.5billionInnovationandTechnologyVentureFundtoprovidecriticalmatchinginvestmentsforstartupsinstrategicemergingfields.

TheHetaoCooperationZone.TheNorthernMetropoliswillprioritizethedevelopmentoftheHetaoShenzhen-HongKongScienceandTechnologyInnovationCo-operationZone.Rulesgoverningscientificresearchwillbealignedtofacilitatethesecureandefficientcross-borderflowofpersonnel,materials,capital,anddata,supportingacollaborativeecosystemwhereresearchconductedbylocalinstitutionsgoesforproductionintheGBAwithfinancingsupportinHongKongandMacao.

4.Connectivity

EnhancingGBAHardandSoftConnectivity.Tofacilitatetheseamlesscross-boundaryflowofpeople,logistics,capital,anddata,theGovernmentisadvancingtransportnetworkslike"GBAontheRail",implementinganovel"collaborativeinspectionandjointclearance"modeatredevelopedboundarycontrolpoints,andcontinuallyenhancingtheCross-boundaryWealthManagementConnectScheme.Thesearebackedbylivelihood-focusedintegrations,includingtheGBAYouthEmploymentScheme,expandedcross-boundaryeHealthsharing,andmutualprofessionalqualificationrecognitions.

DeepeningInternationalCooperationandsupportingtheBeltandRoadInitiative.HongKongwillleverageits"superconnector"roletoactivelyparticipateinmultilateraleconomicorganizationslikeAPECandtheWTO,whiledevelopingintoaglobalmediationhubbyestablishingtheheadquartersoftheInternationalOrganizationforMediation.Also,HongKongissolidifyingitspositionasapremierpartnerandmultilateralhubbyprovidingfinancing,projectmanagement,andriskassessmentservicesforgreeninfrastructureandtransportprojectsinBeltandRoadcountries.

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5.Near-termMeasures

ThePolicyAddresscontainstwokeypoliciesonimprovinglivelihood:

•Strongerincentivesforchildbirth.1)Thecashbonusschemewillbeextendedforanadditionalthreeyears.2)ThecashbonusforthesecondandeachsubsequentchildwillbeincreasedfromHKD20,000toHKD30,000.3)ThechildallowancefornewbornswillberaisedfromHKD140,000toHKD160,000.4)Forfamilieswithnewborns,themaximumdownpaymentratiowillbeelevatedfrom90%to95%,andeligiblehouseholdswillreceiveaHKD20,000stampdutyconcession.

•Increasedlandandpublichousingsupply.Over2,500hectaresofformedlandisprojectedfordeliveryoverthenexttenyears.Thegovernmentwillalsoassessstrategiestoreactivateurbanindustrialland.Inpublichousing,averageannualcompletionsaretargetedtoexceed35,000unitsoverthenextfiveyears,a73%increasefromthepreviousperiod.Inaddition,forsubsidizedsaleflatsbetween2022and2025,theresalelock-upperiodwillbeshortenedfrom15yearsto10years.

EconomicImplications

WeforecastthatHongKong’seconomicgrowthwillaverage2.5–3.0%overthenextfiveyears,underpinnedbyinvestmentandmigration.Thiscouldmarkamaterialaccelerationfromthe1.3%averagegrowthrecordedduring2016–25.Weseeafewkeydrivers.Firstly,constructionoftheNorthernMetropolisandpublichousingexpansionwillboosthousingandconstructionactivitiesoverthenextfewyears.Secondly,expansionofHongKong’sfinancialsectorinoffshoreRMBcenterandcommoditytradingactivities.Thirdly,additionalgrowthupsidecouldemergefromthemanufacturingsectorandtechsector,ifthegovernment’stargetof10%annualgrowthinmanufacturingvalue-addedisachieved.

Populationgrowthisprojectedataround0.5%peryear.Reboundingfromits2021trough,HongKong’spopulationhasgrownatanaverageannualrateof0.3%overthepastfiveyears,drivenbyexpandedtalentadmissionschemesandeducationalenrollment.WeexpectthisgrowthtoaccelerateastheconstructionoftheNorthernMetropolisprogresses,HongKong'scapacitytoabsorbtalentfrommainlandChinaandglobalmarketsshouldfurtherimprove,likelypushingpopulationgrowthabove0.5%peryear—modestlybelowthe0.7%averagerecordedduring2015–19.Whilebirthshavenotyetshownaclearrebound,thegradualtransmissionofnewchildbirthincentivescouldprovideanadditionalsourceofdemographicgrowth.

Fiscaldeficitwilllikelyremaininthemediumterm.Whileanimprovedeconomicoutlookshouldbolsterfiscalrevenues,infrastructureexpenditureandfiscalincentiveswilllikelydrivefastergrowthinspending.Inthisyear'sBudgetconsultation,thegovernmentraiseditspost-2027spendinggrowthforecastby1pptandreviseditsprojectedfiscaldeficitupwardfrom1.4%ofGDPto2.1%.Althoughtheadministrationcommittedtocurtailingoperationalexpenditures,itwillnecessitatelargergovernmentbondissuancesandfundtransfers.Wedonotseethismedium-termdeficitasanissue,givenHongKong’sfiscalstrength:HongKong’spublicdebtlevelisstilllowat12%ofGDP,whileitsfiscalreservesstoodat20%ofGDPasoftoday.

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ThefinancialsectorispoisedtobenefitfromacceleratingIPOactivityandadeepeningoffshoreRMBmarket.Regulatorsarescheduledtolaunchthesecond-phaseconsultationonenhancingthecompetitivenessofthelistingregimeinQ3,followedbyareviewofthemarketcapitalizationthresholdforthespecialisttechnologylistingchannelnextyear.ThesereformscouldimpactIPOvolumes,thoughthedirectionandmagnituderemaindependentonthefinalregulatorydetails.Concurrently,dim-sumbondissuancesandRMB-denominatedloanshavesurgedinrecentyears.CloserpolicycoordinationbetweentheHKMAandthePBOCisexpectedtoinjectadditionaloffshoreRMBliquidity,whilearenewedoverseasmonetarytighteningcyclehasenhancedthefunding-costadvantageoftheRMB.Consequently,weprojectsustainedgrowthinRMB-denominatedinterest-bearingproducts.

Weexpectthepropertysectortoseeexpansioninbothdemandandsupply.

Highereconomicgrowthandsustainedpopulationinflowsshouldsupportresidentialdemandandmaintainmomentumintheleasingmarket.Onthesupplyside,theNorthernMetropolisandothermajorinfrastructureprojectsareprojectedtosignificantlyexpandlandandhousingsupply,withnewcompletionslikelytooutpacetherateobservedoverthepastdecade.

Figure2:Fiscalbalancewilllikelystayindeficitoverthemediumterm

Source:DeutscheBankResearch,CEIC

Figure1:Constructionoutputhasbeenrisingsince2023

Source:DeutscheBankResearch,CEIC

Figure3:Populationwilllikelyincreasesteadily

Figure4:Dimsumbondsandrenminbiloanshavebothsurgedinrecentyears

Source:DeutscheBankResearch,CEIC

Source:DeutscheBankResearch,Wind

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Appendix1

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Theviewsexpressedinthisreportaccuratelyreflectthepersonalviewsoftheundersignedleadanalyst(s).Inaddition,theundersignedleadanalyst(s)hasnotandwillnotreceiveanycompensationforprovidingaspecific

recommendationorviewinthisreport.DeyunOu,YiXiong,Ph.D..

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