The upcoming national 15th Five-Year Plan (2026-30) and Chief Executive John Lee Ka-chiu’s fourth Policy Address — which is set to be released on Wednesday — will offer Hong Kong a timely mirror for future development.  

The past half-decade has been unforgiving, embracing a global pandemic and its aftermath, escalating geopolitical conflicts and sanctions risks, China’s growth slowdown and property market correction, and the end of the era of cheap money. No open economy so tightly coupled to the Chinese mainland could be fully insulated. Yet Hong Kong has also benefited from its proximity to the mainland, and especially the Guangdong-Hong Kong-Macao Greater Bay Area. Former Morgan Stanley Asia chairman Stephen Roach, once a prominent pessimist as far as Hong Kong’s prospects were concerned, was reported in June as saying that a bifurcating world may actually create space for the city to reassert its role.

It has been recognized that “the full significance of Hong Kong’s return to the China orbit was previously underestimated”. Anthony Cheung Bing-leung, chair professor and adviser in public administration at the Education University of Hong Kong, said that steering the course between two systems and institutional cultures under a unitary sovereign State demands good balancing skills. The lesson is dialectical: Alignment with the mainland is both an asset and a vulnerability (to geopolitical risks); and connection to the world is both a hedge and a differentiator. Judging Hong Kong’s performance against the 14th Five-Year Plan’s (2021-25) “eight centers” aspiration requires holding these truths together — and then insisting on concrete improvements. The international finance center, Hong Kong’s traditional strength, is the first sector facing added vulnerabilities from worsening geopolitics and a growing US-China divide.

Context has not been kind. As the US Federal Reserve ended the low interest rate era, Asia-Pacific IPO volumes slumped, and capital diversified from dollar and dollar-based assets. Hong Kong faced extra headwinds: Slowed economic growth in the mainland resulting from structural difficulties and a property downturn, especially among offices and luxury residences.

Hong Kong can overcome structural dependency through diversification.

Reinforcing Hong Kong’s status as a major offshore renminbi business hub is the theme of the future, and the city is poised to play a role and ride the trend of rising de-dollarization hedging

The Hang Seng Index peaked above 30,000 points in early 2021, then declined for years before rebounding to reach a three-year high of over 26,000 points in September. IPO proceeds recovered enough for the Hong Kong stock exchange to reclaim top place globally in the first half of 2025, though more than 70 percent of funds raised came from A+H listings. Mainland-based firms now account for at least three-quarters of Hong Kong’s market capitalization, a structural dependency that both anchors and exposes.

The Hong Kong Special Administrative Region government has not stood still. It shored up the listing regime with new rules, pushed wealth management tax incentives, accelerated green finance, deepened the Stock Connect and Bond Connect programs, and critically — moved early and prudently on virtual assets. The Stablecoins Ordinance’s enactment gives Hong Kong the rarest commodity in crypto-land — clarity. That, plus a credible licensing regime, has attracted serious operators rather than hype machines.

Outcomes are mixed but real. Fund flows have stabilized; family-office interest is tangible; green and transition bond issuance has grown; and fintech/Web3 activity has a regulatory home. Yet deal diversity remains narrow, the IPO pipeline is heavily mainland-centric, and global capital still prices perceived mainland regulatory, growth and geopolitical risks into Hong Kong assets.

The way forward is diversification and depth. Court more Asia-Pacific issuers — Southeast Asian champions, Indian mid-caps, Middle Eastern infrastructure vehicles — so that Capital A Berhad’s secondary listing is a harbinger, not an outlier. Become the leading marketplace for transition finance by marrying the mainland’s greentech scale with Belt and Road Initiative project needs, backed by rigorous taxonomies and disclosure.

Reinforcing Hong Kong’s status as a major offshore renminbi business hub is the theme of the future, and the city is poised to play a role and ride the trend of rising de-dollarization hedging.

In the realm of virtual assets, it’s essential to pair permissive licensing with tough supervision, banking connectivity, and investor protection, so “first mover” does not become “first victim”. Above all, keep the door open: Credibility rests on equal treatment for nonmainland capital and issuers. It should be borne in mind that maintaining Hong Kong as a major player in global markets and a pioneer in the Greater Bay Area is in line with national interests.

The author is a member of the Legislative Council of the Hong Kong Special Administrative Region and a councilor of the North District Council.

The views do not necessarily reflect those of China Daily.