Hong Kong’s 2025 Budget, announced by Financial Secretary Paul Chan, outlines a strategy focused on long-term economic stability, technological advancement, and reinforcing the city’s role as a global financial hub. While addressing fiscal pressures, the government is increasing investments in artificial intelligence (AI), innovation, and financial services, positioning Hong Kong for future growth amid evolving global challenges.
To maintain fiscal stability, the government has introduced a reinforced fiscal consolidation programme, which includes a 7% reduction in recurrent expenditure by 2028 and a planned reduction of 10,000 civil service jobs by 2027. These measures are intended to ensure a sustainable fiscal foundation while maintaining essential public services.
One of the key drivers behind this move is a shift in government revenue sources. Historically, land sales contributed over 20% to Hong Kong’s fiscal reserves, but this has now dropped to around 5%, impacting the city’s budget balance. With the 2024-25 deficit estimated at HK$87.2 billion, the government is exploring alternative strategies to ensure economic resilience.
While some analysts suggest that structural reforms, including a broader tax base, may be necessary in the long run, the government’s current focus remains on managing expenditure prudently and fostering new growth sectors.
A major highlight of the budget is the HK$1 billion investment in an AI Research and Development Institute, reinforcing Hong Kong’s ambition to become a leading innovation hub. This aligns with broader efforts to integrate AI and digital transformation into key industries, enhancing Hong Kong’s competitiveness in global markets.
Additionally, the government is expanding its support for financial technology (fintech), startups, and smart manufacturing, further strengthening the city’s reputation as a hub for technological innovation and financial services.
These initiatives have been well-received by the market, with the Hang Seng Index rising 3% after the budget announcement, and both property and technology stocks posting gains.
Despite strong policy measures, Hong Kong’s open economy remains sensitive to external developments. The city’s GDP is projected to grow 2-3% in 2025, reflecting steady expansion despite global economic fluctuations.
Trade relations with the United States and Mainland China continue to be key considerations, particularly in light of new U.S. tariffs on Chinese and Hong Kong goods. While these geopolitical factors add a layer of complexity, Hong Kong remains well-positioned to capitalise on its deep financial links with Mainland China and its role within the Greater Bay Area (GBA).
The real estate sector is undergoing a transition, with the government pausing commercial land sales in 2025 to balance supply and demand. This comes amid high office vacancy rates and shifts in investor sentiment.
To support long-term market stability, authorities are considering rezoning commercial sites for residential development, which may lead to new opportunities for investors and developers looking at Hong Kong’s evolving property landscape.
Hong Kong continues to reinforce its status as a global asset and wealth management centre, attracting high-net-worth individuals and institutional investors. The government has prioritised initiatives to expand the city’s family office ecosystem, with InvestHK assisting over 160 family offices in setting up or expanding operations. To further showcase Hong Kong’s strengths in this sector, the government will host the third edition of the Wealth for Good in Hong Kong Summit, an event aimed at highlighting the city’s role as a premier destination for wealth management and investment.
As a leading offshore renminbi (RMB) business hub, Hong Kong continues to enhance its financial infrastructure and liquidity support. Efforts are underway to expand RMB investment products and improve risk management tools, ensuring a more dynamic and efficient market. The Hong Kong Monetary Authority (HKMA) has introduced a new RMB Trade Financing Liquidity Facility valued at RMB100 billion, designed to provide banks with a stable and cost-effective funding source. This initiative is expected to strengthen Hong Kong’s role in RMB trade finance and further integrate the city into global financial markets.
Recognising the importance of small and medium enterprises (SMEs) to Hong Kong’s economy, the government has introduced several initiatives to support business growth and improve access to financing. A total of HK$1.5 billion will be injected into the BUD Fund and the Export Marketing and Trade and Industrial Organisation Support Fund, with streamlined application processes to facilitate easier access for businesses.
Additionally, the SME Financing Guarantee Scheme has been extended, allowing enterprises to apply for a principal moratorium of up to 12 months until November 2025, easing cash flow pressures. To further support SME lending, banks participating in the Taskforce on SME Lending have increased the dedicated funds for SME financing to over HK$390 billion, ensuring businesses have the resources needed to expand and thrive.
The New Capital Investment Entrant Scheme has continued to attract strong interest from investors, with over 880 applications received and anticipated investments exceeding HK$26 billion. To further enhance its appeal, the government plans to introduce additional flexibility within the scheme, making Hong Kong an even more attractive destination for investors seeking long-term residency and capital opportunities.
The budget introduces a range of financial relief measures aimed at reducing the tax burden on individuals and businesses while stimulating economic activity:
These measures are intended to support economic recovery and ease financial pressures on both households and businesses.
The 2025 Budget reflects a measured and forward-looking approach to economic management, balancing fiscal discipline with investments in high-growth industries. While external uncertainties remain, Hong Kong’s strategic focus on innovation, financial services, and business expansion ensures that it remains a dynamic and competitive hub for investment and entrepreneurship.
