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Regina Ip

For the first time in its history – and in a striking departure from its long-standing doctrine of minimal economic intervention – Hong Kong is preparing to draw up a five-year plan.
Chief Executive John Lee Ka-chiu has asked all policy bureaus to help draft proposals by the end of the year. To lead the exercise, veteran civil servant Janice Tse Siu-wah has come out of retirement. The Legislative Council, not to be left out, has formed a committee supported by six coordinating groups spanning nearly every major policy domain.
This is more than an administrative exercise. It marks a fundamental shift in Hong Kong’s economic philosophy.
For decades, the city has prided itself on low taxes, light regulation and market-led growth. Now it is moving – cautiously but unmistakably – towards a model more aligned with mainland China’s state-led development strategy.
Conventional economic thinking has long held that markets are best at allocating resources and driving innovation. Yet mainland China’s rise has challenged this orthodoxy. Through long-term planning, policy coordination and targeted investment, it has become the world’s second-largest economy and a formidable technological power.
This model is not simply about central control. It combines top-level strategic direction with broad consultation and coordinated execution. The result is an ability to mobilise resources at scale towards national priorities.

Hong Kong could benefit from adopting these strengths. A five-year plan may help overcome the short-termism that has often constrained policymaking, particularly in innovation and technology. Closer alignment with national priorities could also allow the city to plug into China’s broader push in advanced manufacturing, green technology and digital infrastructure.
But planning, by itself, guarantees nothing. The real test is whether Hong Kong can identify where it has a genuine comparative advantage, rather than simply following policy fashion.
This question is especially pressing as the city considers which “industries of the future”, highlighted in China’s five-year blueprint, it should prioritise.
The much-discussed low-altitude economy, encompassing piloted and unpiloted aviation within airspace up to 3,000 metres, is a prime example. Its potential applications are wide-ranging, from logistics and agriculture to aerial surveys and urban mobility.


Yet Hong Kong’s realities are far less accommodating. Its dense urban environment, constrained airspace and stringent regulatory requirements limit the scope for large-scale deployment. Cross-boundary operations would face additional legal and security complexities given the city’s status as a separate customs territory.
In this area, Hong Kong risks investing heavily in a sector where its structural constraints are difficult to overcome.
By contrast, it has far stronger potential to position itself as a service hub for mainland China’s rapidly expanding commercial aerospace industry. Since Beijing opened the sector to private capital in 2015, the industry has grown quickly, spawning hundreds of companies and reaching an estimated value of 2.8 trillion yuan (US$410 billion).
Hong Kong is unlikely to compete in manufacturing rockets or satellites. But it does not need to. Its strengths lie elsewhere.

As an international financial centre, it can help mainland firms raise capital and expand globally. Its legal, insurance and professional service sectors are well placed to manage the increasingly complex risks associated with space activity – from orbital congestion to liability for debris damage.
These capabilities will become increasingly important as low-Earth-orbit satellite constellations proliferate, with competing systems from the United States and China seeking to build next-generation global communications networks.
Closer to home, the Northern Metropolis presents an even more immediate test of Hong Kong’s new industrial strategy.
Envisioned as the city’s future innovation and technology engine, the development aims to integrate industry, housing and research. But successful technology clusters cannot be built by decree alone.

China’s leading technology sectors have flourished on the back of sustained state support, deep talent pools and highly coordinated ecosystems. Replicating this in Hong Kong will require more than land and infrastructure.
The government appears to recognise this. It is moving to allow lower land premiums, streamline planning procedures, promote cross-boundary flows of talent and capital, and take a more direct role in investment. It has pledged to enact tailor-made legislation to fast track tech development in the Northern Metropolis by the end of the year.
In January, the Hong Kong government registered a commercial vehicle, Hung Shui Kiu Industrial Park Company Limited, to spearhead tech investment in the Northern Metropolis. Two more such companies, in the San Tin Technopole and in the Hetao area bordering Shenzhen, are following suit. As the majority shareholder, the government hopes that its investment will unlock private capital.
The government’s resolve is further exemplified by the Executive Council’s landmark decision earlier this week to transfer HK$150 billion ($19.1 billion) from the Exchange Fund to the Capital Works Reserve Fund to finance the Northern Metropolis’ infrastructure development.
These are significant steps. They signal a willingness to move beyond Hong Kong’s traditional laissez-faire approach.
But in the end, markets will deliver the verdict. Industrial policy can guide and catalyse. It cannot substitute for a genuine competitive advantage. If Hong Kong’s technology ambitions are to succeed, they must align not only with national strategy but also with the city’s own strengths.
That is the balance policymakers will need to strike and the test that markets will ultimately face.


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Industrial policy can guide and catalyse but it cannot substitute for a genuine competitive advantage


Industrial policy can guide and catalyse but it cannot substitute for a genuine competitive advantage.


Hong Kong economy

Legislative Council of Hong Kong (Legco)

John Lee

Northern Metropolis

Low-altitude economy

Aerospace: Industry Trends

Aerospace: Policy

Banking & finance

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Hong Kong innovators

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


How markets will test Hong Kong’s new economic model

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Industrial policy can guide and catalyse but it cannot substitute for a genuine competitive advantage

Industrial policy can guide and catalyse but it cannot substitute for a genuine competitive advantage