Is Hong Kong back on track? Officials, industry leaders talk up its economy

HONG KONG – Hong Kong trotted out its top officials to project confidence to the international audience at major business forums in the past week, but the verdict is still out on whether its recovering economy has turned the corner.

“Spring has arrived for Hong Kong’s capital markets,” Mr Qi Bin, a deputy director at Beijing’s liaison office in Hong Kong, declared at the HSBC Global Investment Summit on March 25.

Chief Executive John Lee touted Hong Kong’s latest ranking as Asia’s top financial centre in a global index when he spoke at the Boao Forum for Asia in mainland China’s Hainan province on March 27.

Financial Secretary Paul Chan talked up the city’s economic achievements over the past year at the Milken Institute’s Global Investors’ Symposium on March 24.

Industry leaders, too, expressed optimism that “Hong Kong is back”, with more opportunities for closer business and international cooperation.

But at the same time, they struck a cautious note on the challenges that lie ahead amid an increasingly complex global landscape.

At the Milken and HSBC conferences, Mr Chan, the city’s No. 2 official, urged people not to keep looking at Hong Kong “from the rear-view mirror” but to focus instead on the future.

On paper, the signs are encouraging.

Mr Chan cited Hong Kong’s “remarkable resilience” that saw its economy grow by 2.5 per cent over the past year despite external headwinds.

He noted that the city’s benchmark Hang Seng Index had surged 20 per cent in the last three months and that its initial public offering (IPO) market had staged a comeback to rank fourth globally after raising US$11 billion (S$14.7 billion) in 2024.

Battered by Covid-19 restrictions and a period of anti-government protests, Hong Kong’s economy shrank in three of the four years between 2019 and 2022. It grew 3.2 per cent from a low base in 2023. The stock market hit a 13-year low in late 2022 and deal-making had also slowed amid recent years of high interest rates and flagging global growth.

But the Hang Seng Index today remains a good 30 per cent below its peak in 2018, and the Hong Kong IPO market remains heavily dependent on Chinese business sentiment.

Mr Lee told the Boao forum that Hong Kong is still “the best platform” for foreign firms to make inroads into the mainland market and for mainland firms to expand globally.

He also vowed to “further deepen international cooperation... to drive Asia’s economic growth and advance global economic integration”.

The city was ranked top in Asia and third in the world after New York and London in the Global Financial Centres Index released on March 21, he added.

Mr Qi, meanwhile, said it was important to ride on Hong Kong’s “positive momentum” to strengthen its capital markets and boost funding for China’s burgeoning technology sector.

“Many Chinese tech companies have emerged in AI (artificial intelligence) and robotics, and thousands of tech entrepreneurs are in urgent need of capital to support their talent recruitment and development,” he said at the HSBC summit. “Hong Kong’s capital markets could help them raise capital and grow to be potentially global leaders.”

Industry leaders and geopolitical experts at the forums were upbeat as well.

Mr Oliver Weisberg, CEO of Hong Kong-based investment firm Blue Pool Capital, noted that the robust structure of Hong Kong’s financial markets aided the city on its path to recovery after the recent years of economic turmoil.

“We’ve slowly seen over the last couple of months an increased visitation of foreign investors, whether in private equity or hedge funds, and that is the core to bringing Hong Kong back to the place it should be,” he told the Milken conference.

The economic sentiment in Hong Kong “between this year and last year is so much more buoyant now”, said Mr George Yeo, visiting scholar at the National University of Singapore’s Lee Kuan Yew School of Public Policy, at the HSBC summit.

“Next year will be even more buoyant because the Chinese economy is recovering,” added Mr Yeo, Singapore’s former foreign minister, who also expressed optimism that the tense China-US relations “will be managed”.

Recent data showed better-than-expected economic activity in China in the first two months of the year, with the Organisation for Economic Cooperation and Development and some banks raising their growth forecasts for the world’s second-biggest economy in March.

Hong Kong, which is a part of China, has been buffeted by global uncertainty and market volatility from US President Donald Trump’s constant threats of further tariffs on Chinese goods and related trade with other countries.

The latest US tariffs on China, which also apply to Hong Kong goods, risk eroding the city’s main selling point as a global financial hub.

But Hong Kong may yet find space to negotiate its role in the world as countries reshape their alliances under the cloud of the US-China rivalry.

During an HSBC panel discussion, Mr Martin Wolf, associate editor and chief economics commentator at the Financial Times, alluded to pockets of opportunities for Hong Kong in its aim to deepen international cooperation in this climate.

“The implications of (Trump’s preoccupation with bringing manufacturing back to America) is that if you’re looking for good trade opportunities, you should start looking elsewhere, most obviously in Europe, where there are people who will be really interested in forming new bonds and cooperating in other aspects of globalisation in this very chaotic world,” he said.

Others, however, highlighted the continuing uncertainties and potential pitfalls in the broader global environment.

Chinese tech giant Alibaba co-founder and chairman Joe Tsai warned of a growing trend of AI investments being fuelled by speculative, potentially overestimated demand.

“I see the beginning of some kind of bubble,” Mr Tsai told attendees at the HSBC summit. “People are building data centres on speculation... investing ahead of the demand that they’re seeing today, but projecting much bigger demand (for AI services).”

A rush by tech firms, investment funds and other entities around the world to set up server bases for anticipated AI services has resulted in many multi-billion-dollar projects that do not have clear customers in mind, he said.

Hong Kong is among the economies on the AI bandwagon, with the government planning to develop the city into a global AI hub and earmarking billions of dollars towards this.

It has

budgeted HK$1 billion (S$172 million) to set up an AI research centre

, HK$3.7 billion as part of building a tech hub in its border area with Shenzhen, and HK$10 billion for an innovation and tech industry-oriented fund, among other plans.

Mr Kevin Sneader, Asia-Pacific president of US investment bank Goldman Sachs, said weak consumer demand on the mainland is another area of concern.

China has been trying to boost domestic consumption to cushion the impact of Mr Trump’s latest tariffs on its crucial export engine and sustain its fragile economic recovery.

Chinese consumer behaviour and sentiment weigh heavily on Hong Kong’s various economic sectors, including retail and tourism, and have an outsized impact on the city’s overall growth.

“The real issue for China is (whether) consumption can be stimulated to a level that offsets some of the broader challenges of an economic model that relies on export demands,” Mr Sneader said at the Milken forum.