Hong Kong Slashes Civil Service Jobs and Invests in AI to Combat Rising Deficit

Hong Kong to cut civil service jobs and invest in AI to tackle a rising deficit

HONG KONG -- HONG KONG (AP) -- Hong Kong will cut thousands of civil service jobs and boost spending in artificial intelligence as it seeks to tackle an increasing deficit, authorities said Wednesday. Finance Secretary Paul Chan said during a budget speech that there would be a "cumulative reduction" of government recurrent expenditure by 7% from now until 2027-2028. Hong Kong's deficit had reached $87.2 billion Hong Kong dollars ($11.2 billion) for the financial year of 2024-2025, making it the third straight year of losses. "It gives us a clear pathway towards the goal of restoring fiscal balance," Chan said. He said 10,000 civil servant posts would be cut by April 2027, representing a reduction of about 2% of the civil service in each of the next two years. Salaries will also be frozen in the civil service this year. Chan also said that up to $195 billion Hong Kong dollars ($25 billion) worth of bonds will also be issued in the next five years to ensure progress of important infrastructure projects, with more than half used to refinance sort-term debt. To boost income, Hong Kong will also raise its airport departure tax from 120 Hong Kong dollars ($15.50) to 200 Hong Kong dollars ($25.70) from the third quarter of the year, representing a 67% increase. Separately, Hong Kong will also make a push into artificial intelligence by leveraging the city's "internationalized characteristic to develop Hong Kong into an international exchange and co-operation hub for the AI industry." Authorities have also earmarked $1 billion Hong Kong dollars for an AI research and development institute, and will set up a $10 billion ($1.29 billion) innovation and technology fund to invest in "emerging and future industries of strategic importance." Hong Kong's finances have been impacted by a weak property sector, as home prices plunged some 30% over the last three years. It is also grappling with economic uncertainty and geopolitical tensions as U.S.-China relations deteriorate. The amount of land premiums paid by developers to the government has declined, hurting Hong Kong's revenues. Land sales typically made up about a fifth of government income, but this has fallen to just above 5% in the last fiscal year. Hong Kong's fiscal reserves will shrink 12% from $734.5 billion Hong Kong dollars ($94.5 billion) to about $647.3 billion Hong Kong dollars ($83.3 billion) by the end of March, and a further 10% in 2025-26, Chan said.

Hong Kong is to cut thousands of civil service jobs and invest in AI to tackle a rising deficit

HONG KONG (AP) -- Hong Kong will cut thousands of civil service jobs and boost spending in artificial intelligence as it seeks to tackle an increasing deficit, authorities said Wednesday. Finance Secretary Paul Chan said during a budget speech that there would be a "cumulative reduction" of government recurrent expenditure by 7% from now until 2027-2028. Hong Kong's deficit had reached $87.2 billion Hong Kong dollars ($11.2 billion) for the financial year of 2024-2025, making it the third straight year of losses. "It gives us a clear pathway towards the goal of restoring fiscal balance," Chan said. He said 10,000 civil servant posts would be cut by April 2027, representing a reduction of about 2% of the civil service in each of the next two years. Salaries will also be frozen in the civil service this year. Chan also said that up to $195 billion Hong Kong dollars ($25 billion) worth of bonds will also be issued in the next five years to ensure progress of important infrastructure projects, with more than half used to refinance sort-term debt. To boost income, Hong Kong will also raise its airport departure tax from 120 Hong Kong dollars ($15.50) to 200 Hong Kong dollars ($25.70) from the third quarter of the year, representing a 67% increase. Separately, Hong Kong will also make a push into artificial intelligence by leveraging the city's "internationalized characteristic to develop Hong Kong into an international exchange and co-operation hub for the AI industry." Authorities have also earmarked $1 billion Hong Kong dollars for an AI research and development institute, and will set up a $10 billion ($1.29 billion) innovation and technology fund to invest in "emerging and future industries of strategic importance." Hong Kong's finances have been impacted by a weak property sector, as home prices plunged some 30% over the last three years. It is also grappling with economic uncertainty and geopolitical tensions as U.S.-China relations deteriorate. The amount of land premiums paid by developers to the government has declined, hurting Hong Kong's revenues. Land sales typically made up about a fifth of government income, but this has fallen to just above 5% in the last fiscal year. Hong Kong's fiscal reserves will shrink 12% from $734.5 billion Hong Kong dollars ($94.5 billion) to about $647.3 billion Hong Kong dollars ($83.3 billion) by the end of March, and a further 10% in 2025-26, Chan said.

Hong Kong is to cut thousands of civil service jobs and invest in AI to tackle a rising deficit

HONG KONG (AP) -- Hong Kong will cut thousands of civil service jobs and boost spending in artificial intelligence as it seeks to tackle an increasing deficit, authorities said Wednesday. Finance Secretary Paul Chan said during a budget speech that there would be a "cumulative reduction" of government recurrent expenditure by 7% from now until 2027-2028. Hong Kong's deficit had reached $87.2 billion Hong Kong dollars ($11.2 billion) for the financial year of 2024-2025, making it the third straight year of losses. "It gives us a clear pathway towards the goal of restoring fiscal balance," Chan said. He said 10,000 civil servant posts would be cut by April 2027, representing a reduction of about 2% of the civil service in each of the next two years. Salaries will also be frozen in the civil service this year. Chan also said that up to $195 billion Hong Kong dollars ($25 billion) worth of bonds will also be issued in the next five years to ensure progress of important infrastructure projects, with more than half used to refinance sort-term debt. To boost income, Hong Kong will also raise its airport departure tax from 120 Hong Kong dollars ($15.50) to 200 Hong Kong dollars ($25.70) from the third quarter of the year, representing a 67% increase. Separately, Hong Kong will also make a push into artificial intelligence by leveraging the city's "internationalized characteristic to develop Hong Kong into an international exchange and co-operation hub for the AI industry." Authorities have also earmarked $1 billion Hong Kong dollars for an AI research and development institute, and will set up a $10 billion ($1.29 billion) innovation and technology fund to invest in "emerging and future industries of strategic importance." Hong Kong's finances have been impacted by a weak property sector, as home prices plunged some 30% over the last three years. It is also grappling with economic uncertainty and geopolitical tensions as U.S.-China relations deteriorate. The amount of land premiums paid by developers to the government has declined, hurting Hong Kong's revenues. Land sales typically made up about a fifth of government income, but this has fallen to just above 5% in the last fiscal year. Hong Kong's fiscal reserves will shrink 12% from $734.5 billion Hong Kong dollars ($94.5 billion) to about $647.3 billion Hong Kong dollars ($83.3 billion) by the end of March, and a further 10% in 2025-26, Chan said.

Hong Kong to cut thousands of civil service jobs, invest in AI to tackle rising deficit

Hong Kong will cut thousands of civil service jobs and boost spending in artificial intelligence as it seeks to tackle an increasing deficit, authorities said Wednesday. Finance Secretary Paul Chan said during a budget speech that there would be a "cumulative reduction" of government recurrent expenditure by 7 per cent from now until 2027-2028. Hong Kong's deficit had reached 87.2 billion Hong Kong dollars (USD 11.2 billion) for the financial year of 2024-2025, making it the third straight year of losses. "It gives us a clear pathway towards the goal of restoring fiscal balance," Chan said. He said 10,000 civil servant posts would be cut by April 2027, representing a reduction of about 2 per cent of the civil service in each of the next two years. Salaries will also be frozen in the civil service this year. Chan also said that up to 195 billion Hong Kong dollars (USD 25 billion) worth of bonds will also be issued in the next five years to ensure progress of important infrastructure projects, with more than half used to refinance sort-term debt. To boost income, Hong Kong will also raise its airport departure tax from 120 Hong Kong dollars (USD 15.50) to 200 Hong Kong dollars (USD 25.70) from the third quarter of the year, representing a 67 per cent increase. Separately, Hong Kong will also make a push into artificial intelligence by leveraging the city's "internationalised characteristic to develop Hong Kong into an international exchange and co-operation hub for the AI industry." Authorities have also earmarked 1 billion Hong Kong dollars for an AI research and development institute, and will set up a 10 billion Hong Kong dollars (USD 1.29 billion) innovation and technology fund to invest in "emerging and future industries of strategic importance." Hong Kong's finances have been impacted by a weak property sector, as home prices plunged some 30 per cent over the last three years. It is also grappling with economic uncertainty and geopolitical tensions as US-China relations deteriorate. The amount of land premiums paid by developers to the government has declined, hurting Hong Kong's revenues. Land sales typically made up about a fifth of government income, but this has fallen to just above 5 per cent in the last fiscal year. Hong Kong's fiscal reserves will shrink 12 per cent from 734.5 billion Hong Kong dollars (USD 94.5 billion) to about 647.3 billion Hong Kong dollars (USD 83.3 billion) by the end of March, and a further 10 per cent in 2025-26, Chan said.

Hong Kong to cut thousands of civil service jobs and invest in AI | BreakingNews.ie

Hong Kong will cut thousands of civil service jobs and boost spending in artificial intelligence (AI) as it seeks to tackle an increasing deficit, authorities said. Finance secretary Paul Chan said during a budget speech that there would be a "cumulative reduction" of government recurrent expenditure by 7% from now until 2027-2028. Hong Kong's deficit had reached 87.2 billion Hong Kong dollars (£8.86 billion) for the financial year of 2024-2025, making it the third straight year of losses. "It gives us a clear pathway towards the goal of restoring fiscal balance," Mr Chan said. He said 10,000 posts would be cut by April 2027, representing a reduction of about 2% of the civil service in each of the next two years. Salaries will also be frozen in the civil service this year. Mr Chan also said that up to 195 billion Hong Kong dollars (£19.83 billion) worth of bonds will also be issued in the next five years to ensure progress of important infrastructure projects, with more than half used to refinance sort-term debt. To boost income, Hong Kong will also raise its airport departure tax from 120 Hong Kong dollars (£12.20) to 200 Hong Kong dollars (£20.30) from the third quarter of the year, representing a 67% increase. Separately, Hong Kong will also make a push into artificial intelligence by leveraging the city's "internationalised characteristic to develop Hong Kong into an international exchange and co-operation hub for the AI industry". Authorities have also earmarked one billion Hong Kong dollars (£101 million) for an AI research and development institute, and will set up a 10 billion Hong Kong dollar (£1.01 billion) innovation and technology fund to invest in "emerging and future industries of strategic importance". Hong Kong's finances have been hit by a weak property sector, as home prices plunged some 30% over the last three years. It is also grappling with economic uncertainty and geopolitical tensions as US-China relations deteriorate. The amount of land premiums paid by developers to the government has declined, hurting Hong Kong's revenues. Land sales typically made up about a fifth of government income, but this has fallen to just above 5% in the last fiscal year. Hong Kong's fiscal reserves will shrink 12% from 734.5 billion Hong Kong dollars (£74.6 billion) to about 647.3 billion Hong Kong dollars (£65.83 billion) by the end of March, and a further 10% in 2025-26, Mr Chan said.

Hong Kong to slash 10,000 civil service jobs, push AI in bid to reverse deficit

HONG KONG (Reuters) - Hong Kong aims to cut spending by slashing 10,000 civil service jobs in an effort to rein in a rising deficit, and plans a big AI push as it navigates headwinds from global economic uncertainty, geopolitical tensions and a weak property market. "It gives us a clear pathway towards the goal of restoring fiscal balance in the operating account, in a planned and progressive manner," said the city's Financial Secretary Paul Chan in announcing the financial hub's annual budget. Chan said 10,000 civil servant jobs would be cut by April 2027, representing a reduction of 2% of the civil service in each of the coming two years. Public sector salaries will also be frozen this year. Chan said the "reinforced" fiscal consolidation programme would see a cumulative reduction in public expenditure by 7% from now till fiscal year ending on March 31, 2028. The spending cut would lay a "sustainable fiscal foundation for future development", he said, after a sharp fall in revenue from land sales left the deficit at HK$87.2 billion, nearly double the previous forecast of HK$48.1 billion. Separately, in line with China's growing push to develop self-reliance in AI and other high technology sectors including robotics, Chan said Hong Kong would "leverage its strength as an international platform for stepping up the development of the AI industry". The city has earmarked HK$1 billion for an AI Research and development institute. Yet, some observers said the budget didn't go far enough, and called for more structural changes to address the city's strained finances. "While the city's fiscal reserves provide a buffer, the escalating deficit demands immediate and strategic actions," said William Chan, a partner at Grant Thornton Hong Kong. "To safeguard Hong Kong's future prosperity, we urge the government to immediately launch a comprehensive tax base expansion study." The AI push and spending cut plans though cheered markets. The Hong Kong's Hang Seng Index was up 3% while the property and tech sub-indices rose over 3% and 4%, respectively. GLOBAL UNCERTAINTY Hong Kong's small and open economy has also been vulnerable to external headwinds including China's economic slowdown, and the tensions between China and the U.S. as President Donald Trump ramps up pressure on Beijing around trade, tech and geopolitics. The city's GDP is expected to grow between 2%-3% this year, versus 2.5% last year and 3.2% in 2023. Earlier this year, the U.S. imposed additional tariffs of 10% on goods from China and also Hong Kong, which the financial hub's government has criticised, saying Washington has ignored the city's status as a separate customs territory. Following China's imposition of a powerful national security law on Hong Kong in 2020, a number officials including current leader John Lee were sanctioned, and the city was stripped of its special status as a separate trading entity. One of Hong Kong's major conglomerates, CK Hutchison, owned by billionaire Li Ka-shing, is also facing pressure from the U.S. over its ports in the Panama Canal, after Trump falsely claimed China is operating the canal. "Hong Kong is facing a rather complicated international environment amid changes unseen in a century around the world. The rise of protectionism and unilateralism has resulted in a fragmented global political and economic landscape," Chan said. Hong Kong's finances have been hurt in the last three years by plunging revenues from land premiums - which developers pay for land use - as home prices tumbled nearly 30%. Marcos Chan, the head of research for real estate consultancy CBRE Hong Kong, said high financing costs and an oversupply of properties would remain "significant obstacles" to a meaningful rebound in demand in property investments. The government will not put any commercial sites on sale in the coming year, due to high office vacancy rates and ample future supply, and will consider rezoning some commercial sites to residential sites. Land sales have traditionally been a main source of income for the government, contributing more than 20% to coffers, a figure that has now slipped to around 5%. Hong Kong's fiscal reserves are now around HK$647.3 billion, down from HK$734.6 billion at the end of March 2024. (Reporting by Jessie Pang, Clare Jim, Donny Kwok, Anne Marie Roantree; Writing by James Pomfret; Editing by Christian Schmollinger and Shri Navaratnam)

Hong Kong to slash 10,000 civil service jobs, push AI in bid to reverse deficit

Hong Kong aims to cut spending by slashing 10,000 civil service jobs in an effort to rein in a rising deficit, and plans a big AI push as it navigates headwinds from global economic uncertainty, geopolitical tensions and a weak property market. "It gives us a clear pathway towards the goal of restoring fiscal balance in the operating account, in a planned and progressive manner," said the city's Financial Secretary Paul Chan in announcing the financial hub's annual budget. Chan said 10,000 civil servant jobs would be cut by April 2027, representing a reduction of 2% of the civil service in each of the coming two years. Public sector salaries will also be frozen this year. Chan said the "reinforced" fiscal consolidation programme would see a cumulative reduction in public expenditure by 7% from now till fiscal year ending on March 31, 2028. The spending cut would lay a "sustainable fiscal foundation for future development", he said, after a sharp fall in revenue from land sales left the deficit at HK$87.2 billion, nearly double the previous forecast of HK$48.1 billion. Separately, in line with China's growing push to develop self-reliance in AI and other high technology sectors including robotics, Chan said Hong Kong would "leverage its strength as an international platform for stepping up the development of the AI industry". The city has earmarked HK$1 billion for an AI Research and development institute. Yet, some observers said the budget didn't go far enough, and called for more structural changes to address the city's strained finances. "While the city's fiscal reserves provide a buffer, the escalating deficit demands immediate and strategic actions," said William Chan, a partner at Grant Thornton Hong Kong. "To safeguard Hong Kong's future prosperity, we urge the government to immediately launch a comprehensive tax base expansion study." The AI push and spending cut plans though cheered markets. The Hong Kong's Hang Seng Index was up 3% while the property and tech sub-indices rose over 3% and 4%, respectively. Hong Kong's small and open economy has also been vulnerable to external headwinds including China's economic slowdown, and the tensions between China and the U.S. as President Donald Trump ramps up pressure on Beijing around trade, tech and geopolitics. The city's GDP is expected to grow between 2%-3% this year, versus 2.5% last year and 3.2% in 2023. Earlier this year, the U.S. imposed additional tariffs of 10% on goods from China and also Hong Kong, which the financial hub's government has criticised, saying Washington has ignored the city's status as a separate customs territory. Following China's imposition of a powerful national security law on Hong Kong in 2020, a number officials including current leader John Lee were sanctioned, and the city was stripped of its special status as a separate trading entity. One of Hong Kong's major conglomerates, CK Hutchison , owned by billionaire Li Ka-shing, is also facing pressure from the U.S. over its ports in the Panama Canal, after Trump falsely claimed China is operating the canal. "Hong Kong is facing a rather complicated international environment amid changes unseen in a century around the world. The rise of protectionism and unilateralism has resulted in a fragmented global political and economic landscape," Chan said. Hong Kong's finances have been hurt in the last three years by plunging revenues from land premiums - which developers pay for land use - as home prices tumbled nearly 30%. Marcos Chan, the head of research for real estate consultancy CBRE Hong Kong, said high financing costs and an oversupply of properties would remain "significant obstacles" to a meaningful rebound in demand in property investments. The government will not put any commercial sites on sale in the coming year, due to high office vacancy rates and ample future supply, and will consider rezoning some commercial sites to residential sites. Land sales have traditionally been a main source of income for the government, contributing more than 20% to coffers, a figure that has now slipped to around 5%. Hong Kong's fiscal reserves are now around HK$647.3 billion, down from HK$734.6 billion at the end of March 2024.

Hong Kong to slash public spending, build AI institute

HONG KONG (AFP) - Hong Kong will cut public spending and restore fiscal balance by mid-2027 after a string of huge deficits, the city's finance chief said Wednesday as he unveiled growth plans including an artificial intelligence institute. Officials are under pressure to balance the books as Hong Kong faces its toughest fiscal test in three decades, with annual deficits exceeding USD20 billion in four of the past five years. It is also being weighed by China's economic malaise and a looming US-China trade war, following an opening salvo of tariffs from President Donald Trump. The economy is expected to grow between two and three percent this year, on par with last year's 2.5 per cent. Financial Secretary Paul Chan said in his annual budget speech that the government will contain spending in a way that minimises the impact on public services and livelihoods. A "cumulative reduction" of government recurrent expenditure by seven percent through to 2027-28 would take place, he said. "It gives us a clear pathway towards the goal of restoring fiscal balance in the operating account... within the current term of the government," which ends in June 2027, he added. Chan announced a pay freeze for all branches of government and said around six percent of its 170,000-strong civil service will be trimmed by April 2027. Other spending curbs include a cap on a transport subsidy for people aged above 60. Hong Kong has long relied on land-related revenue to fill government coffers, but income from that plunged last year to USD1.7 billion -- the lowest in two decades. Chan said Hong Kong's asset market was "under pressure" and that land-related revenue will rebound to USD2.7 billion this year. The government said it would not put commercial land up for sale in the coming year amid high office vacancy rates. To reverse the property slump, Hong Kong will also lower the stamp duty of homes valued under US$515,000. Marcos Chan, from commercial real estate firm CBRE Hong Kong, said the budget had "fewer policy measures aimed at directly boosting property demand". The finance chief said Wednesday that the government would spend HKD1 billion (USD129 million) to set up a Hong Kong AI Research and Development Institute, in a bid to make the city "an international exchange and co-operation hub for the AI industry". The city is eager to lure back international visitors after its reputation took a hit from political unrest and pandemic-related curbs. The government will allocate USD159 million to its tourism body to promote "distinctive tourism products" such as panda tourism and horse-racing tourism. Chan's speech saw no public opposition, as authorities continued to crack down on dissent in the city. Activists from the League of Social Democrats, one of the last remaining pro-democracy groups, cancelled their annual pre-budget petition citing "strong pressure". The group planned to call for pay cuts for top officials, greater government accountability and halting costly infrastructure projects such as the "Northern Metropolis". But Chan said on Wednesday the government will push ahead with the project, which aims to integrate Hong Kong more closely to its neighbour Shenzhen. "We must accelerate the development of the Northern Metropolis. It is an investment in our future," he said. The government will issue up to USD25.1 billion in bonds every year until 2029-30 to fund its infrastructure ambitions. The International Monetary Fund said last month that Hong Kong was "recovering gradually after a protracted period of shock". The city's benchmark Hang Seng Index, which has rallied to a three-year high thanks to a recent surge in mainland tech companies, rose more than three percent Wednesday.

Hong Kong to slash public spending, build AI institute

Hong Kong (AFP) - Hong Kong will cut public spending and restore fiscal balance by mid-2027 after a string of huge deficits, the city's finance chief said Wednesday as he unveiled growth plans including an artificial intelligence institute. Officials are under pressure to balance the books as Hong Kong faces its toughest fiscal test in three decades, with annual deficits exceeding US$20 billion in four of the past five years. It is also being weighed by China's economic malaise and a looming US-China trade war, following an opening salvo of tariffs from President Donald Trump. The economy is expected to grow between two and three percent this year, on par with last year's 2.5 percent. Financial Secretary Paul Chan said in his annual budget speech that the government will contain spending in a way that minimises the impact on public services and livelihoods. A "cumulative reduction" of government recurrent expenditure by seven percent through to 2027-28 would take place, he said. "It gives us a clear pathway towards the goal of restoring fiscal balance in the operating account... within the current term of the government," which ends in June 2027, he added. Chan announced a pay freeze for all branches of government and said around six percent of its 170,000-strong civil service will be trimmed by April 2027. Other spending curbs include a cap on a transport subsidy for people aged above 60. Hong Kong has long relied on land-related revenue to fill government coffers, but income from that plunged last year to US$1.7 billion -- the lowest in two decades. Chan said Hong Kong's asset market was "under pressure" and that land-related revenue will rebound to US$2.7 billion this year. The government said it would not put commercial land up for sale in the coming year amid high office vacancy rates. 'Northern Metropolis' To reverse the property slump, Hong Kong will also lower the stamp duty of homes valued under US$515,000. Marcos Chan, from commercial real estate firm CBRE Hong Kong, said the budget had "fewer policy measures aimed at directly boosting property demand". The finance chief said Wednesday that the government would spend HK$1 billion (US$129 million) to set up a Hong Kong AI Research and Development Institute, in a bid to make the city "an international exchange and co-operation hub for the AI industry". The city is eager to lure back international visitors after its reputation took a hit from political unrest and pandemic-related curbs. The government will allocate US$159 million to its tourism body to promote "distinctive tourism products" such as panda tourism and horse-racing tourism. Chan's speech saw no public opposition, as authorities continued to crack down on dissent in the city. Activists from the League of Social Democrats, one of the last remaining pro-democracy groups, cancelled their annual pre-budget petition citing "strong pressure". The group planned to call for pay cuts for top officials, greater government accountability and halting costly infrastructure projects such as the "Northern Metropolis". But Chan said on Wednesday the government will push ahead with the project, which aims to integrate Hong Kong more closely to its neighbour Shenzhen. "We must accelerate the development of the Northern Metropolis. It is an investment in our future," he said. The government will issue up to US$25.1 billion in bonds every year until 2029-30 to fund its infrastructure ambitions. The International Monetary Fund said last month that Hong Kong was "recovering gradually after a protracted period of shock". The city's benchmark Hang Seng Index, which has rallied to a three-year high thanks to a recent surge in mainland tech companies, rose more than three percent Wednesday.

Hong Kong flags spending cut, AI push in bid to reverse booming deficit

HONG KONG (Reuters) - Hong Kong aims to cut public recurrent expenditure by 7% from now till 2027/28 to rein in a rising deficit and plans a big AI push as it tries to mitigate headwinds from global economic uncertainty, geopolitical tensions and a weak property market. "It gives us a clear pathway towards the goal of restoring fiscal balance in the operating account, in a planned and progressive manner," said the city's Financial Secretary Paul Chan in announcing the financial hub's annual budget. Chan said the "reinforced" fiscal consolidation programme lay a "sustainable fiscal foundation for future development" after sharp fall in revenue from land sales over the past financial year. He warned "geopolitics will still bring challenges to Hong Kong's economy" with GDP forecast to grow between 2-3% this year. The next financial year, starting April 1, presents fresh economic challenges for Hong Kong, as U.S. President Donald Trump's tariff policies threaten to dent global growth. Trump has imposed additional tariffs of 10% on goods from China and also Hong Kong, which the financial hub's government has criticised, saying Washington has ignored the city's status as a separate customs territory. In line with China's growing strategic push into AI and other high technology sectors including robotics, Chan said Hong Kong would place AI as a core industry with HK$1 billion to be used to set up an AI Research and development institute. (Reporting by Jessie Pang, Clare Jim, Donny Kwok, Anne Marie Roantree; Writing by James Pomfret; Editing by Christian Schmollinger and Shri Navaratnam)

Hong Kong government earmarks $128 million for new AI research institute and aims to cut public spending

The government also aims to cut public recurrent expenditure by 7% from now till 2027/28 to tackle its rising deficit. Hong Kong's government has earmarked 1 billion Hong Kong dollars ($128.67 million) for the establishment of an artificial intelligence research institute. Called the Hong Kong AI Research and Development Institute, the facility will "spearhead and support Hong Kong's innovative R&D as well as industrial application of AI," the city's Financial Secretary Paul Chan said in his budget speech Wednesday. Gary Ng, senior economist at Natixis, sees Hong Kong's investment in innovation and AI as a positive move. "Hong Kong hasn't been so good in terms of innovation ... like, how to actually create a new product. But ... the AI industry is evolving in quite a quick pace. So for the case of Hong Kong, if it is able to adapt to this new environment, trying to use AI more, including what we see within the government, I think that is definitely a positive signal," he told CNBC's "Street Signs Asia" on Wednesday. Tech stocks rallied on the back of the announcement, with the Hang Seng Tech Index gaining as much as 4.49%. Chan attributed improved sentiment in asset markets this year in part to Central Government measures to support Hong Kong's capital market, and the U.S. rate cut cycle. "The stock market saw increases in both prices and turnover volume," he said, adding that the Hang Seng Index rose 18% for the year, while the average daily turnover increased by 26%. Funds raised by new listings increased to HK$88 billion, he added. Chan expects Hong Kong's economy to grow at an average rate of 2.9% a year in real terms from 2026 to 2029, and the underlying inflation rate to be 2.5% a year, on average. But Natixis' Ng says that economic growth forecast is "too optimistic." "In the short run, we still see this uncertainty in the global interest rate environment. There are actually still a lot of geopolitical tensions that can actually affect our Hong Kong trade flows," he said. Other concerns he outlined include more trade restrictions from the United States and potentially other countries. Ng estimates that the Hong Kong economy will grow at 2% this year and over the long term.