Hong Kong needs to create new momentum for economic growth through re-industrialisation and seizing opportunities presented by the "One Belt, One Road" strategy of Chinese President Xi Jinping, its Chief Executive Leung Chun Ying said yesterday.
The government will set up a HK$2 billion (S$369 million) matching fund to encourage private venture capital funds to invest in local start-ups in the innovation and technology sector, Mr Leung said in his fourth annual policy address.
The initiative is seen as part of the city's efforts to overcome weak growth and a diminishing competitive edge, said OCBC Bank economist Tommy Xie.
"As a result of rising volatility in the financial market, contraction of global trade and a weaker RMB (China's currency), Hong Kong's three pillar industries - financial services, shipping and tourism - are losing steam, resulting in weaker GDP growth.
"As such, it is important to find an alternative growth engine to sustain Hong Kong's growth. 'Re- industrialisation' is a potential new area of growth for Hong Kong," he said.
The motivation for re-industrialisation also comes from the fact that the city's competitiveness in the region is being chipped away by other regional hubs like Singapore and South Korea, he added.
Mr Leung, who is expected to seek a second term next year, also spent more than an hour emphasising the economic development opportunity for Hong Kong under China's "One Belt, One Road" initiative, which aims to better link China with external economies.
"By leveraging the combined advantages of 'one country' and 'two systems', industries in Hong Kong, regardless of scale, can perform their role as a 'super connector' to attract foreign technologies and investment. They can also serve as a platform or partner for mainland enterprises to go global," said Mr Leung. He was referring to the "one country, two systems" formula under which the city has kept its autonomy since it was returned to China by the British in 1997.
At a press conference later, he said Singapore was also taking part in "One Belt, One Road" and that Hong Kong would lose out if it did not start early.
His focus on "One Belt, One Road", mentioning it at least 40 times in his speech, did not sit well with democratic lawmakers, who slammed him for not touching on Hong Kongers' "real concerns".
Democratic Party leader Emily Lau told The Straits Times that Hong Kongers are more interested in bread-and-butter issues such as housing, welfare, education, health and safety, but Mr Leung had not really offered any solutions to problems in those areas.
She also cited how the recent disappearance of five booksellers has rocked Hong Kong's reputation as a safe city. During Mr Leung's speech, four lawmakers were removed for heckling over a lack of substance and his failure to express concern over the missing booksellers.
Ms Lau was also not optimistic about re-industrialisation, saying: "Over the past years, we have seen how the various industries fizzled out. High rental was a key reason. We have not seen any concrete action or these people coming back."
Mr Leung said 97,100 public housing units would be built in the next five years. But critics said this was not enough to address the city's serious housing problem.