Hong Kong Embraces Five-Year Planning — But Can It Preserve Its
Free-Market Edge?
As Hong Kong embraces long-term planning
for the first time, economists and officials debate whether strategic state guidance
can coexist with its open, market-led economy
·
First
five-year plan:
Hong Kong plans to release its first-ever five-year plan by the end of
September 2026, aligning the city’s development more closely with China’s
national strategy.
·
Why
now: Supporters
argue that Hong Kong's previous reliance on annual policy addresses and budgets
resulted in insufficient long-term coordination, contributing to issues such as
housing shortages, inequality and limited upward mobility.
Six major pillars: The proposed 2026–30 plan focuses on:
1.
Northern
Metropolis development
2.
Economy,
finance and trade
3.
Innovation
and technology
4.
People's
livelihoods
5.
Regional
cooperation
6.
Culture,
sports and tourism.
These
priorities are broadly linked with China's 15th Five-Year Plan,
including Greater Bay Area integration, RMB internationalisation, technological
self-reliance, common prosperity and Belt and Road cooperation.
·
Main
concern: Critics
fear that adopting a planning model influenced by mainland China could weaken
Hong Kong's identity as an open, free-market economy.
·
Government's
position: Hong
Kong officials insist the plan will not create a command economy. The
government says it will continue to follow a market-led,
government-facilitated economic model.
·
International
examples:
Economists point to Singapore, South Korea and Japan as examples where
strong government strategic planning has coexisted with open, capitalist
economies.
·
Potential
benefit:
Long-term planning could provide greater policy continuity, help
diversify Hong Kong's economy, improve resilience to geopolitical shocks and
strengthen coordination with mainland China.
·
Critical
factor: The
success of the plan will depend on implementation, including specific
action plans, measurable KPIs, regular reviews and accountability when targets
are not achieved.
As
the government completes a public consultation exercise to craft the city’s own
five-year plan to align with national development, the first of this five-part series
looks at key questions, starting with the need for such a blueprint.
Economist
Heiwai Tang has a line he likes to use on free-market
purists: “The market is almost always right, but it’s not always right.”
While
Hong Kong has long been ranked the world’s freest economy, Tang, an associate dean
at the University of Hong Kong’s (HKU) Business School, said the government’s lack
of overarching, long-term planning had contributed to a housing shortage, widening
inequality and limited upward mobility, among other social problems.
“We
should not be the last defender of laissez-faire, which has created a lot of prosperity
for many people but has also created a lot of long-term structural problems that
cannot easily be overcome by market forces,” he said.
All
that may change soon if the government plays its hand well.
By
the end of September, Hong Kong will make a pivot in governance by rolling out its
first-ever five-year plan to set the direction for the city’s economic and social
development that is aligned with national strategy.
This
is uncharted territory for Hong Kong. From the 1970s under British colonial rule
to the post-handover period, the city government, characterised by its laissez-faire
policy, relied on annual policy addresses and budgets for overall planning.
Soon,
these two blueprints will effectively become progress reports to complement broader
targets set by the new five-year master plan.
Proponents
anticipate that the move can provide policy continuity, which the five-year-term
government never enjoyed, while helping the international hub navigate persistent
geopolitical tensions.
But
some question whether this planning approach, modelled on that of mainland China,
risks diluting Hong Kong’s identity as an open, free-market economy and squandering
its established advantages.
What’s on the table?
The
South China Morning Post has learned that as the consultation period ends this Friday,
the government aims to publish public views online and finalise the plan in early
September for “high-level internal review” before releasing it publicly by the end
of the month.
“A
mainstream view internally is to create momentum in society to discuss the plan
by delivering the five-year plan first, followed by the annual policy address, which
would serve as an implementation document,” a source familiar with the planning
process said.
“We
should seize the opportunity before the independent committee’s report on the Tai
Po fire is made public in late October.”
The
source said Macau’s third five-year plan, scheduled for release this month, would
be studied meticulously as “an important reference”.
Beijing
had viewed the casino hub’s previous two plans, which focused on economic diversification
away from gaming, as “successful road maps” for guiding its development over the
past decade.
The
public consultation document for Hong Kong’s first five-year plan (2026-30) outlines
strategic objectives across six core pillars: the development of the Northern Metropolis;
the economy, finance and trade; innovation and technology; people’s livelihoods;
regional cooperation; and the integration of culture, sports and tourism.
The
pillars correspond to various themes in China’s 15th five-year plan, including Greater
Bay Area integration, the internationalisation of the renminbi, technological self-reliance,
common prosperity and Belt and Road Initiative cooperation.
While
China’s blueprint contains 20 main quantitative indicators, including annual R&D
expenditure growth of more than 7 per cent and a 17 per cent target for cutting
carbon intensity, some observers have questioned whether Hong Kong’s road map will
also include quantitative indicators.
At
a recent consultation session with residents, Chief Executive John Lee Ka-chiu said Hong Kong’s five-year plan would set out “macro indicators”,
while policy addresses contained more than 100 indicators for departments to follow
up on.
Lawmaker
Rock Chen Chung-nin expected the plan to be “directional”
in nature, with the implementation details for each goal left to annual blueprints.
“It
is like setting a destination first. But how do you reach it – by bus, MTR or ferry?
That would be reflected in the details of the policy addresses and budgets,” he
said, adding that such long-term planning could also ensure policy continuity when
a new term of government begins next July.
“Even
if there is a new chief executive, he or she will make slight adjustments to the
measures in the policy address and budget each year according to the circumstances,
but the general direction will not change.”
Why Hong Kong – and why now?
A
question simmering amid the discussions is this: why does Hong Kong need a five-year
plan now? What is wrong with the way things are currently done?
When
Lee began the final year of his term in July, the government already had long-term
policies in place in areas such as housing and healthcare. With China having released
its 15th five-year plan and Macau already drafting its third, why does Hong Kong
need to follow suit?
Shiu
Sin-por, former head of the Central Policy Unit, recalled
that initiating such a plan had long been regarded as a political taboo.
Before
the handover, whenever suggestions emerged that Hong Kong should participate in
the national five-year plan, the mainstream counterargument was that “one country,
two systems” meant non-interference, he said. There was therefore no need to copy
the mainland.
Political
veterans said Beijing had assessed the political climate as finally ripe for “institutionalising”
long-term planning in Hong Kong. The city was now more stable following the implementation
of the national security law and an electoral overhaul after the 2019 anti-government
protests, which were aimed at ensuring that only “patriots” govern Hong Kong.
Sonny
Lo Shiu-hing, a veteran political commentator specialising
in Beijing’s relations with Hong Kong and Macau, explained that the shift in political
discourse had allowed Beijing to address Hong Kong’s persistent failure to align
itself with national planning cycles.
Political
discussions in the city had long focused primarily on maintaining “two systems”.
But the paradigm had now shifted towards greater integration with the mainland while
making use of the advantages offered by “two systems”, he said.
“More
importantly, there’s a strong executive-led system, meaning that the political system
should be aligned with the central government’s vision, both economically and politically.”
Will planning dilute the city’s
free-market edge?
The
impending shift towards a more planned approach has raised a soul-searching question:
will Hong Kong’s reputation as a free-market economy suffer? American economist
Milton Friedman once called it his “favourite economy”.
In
1978, Nobel laureate Friedman chose Hong Kong as the backdrop for his exploration
of free-market economics. He praised the city’s low taxes and lack of state intervention
as engines of prosperity, describing its approach as “positive non-interventionism”.
In
a recent commentary, former Morgan Stanley Asia chairman Stephen Roach cautioned
that “Chinese-style central planning” could often “over-promise and under-deliver”.
His
remarks prompted a rebuttal from Deputy Financial Secretary Michael Wong Wai-lun, who wrote in a separate commentary that the critic, whom
he did not name, appeared to be driven by anti-China bias and that his views were
“neither backed by evidence nor aligned with facts”.
The
conflation of planning with a command economy is an issue the government has had
to address. During the launch of the consultation exercise in mid-June, Secretary
for Constitutional and Mainland Affairs Janice Tse Siu-wa
stressed that Hong Kong was not pivoting towards a command economy.
The
government “steadfastly adheres to a free-market economy that is market-led and
government-facilitated”, she said.
Economists
have also pointed out that many countries with different economic models incorporate
some form of long-term planning.
Moreover,
the idea of a command economy could itself be a relic of the past if viewed through
the lens of pre-reform mainland China or the Soviet bloc, where the state strictly
controlled production quotas and prices.
This
was vastly different from the indicative planning adopted by capitalist economies
such as post-war Japan, South Korea and Singapore, where governments provided strategic
direction while leaving the allocation of resources to market forces.
During
his 1992 tour of southern China, the late paramount leader Deng Xiaoping said that
both planning and the market were tools for allocating resources.
“A
planned economy is not the same as socialism, as capitalism also involves planning.
A market economy is not the same as capitalism, as socialism also involves a market,”
Deng said in Zhuhai. His remarks helped accelerate the pace of China’s reform and
opening up.
For
Hong Kong, some critics have argued that the city was paying the price for its supposed
laissez-faire principles. The resulting lack of a comprehensive industrial policy
and the absence of strategic coordination, as demonstrated by the early efforts
to develop Cyberport and the Science Park, had hobbled the city, they said.
They
argued that the “small government, big market” policy that Hong Kong once treated
as sacred was outdated, particularly as competing economies had already moved in
this direction.
Can strategic planning and
free markets coexist?
Lau
Siu-kai, a consultant for semi-official think tank the Chinese Association of Hong
Kong and Macau Studies, maintained that Hong Kong’s inaugural five-year plan would
not alter the essence of its capitalist system.
The
government was not attempting to replace private enterprise, commercial capital
and professionals as the bedrock of the city’s long-term growth, he stressed.
Politically,
he said, the framework would bring numerous benefits to Hong Kong.
For
example, it would set a higher benchmark for the city’s leadership by requiring
officials to grasp global macroeconomic shifts and national priorities, and to identify
precisely where Hong Kong could leverage its unique advantages to drive growth.
“The
bureaucratic culture has been focusing on short-term execution instead of visionary
foresight,” he said.
“Formulating
and executing this first five-year plan offers a steep learning curve, as well as
a challenging test, for officials to cultivate a macro-level mindset and elevate
strategic thinking, which is key to Hong Kong’s development.”
HKU
economist Tang pointed to Asian powerhouses such as Singapore, South Korea and Japan
as proof that strategic state guidance and free-market dynamism were not mutually
exclusive.
He
said these countries had flourished under “very strong governments” with top-down
industrial policies while maintaining “open, free and capitalist” economies.
He
said the five-year plan was also a crucial step towards helping Hong Kong diversify
its economy, generate fresh growth momentum and navigate geopolitical shocks.
“Given
the geopolitical turmoil … [we shouldn’t] allow just the global free market to drive
us in any direction. And Hong Kong needs to be more resilient and continue to be
open. And at the same time, we need to think more strategically about our position
in the global economy.”
After
all, he said, whether the inaugural plan could achieve its goals would hinge on
the rigour of its execution.
“We
need specific action plans, clear KPIs across the design, implementation and review
stages, and accountability for government officials if targets are missed,” he said.