The Hong Kong government in its 2025-26 budget is doubling down on a commitment to establish stronger presence in the technology and artificial intelligence ( AI ) space through new investments and funding programmes.

Riding on a global AI boom, the government’s budget will allocate HK$1 billion ( US$130 million ) to the establishment of the new Hong Kong AI Research and Development Institute, to further strengthen the booming technology’s development in the city.

As well, as part of its support for AI development, and in recognition of the significance of microelectronics in enhancing computing and advanced semiconductor technologies, the government is giving strong support to two new pilot programmes at the Hong Kong Microelectronics Research and Development Institute, which are expected to begin in 2026.

AI is fast becoming indispensable for many Hong Kong corporates, especially for those in the financial sector. The city leads the global use in generative AI, according to a 2023 Finastra survey report, in which 38% of surveyed companies stated that they were rolling out the technology, compared with the global average of 26%. Yet, only 29% of Hong Kong respondents found AI created an improvement within their company.

Not only is AI a central focus for companies in the financial sector in Hong Kong, those in other industries, in particular in manufacturing, are seeking smarter and more digitalized operations. A two-year HK$100 million Pilot Manufacturing and Production Line Upgrade Support Scheme, aiming to benefit 400 enterprises, is proposed in the budget as part of an effort to help these companies transition to smart manufacturing and production. The scheme will offer HK$250,000 to each local beneficiary to help them upgrade with smart production strategies and advanced technologies.

Smart production is one of the key themes of revitalizing the city’s manufacturing sector, which was the mainstay of Hong Kong’s economy during the ‘70s and ‘80s. In 2022, Hong Kong’s first Advanced Manufacturing Centre was established to explore customized production with support in logistics, warehousing and prototyping. The New Industrial Funding rolled out last year supported more than 100 smart production lines in biotech, nano-fibre materials and new energy.

However, manufacturing activities in Hong Kong as a whole have dwindled to a trickle despite the sizable returns they brought at their peak. Manufacturing only accounted for 1% of GDP in 2023, according to data from the government, with approximately 7,700 small or medium-sized enterprises ( SMEs ) engaged in this sector.

The 2025-26 budget also introduced strong backing to the start-ups through the HK$10 billion Innovation and Technology Industry Oriented Fund for emerging and future industries, paired with the I&T Accelerator Pilot Scheme designed to enrich the start-up ecosystem through offering as much as HK$30 million to each start-up service agency.

As well, robust support in tech innovation, the Hong Kong Trade Development Council says, will empower start-ups and SMEs, while attracting more diverse investment that is useful to promote mega-events.