Hong Kong 2030
I am not sure that everyone in Hong Kong has taken fully on board the breadth and depth of our city’s intended role in the future economic development of the nation. It is right there in the budget speech promulgated last month by financial secretary Paul Chan Mo-po, and is currently being fleshed out on the 15th five-year plan now being finalised in Beijing. But sometimes the things that are presented most prominently are the ones most easily overlooked.
In an early paragraph of the speech, Chan states clearly that the government’s objective is “to enhance our influence as a global source of original innovation”. This is a seismic shift.
One way of looking at economic progress is to divide it into two main phases: first comes creation of a new product that did not previously exist (for the purposes of this discussion, “product” includes both tangible goods and intangible service innovations). The second phase covers widespread rollout of the new product until it becomes a commodity which everyone takes for granted. The objective here is to maximise efficiency in production, reduce costs, and in the process make incremental improvements to the original invention.
The first phase is sometimes described in academic circles as “Zero to One” i.e. there was nothing there before and now there is something. The second phase covers subsequent development from one to an infinite number, abbreviated to “One to N”.
Much of China’s economic progress over the past 40 years has been in the second phase, taking an item that has been designed somewhere else then proceeding to mass production with economies and efficiencies of scale and progressive improvements. Think solar panels, electric cars, battery power storage etc.
But in recent times more emphasis has started to be placed on ab initio innovation which is essential if the country is to deliver high quality, high value added industrial development and achieve diversified economic growth.
Historically Hong Kong has undertaken a supportive role in this development. We provided the financial services, the business and professional services, marketing skills, management of logistics and so on. We served to help phase 2. Now we are being called on to up our game and contribute more directly to the early stages of product development, in phase 1.
Much of the post budget media coverage focussed on the planned increasing use of Artificial Intelligence in industrial development, which would gradually permeate most aspects of daily life, giving rise to the concept of “AI Training for all”. Such an emphasis is eye-catching and natural.
But the budget also lays out a sophisticated infrastructure to support our projected enhanced role in innovation. The aim is to boost our position as a key regional intellectual property trading centre. This will involve a review of our existing arrangements including tax regime. How much more compelling that status will be when we are seen to be the original source of much new intellectual property.
Specifically on capital expenditure incurred for purchasing IP or the right to use IP, we will need to review how we allow tax deduction for this to ensure we remain competitive.
Chan also reported on operation of the IP financing Sandbox. Launched late last year it includes three major Hong Kong banks and clients in three key sectors (biotech, electronics and technology). The government has set aside funds for the Hong Kong Technology and Innovation Support Centre to help companies evaluate patents, and to expand the number of patent examiners. There are also plans to establish an Intellectual Property Academy to provide proper training for the different professions involved (legal, marketing, retail etc).
Taken together, these initiatives provide the necessary support. What we need now is the innovation itself.
This is where our education system is bound to be influenced by the new direction. Luckily we already have five of the world’s top 100 universities and they have a good reputation for research. They are open to, and increasingly attractive to, the best and the brightest students from around the world, particularly the mainland. Young people from ASEAN and Belt and Road countries are also showing interest. The local universities are now permitted to make up to 40 per cent of the places available to external students (up to 50 per cent on a self-financing basis). Not surprisingly the percentage of non-locals is increasing and for the 2025-26 academic year reached 25 per cent.
This is great news for Hong Kong’s aspiration to be an education hub, and promises a bright future for Hong Kong as an economic entity.
But Hong Kong the city is not just an economic body like a corporation, it is home to over seven million people. What we have to ensure now is that we equip our own young people at secondary school level with the skills and aptitude to be competitive in applying for university places. In this context it is striking how many local parents are prepared to spend substantial sums to send their children to an international or ESF school in Hong Kong, or even overseas, in preference to a highly subsidised place in a local school.
Given that our economic course has been set, we must produce more creative free-thinkers rather than rote learners geared to a demanding examination schedule.
The message to our young people and their families is clear: Hong Kong has a bright future, with all the existing paths to success (finance, professions, trade etc) still open, plus the addition of technological innovation. They just need the right language and IT skills, and equally important, the right mindset.
Food for thought for our education authorities.