A year ago, the central question was whether Hong Kong, China’s economy could recover. The pandemic, a prolonged property market correction, and rising geopolitical tensions had fueled doubts about its future.
Against that backdrop, AMRO’s assessment at the time was that reports of Hong Kong’s decline were greatly exaggerated. Beneath the skepticism lay a city whose institutional strengths, financial stability, and deepening integration with the Chinese Mainland continued to provide remarkable resilience.
The recovery has taken hold.
Hong Kong’s economy grew by 3.6 percent in 2025, supported by resilient external trade, recovering tourism, and renewed financial market activity. Growth is projected to remain strong at around 3.4 percent in 2026, despite a more uncertain global environment. The residential property market has begun to recover, while Hong Kong’s capital markets have regained considerable momentum.
The issue now is not whether Hong Kong can recover, but what kind of economy will emerge from that recovery. As AMRO’s recent Annual Consultation Report argues, Hong Kong is moving from cyclical recovery toward a deeper structural transition in its growth model.
The headline numbers are encouraging, but they conceal an increasingly uneven pattern of growth. Finance, external trade, tourism, and Mainland-related activities have performed strongly. By contrast, parts of the domestic economy remain relatively weak, employment conditions vary considerably across sectors, and commercial real estate continues to face pressure.
Hong Kong is not simply returning to its pre-pandemic economic structure. A different pattern of growth is emerging, with economic activity and employment shifting across sectors.
This distinction matters.
Several long-term structural forces are converging. Population aging is weighing on potential growth and increasing demand for public services. Closer integration with neighboring cities in the Greater Bay Area is reshaping household consumption patterns, as growing cross-boundary spending intensifies competitive pressures on some domestic businesses.
Global fragmentation is reshaping trade, investment, and financial flows. Meanwhile, structural transformation in the Chinese Mainland economy have important implications for Hong Kong, given their deep economic ties.
Taken together, these forces suggest that Hong Kong’s challenge is not simply to preserve what made it successful in the past, but to build on those strengths in new ways and broaden its economic model.
Finance will remain at the heart of that model. Hong Kong’s deep capital markets, freely convertible currency, established legal and regulatory framework, and connectivity with both the Chinese Mainland and global markets give it advantages that are difficult to replicate.
The continuing development of offshore renminbi markets could strengthen these advantages further, particularly as demand grows for cross-border investment, financing, and risk management.
But financial intermediation alone may not generate sufficiently broad-based employment and income growth.
Hong Kong needs complementary sources of growth that build on areas where it already possesses comparative advantages: innovation and technology, advanced producer and professional services, life and health technology, AI and data-related activities, and other knowledge-intensive services connected to both Mainland and global markets.
This brings us to the evolving role of government.
Hong Kong has traditionally placed a premium on fiscal prudence and market allocation. Those principles remain important. But the government is increasingly taking a more proactive role in facilitating economic transition through investments in innovation and artificial intelligence, as well as major development initiatives such as the Northern Metropolis. How that role is designed will be critical.
Industrial policy can help overcome coordination failures and financing gaps, and mitigate early-stage technology risks that private markets may struggle to manage alone. But it must remain selective, transparent, and disciplined. Public investment should catalyze rather than displace private investment, and support should be concentrated where genuine market failures exist and Hong Kong has credible comparative advantages.
Just as importantly, a more proactive government should not mean a less competitive economy. Hong Kong’s next stage of development will depend on preserving open and contestable markets, particularly in domestic services where entry barriers and incumbency advantages can impede productivity and innovation. Professional services, healthcare, technology, and research-related services all stand to benefit from greater competition, talent mobility, and international benchmarking.
There is a broader principle here. Hong Kong should use government capacity to enable markets, not substitute for them. That distinction will become increasingly important as public investment expands and fiscal policy assumes a larger role in supporting long-term development. It will also help preserve the sound public finances and market credibility that have long been among Hong Kong’s greatest strengths.
Closer Mainland integration and international openness are sometimes portrayed as competing choices. For Hong Kong, they are more powerful when they reinforce each other. Mainland integration expands opportunities in finance, trade, innovation, and professional services.
But Hong Kong’s value within that relationship derives precisely from the attributes that distinguish it: international connectivity, open markets, established institutions, and the ability to intermediate between different financial and commercial systems.
Hong Kong’s opportunity is to evolve from being primarily a gateway between the Chinese Mainland and the world into an even broader “super connector” linking the Mainland, Asia, and global markets.
The coming decade will be defined less by whether Hong Kong can recreate its previous growth model than by whether it can successfully broaden it.
That will require new growth drivers alongside finance, a more strategic but disciplined role for government, greater competition and openness at home, deeper integration with the Chinese Mainland, and preservation of the institutional strengths that underpin Hong Kong’s international competitiveness.
A year ago, the defining challenge was recovery.
Today, it is transformation.