FHKI Applauds the Visionary and Ambitious 2025-26 Budget
FHKI Applauds the Visionary and Ambitious 2025-26 Budget
26-02-2025
FHKI Applauds the Visionary and Ambitious 2025-26 Budget
The Federation of Hong Kong Industries (“FHKI”) Financial Secretary Paul Chan's announcement of the 2025-26 Budget today (26 February). In the face of global challenges and local fiscal limitations, the Budget showcases prudent fiscal management and a proactive commitment to innovation and technology (I&T), new industrial development, and the upgrading and transformation of traditional industries. Together, these initiatives foster new growth areas, embodying the Government's dedication to clear, forward-thinking, and decisive reforms.
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Driving New Industrialisation Development with I&T as the Core Engine
FHKI welcomes the Budget's commitment to promoting new industrialisation development in Hong Kong, thereby stimulating industry-wide innovation. The Budget allocates HK$100 million for the Pilot Manufacturing and Production Line Upgrade Support Scheme (Manufacturing+), which assists enterprises operating production lines in Hong Kong to elevate their smart production capabilities, propelling Hong Kong’s industries towards high-quality development. Additionally, FHKI supports the Government’s continued implementation of various new industrial policies and measures aimed at uncovering new economic growth areas.
FHKI appreciates the Government’s focus on the strategic significance of the Northern Metropolis in accelerating the growth of I&T industries. By adopting a diversified development approach and flexibly leveraging market resources, the Government is set to expedite the development of the Northern Metropolis. Plans are also in place to solicit private development proposals and to increase bond issuance, which will hasten the development of the Hong Kong Park of the Hetao Shenzhen Hong Kong Science and Technology Innovation Co‑operation Zone. This development, combined with the rapid construction of the San Tin Technopole and the Data Facility Cluster at Sandy Ridge, injects new momentum into Hong Kong’s innovation and economic growth.
The Budget also reserves HK$1 billion to establish the Hong Kong AI Research and Development Institute, with the goal of enhancing the transformation of R&D outcomes and the expansion of application scenarios. The Hong Kong Exchanges and Clearing Limited is proactively setting up a dedicated "technology enterprises channel" (TECH), leveraging Hong Kong's advantages as an international financial centre to assist technology companies in raising funds. Meanwhile, the Government is streamlining the procedures for vetting licence applications for operating Low Earth Orbit satellites and is enacting dedicated legislation for various types of Advanced Air Mobility, creating a favourable environment for the development of emerging industries.
For life and health technology, the Budget proposes establishing the Real-World Study and Application Centre by the end of this year to accelerate the registration of new drugs and promote R&D and clinical trials. FHKI is pleased to see the Government's commitment to put forward a timetable for establishing the Hong Kong Centre for Medical Products Regulation in the first half of the year. We believed this will further promote the robust development of smart medical engineering and life and health technology in Hong Kong.
Supporting SMEs to Tackle Challenges
Amid the unpredictable geopolitical landscape, FHKI welcomes the Budget's allocation of $1.5 billion to the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund) and the Export Marketing and Trade and Industrial Organisation Support Fund. These funds are designed to help the business sector expand into new markets. The launch of the "E-commerce Express" by the Trade Development Council, coupled with the enhancement of its mentorship scheme in collaboration with the Trade and Industry Department, equips Hong Kong businesses to capitalise on e-commerce opportunities and broaden their business horizons.
FHKI also applauds the Budget's continued support measures for SMEs, addressing their critical financial needs. The relaunch of the principal moratorium arrangement for one year last November, along with funds exceeding $390 billion dedicated to SME financing by banks participating in the Taskforce on SME Lending – jointly established by the Hong Kong Monetary Authority and the Hong Kong Association of Banks – highlights a significant commitment to supporting SMEs with growth potential facing cash flow challenges.
Furthermore, the Budget proposes a rates concession for non-domestic properties for the first quarter of the 2025/26 fiscal year, capped at HK$500; and a 100% reduction in profits tax for the 2024/25 assessment year, capped at HK$1,500. Although these relief amounts have been adjusted compared to previous years, the business community recognizes the Government's efforts to balance its fiscal condition and expresses a willingness to work together with the government to navigate these challenging times. FHKI believes these relief measures reflect the Government's steadfast support for the business sector, enabling enterprises to maintain resilience and progress steadily through a complex and evolving landscape.
Empowering Business Development and Exploring Emerging Markets
FHKI welcomes the Budget proactive efforts to expand Hong Kong's external trade and economic network. Following the industry’s recommendations, the Government has initiated negotiations with Malaysia and Saudi Arabia for the establishment of Economic and Trade Offices. Additionally, InvestHK and HKTDC have set up Consultant Offices in Egypt, Turkey, and Cambodia. These initiatives are poised to attract more enterprises and investments from the Global South markets but also provide more comprehensive support for Hong Kong in tapping into emerging markets, thereby helping to expand its international network.
FHKI supports the Budget's initiatives aimed at enhancing Hong Kong's role as a regional trade hub. The Budget suggests that HKTDC and InvestHK jointly encourage Mainland enterprises to establish a presence in Hong Kong by setting up international or regional headquarters for managing offshore trading and supply chain. This strategy will fully leverage Hong Kong's expertise and advantages in supply chain management, further driving the development of professional services within the city. It will also attract more Mainland enterprises to utilise Hong Kong as a platform for global supply chain and industrial chain layouts, enabling them to "go global" through Hong Kong and thereby injecting new momentum into the economies of both HKSAR and our country.
In terms of enhancing mobility across the Greater Bay Area (GBA), we welcome the Budget’s efforts to improve connectivity between the Mainland and Hong Kong in the realm of e-payment. The Budget actively promotes the integration of faster payment systems between the two regions, offering a round-the-clock, real-time, small-value cross-boundary remittance service. This initiative will further facilitate interactions and cross-boundary business activities between residents of the two regions, promoting the flow of people and capital and benefiting local enterprises looking to expand into the Mainland market. However, the Budget’s proposal to explore a boundary facilities fee on private cars departing via land boundary control points may potentially hinder the mobility of cross-border personnel and economic cooperation. FHKI urges the government to carefully reconsider this measure to better promote the integration and development of the GBA.
Enhancing Strengths to Seize New Opportunities
The Budget delineates several strategic measures to further bolster Hong Kong's role as an international financial hub. These initiatives include collaborations with ASEAN and Middle Eastern countries to facilitate the listing of exchange-traded funds, thereby enriching the diversity of investment products available in mutual markets. Additionally, efforts are being made to enhance financial market interconnectivity and a review with the Securities and Futures Commission (SFC) of the trading unit system is underway to ensure that trading arrangements are optimally aligned with the liquidity characteristics of shares of varying sizes and investment needs. Moreover, the anticipated development of the commodities market is expected to attract significant international capital inflows and foster new economic growth areas. FHKI eagerly anticipates the Working Group on Promoting Gold Market Development to announce its proposed plans shortly.
Hong Kong's robust intellectual property protection framework lays a solid foundation for the advancement of I&T within the region. The FHKI supports the Budget's initiative to review tax deduction arrangements related to the acquisition rights to use intellectual property, aiming to stimulate the intellectual property trade in Hong Kong. Furthermore, the Budget introduces a suite of measures to consolidate and enhance Hong Kong’s status as an international shipping centre. This includes the establishment of the Hong Kong Maritime and Port Development Board this year, optimisation of tax measures to strengthen the maritime industry, provision of a half-rate tax concession to eligible commodity traders, and an allocation of $215 million to implement the port community system, all of which are designed to enhance local competitive advantages.
Attracting Talent and Promoting Sustainable Development
The FHKI commends the Government’s proactive efforts in nurturing and attracting top-tier talent, positioning Hong Kong as a prime hub for talent aggregation. Measures include optimising the New Capital Investment Entrant Scheme, inviting leading global talents to Hong Kong, refining the Admission Scheme for Mainland Talents and Professionals to allow young non-degree holders with relevant professional and technical qualifications and experience to fill roles in skilled trades with manpower shortages, and relaxing restrictions on the GBA and the Youth Employment and Training Programme. These initiatives are set to significantly enhance the capabilities and competitiveness of the youth, further reinforcing Hong Kong’s stature as an International Innovation and Technology Centre and a regional hub, thereby laying a robust foundation for economic transformation and high-quality development.
In terms of sustainable development, the FHKI supports the Budget's decision to extend the Pilot Green and Sustainable Finance Capacity Building Support Scheme to enhance the training of green finance professionals. Additionally, an extra HKD 180 million has been allocated to expand the number of residential food waste smart recycling bins and food waste collection facilities throughout the city, amplifying waste recovery efforts. These initiatives highlight Hong Kong’s commitment to sustainable development and the strengthening of the city’s competitive edge.
FHKI Chairman Steve Chuang fully endorses the Government’s accelerated initiatives in developing the Northern Metropolis and the Hong Kong Park of Hetao Shenzhen Hong Kong Science and Technology Innovation Co-operation Zone. He also supports the sustained investment in I&T and new industrialisation to nurture high quality productive forces. He stated, "Amid challenging fiscal and economic conditions, this year's Budget maintains a focus on the Northern Metropolis, I&T and new industrialisation while reducing expenditures. This reflects the Government’s strong commitment to embracing innovation, implementing reforms, and transforming economic strategies to uncover new growth areas. We are in full support of the Government's strategy to expedite the development of the Northern Metropolis and the Loop through 'large-scale land development' and bond issuance, which are vital for stimulating economic growth and future investments."
Chairman Chuang also highlighted the Government's strategic allocation of one billion dollars to establish the Hong Kong AI Research and Development Institute, positioning AI as a crucial new industry and laying a robust foundation for the I&T sector. The launch of the "Pilot Manufacturing and Production Line Upgrade Support Scheme", together with enhanced funding for the "BUD Fund" and the "Export Marketing and Trade and Industrial Organisation Support Fund", will enable SMEs to penetrate new markets and integrate advanced production technologies. These strategic initiatives aim to drive industrial transformation and strengthen the long-term competitiveness of Hong Kong’s businesses, equipping them to tackle challenges and capitalise on new opportunities in an era marked by profound changes.
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