“Security” has emerged as a prevailing theme around the world amid the precarious state of the global order that was established after World War II. With the specter of collapse looming over the existing international framework, “uncertainty” has become the primary source of anxiety for many nations and regions regarding the future.

As a small, open economy, Hong Kong is inevitably exposed to such global turbulence. The potential impacts are comprehensive, multilayered, and likely to be prolonged. Faced with potential geopolitical and economic storms, Hong Kong must prepare early, strategize effectively, and proactively mitigate risks while seizing opportunities.

Signals are emerging that rifts between the United States and its traditional allies are growing, especially after the eruption of the Iran war. Future conflicts or confrontations are unlikely to be limited to the West versus emerging economies; tensions between the US and Europe, as well as between the US and its neighbors in the Americas, may also escalate. This will profoundly reshape the global geopolitical landscape. While flashpoints for direct armed conflict may be limited, the scope of sanctions and countersanctions is likely to widen, bringing multifaceted challenges to Hong Kong.

In addressing these issues, Hong Kong must anticipate the worst-case scenarios and implement foresight-driven policies. Currently, vigilance is warranted against at least two major risks.

First, the US might have to raise interest rates to suppress runaway inflation should the Pakistan-brokered negotiations between the US and Iran fail to solve the energy crunch caused by the war in the Middle East. Given Hong Kong’s linked exchange-rate system, this would inevitably send shocks through the city’s capital market. Second, while US-Iran negotiations will kick off later this week, offering a glimmer of hope for peace, the conflict could still escalate, dampening investors’ appetite for risk and triggering further market volatility as well causing shocks to the real economy.

To mitigate these potential risks, Hong Kong must adopt a multipronged approach with clear strategic priorities.

First, the city should continue to attract more Chinese mainland enterprises to list in Hong Kong. Having regained the top position globally for IPO fundraising in 2025, with 119 companies listing and raising a total of HK$285.8 billion ($36.48 billion), Hong Kong must build on this momentum by further innovating its financial system and deepening cooperation with the mainland.

Facing a complex and volatile external environment, Hong Kong must brace for the challenges ahead through forward planning and proactive responses

Second, the city must advance its “re-internationalization”. Given that re-exports constitute a significant share of Hong Kong’s trade, and against the backdrop of Sino-US rivalry, it is imperative to vigorously expand into non-US markets. Following the successful visits led by Chief Executive John Lee Ka-chiu to the Middle East and Southeast Asia, efforts should continue to cultivate markets in these regions as well as Belt and Road Initiative partner countries.

Third, the city should accelerate the establishment of an international gold trading center. Amid rising geopolitical risks and trade policy uncertainties, gold has become a focal point for investment and hedging. Hong Kong’s institutional strengths and strategic location provide unique advantages for developing a robust gold market.

Politics and economics are two sides of the same coin; when international politics suffers turbulence, global economic volatility is inevitable. Economic factors such as trade, investment, and supply chains have increasingly been weaponized, resulting in high trade barriers. This poses specific risks to Hong Kong: The fragmentation of global industrial and supply chains could drive up logistics costs and reduce transport efficiency, weighing on the city’s trade and shipping sectors; as an economy heavily reliant on external supplies, volatility in global energy markets could inflate production and living costs, thereby undermining competitiveness; sluggish global growth or recession, particularly among major trading partners, could dampen demand for professional services while curbing consumer spending in the tourism and retail sectors.

Given its nature as a small economy with a dominant service sector, Hong Kong is especially susceptible to international market fluctuations. Therefore, making the economy more resilient must be given top priority. The city should fully leverage its role as a superconnector, evolving from simple intermediation toward resource integration and value creation. To this end, Hong Kong must focus on the following areas:

First, the SAR should actively align with the 15th Five-Year Plan (2026-30) to strengthen its industrial foundation. The plan offers opportunities for Hong Kong. For instance, as the country develops new quality productive forces, Hong Kong can seek central government policy support to advance the city’s innovation and technology sectors. Concurrently, as the mainland promotes high-standard opening-up, Hong Kong is well-positioned to provide professional services, such as finance, insurance, legal, accounting, and customs clearance, to mainland enterprises expanding globally.

Second, Hong Kong must accelerate its integration into the Guangdong-Hong Kong-Macao Greater Bay Area. The city’s limited geographical size constrains the development of a substantial real economy. The mainland side of the Greater Bay Area provides the vast strategic hinterland crucial for Hong Kong’s long-term development.

Third, fiscal investment must balance short-term necessities with long-term economic resilience. As the Hong Kong Special Administrative Region government has seen its fiscal outlook improve — thanks to a stabilizing property sector, export growth, and improved economic performance over the past year — funds should be strategically allocated to initiatives that lay a solid foundation for long-term development.

Facing a complex and volatile external environment, Hong Kong must brace for the challenges ahead through forward planning and proactive responses.

The author is vice-chairman of the Committee on Liaison with Hong Kong, Macao, Taiwan and Overseas Chinese of the National Committee of the Chinese People’s Political Consultative Conference and chairman of the Hong Kong New Era Development Thinktank.

The views do not necessarily reflect those of China Daily.