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Make Good Use of Market Resources to Accelerate Economic Development

The development of innovation and technology (I&T) is experiencing significant transformation. In the past, "Internet Plus" had revolutionised economic development, making our daily life and travel much more convenient. Now, "Artificial Intelligence Plus" ("AI+") is gaining traction, and we can anticipate even more smart products and services in the future.

To harness technology as the core driving force of economic development, it is necessary for us to support both the transformation and application of scientific research outcomes as well as the clustering of and collaboration among enterprises. This will help us build a vibrant ecosystem of industries that will accelerate the exploration of new products and services, and speed up the iteration of technologies as well as nurturing of new quality productive forces.

Accelerating the development of the Northern Metropolis is crucial for Hong Kong to seize the opportunities presented by technological change. The Northern Metropolis serves as the carrier of a new economic growth engine, providing a platform for the advancement of cutting-edge technologies like "AI+", fostering the growth of emerging industries, and facilitating the transformation and upgrading of traditional sectors. By establishing a comprehensive I&T ecosystem, and leveraging the advantages of high-end manufacturing industries and the market scale of the Guangdong-Hong Kong-Macao Greater Bay Area ("GBA"), we will promote collaborative development within the GBA.

The Northern Metropolis development area spans 3,000 hectares and is divided into four major zones from west to east. One of these zones is the "I&T Zone", which includes two key hubs: the "Hong Kong Park of the Hetao Shenzhen-Hong Kong Science and Technology Innovation Co-operation Zone" ("Hong Kong Park") and the "San Tin Technopole", each serving distinct roles.

The "Hong Kong Park" covers 87 hectares and features the advantage of "one zone, two parks". It will collaborate with the adjacent "Shenzhen Park" of the Hetao Co-operation Zone to serve as a platform for promoting the transformation of research outcomes and development of I&T in both Hong Kong and Shenzhen. The first three buildings under the Batch 1 development of the Hong Kong Park are being completed and will begin operation within this year. The development of five more buildings is progressing in full speed. We are also working to implement measures that facilitate the flow of cross-boundary innovative elements within the Hetao Cooperation Zone.

The 210 hectares of I&T land in the "San Tin Technopole" will support research activities and the transformation of outcomes from the "Hong Kong Park", with a strong emphasis on an "industry-oriented" approach. We will leverage Hong Kong's unique advantages in connecting with both the Mainland and the world to attract strategic tech enterprises from around the globe, thereby building a robust I&T industrial chain and a base for emerging I&T industries.

To capitalise on the opportunities presented by the rapid development of frontier technology, we need to accelerate the development of the Northern Metropolis. It will provide ample space and infrastructure to attract tech enterprises to set up business in Hong Kong and expand their research and development or high-end manufacturing activities in the city. Such efforts will invigorate related economic activities.

In the coming years, projects related to the Northern Metropolis will be rolled out progressively, and land for various industries gradually released. Together with other important infrastructure projects aimed at improving people's livelihood (such as the expansion of North District Hospital, the New Acute Hospital at Kai Tak and public housing development site formation works), government spending on capital works is expected to reach its peak.

To ensure that these projects can proceed on schedule and deliver early benefits to the economy and the people, we will leverage market resources, including adopting diverse development models. They include public-private partnerships, in-situ land exchanges, pilot areas for "large-scale land disposal". For "large-scale land disposal", we have invited expressions of interest for three pilot areas in the Northern Metropolis, with plans to invite tenders starting in the second half of this year. Besides, we will issue government bonds to ensure that the progress of the Northern Metropolis, which is crucial to the future development of Hong Kong, remains unimpeded by the fiscal position.

Issuing bonds to support infrastructure projects and invest in the future is a common practice worldwide. Many governments finance infrastructure initiatives through bond issuance to promote economic development. A report from an international organisation indicates that while Hong Kong plans to issue bonds to fund infrastructure projects, its debt level will remain low. A research report from a local university suggests that it can be a wise move to suitably issue debt under the bond programme to support projects that benefit public welfare and long-term social development.

To implement strategic infrastructure projects and expedite the rollout of new land for industries, Hong Kong has the necessary conditions and capability to suitably increase bond issuance, thereby effectively utilising market forces. In many advanced economies, government debt-to-GDP ratios have exceeded 100%. In contrast, Hong Kong's current ratio stands at approximately 9.3%. Even with a moderate increase, it would be significantly lower than that of other advanced economies, and remain at a stable level.

The Government has all along maintained strict fiscal discipline: capital raised through bond issuance is dedicated to future investments and not to meeting operating expenses. As certain infrastructure projects reach completion, the demand for and scale of bond issuance will decline accordingly. On the other hand, economic activities and development of industries driven by infrastructure investments will generate new development opportunities and tax revenues to Hong Kong. Issuing longer-term bonds to support longer-term projects could also align cash flow duration with project requirements.

Bonds issued by the Hong Kong SAR Government in the past have been well-received by global institutional investors, including banks, central banks, sovereign funds and international organisations, as well as fund managers, private banks and insurance companies. For example, in the 2024-25 financial year, institutional green bonds and infrastructure bonds issued by the Hong Kong SAR Government registered subscription amounts nearly three to seven times their issuance sizes, reflecting strong market demand for quality fixed income assets and confidence in Hong Kong's long-term development. Several insurance companies and asset managers have also indicated a preference for the Hong Kong SAR Government to issue more bonds across various tenors and currencies to meet their investment demand for local bonds. This will help establish more comprehensive yield curves, providing benchmarks for other issuers and promoting the further development of Hong Kong's bond market, thereby achieving multiple benefits.

February 16, 2025