Public attention on Financial Secretary Paul Chan Mo-po’s budget for 2023-24 has been riveted on the issue of consumption vouchers. Pundits have overlooked a watershed development, first announced in Chief Executive John Lee Ka-chiu’s policy address delivered last October, and given full financial support in Chan’s budget, to put into effect what will be Hong Kong’s first-ever industrial policy.

As long-standing industrial policy agnostics, the Hong Kong authorities have never adopted an industrial policy, even though national industrial strategies have been practised by scores of Asian economies to jump-start their recovery after World War II.

Singapore, often held as a mirror of where Hong Kong comes up short, has a policy of keeping about 20 per cent of its economy in manufacturing. It has pushed ahead aggressively to lure hi-tech industries to its country, with considerable success.

In contrast, Hong Kong has for a long time remained locked in a simplistic “small government, big market”, “maximum support, minimum intervention” mantra.

Industrial strategies adopted by emerging Asian economies in the post-war years need to be distinguished from the protectionist industrial policy espoused by the Biden administration – through the passage last year of legislation such as the Chips and Science Act and the Inflation Reduction Act – to out-compete China.

Billions will be funnelled into R&D in critical industries, notably semiconductors, to widen the US’ technological lead. Advanced semiconductors and chip-making equipment, whether made in or outside the US, as long as American tools and software are used in their design or manufacture, will be banned from export to China. Allies are being asked to do the same.

China is described in the US national security strategy as “the only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to do it”.

Sheltered from geopolitical headwinds until Sino-US competition intensified in recent years, Hong Kong has lived in blissful ignorance about the need to adopt cutting-edge technologies to stay ahead of the competition, or to play a part in protecting its motherland from the attacks of a superpower afraid of losing its global dominance.

In the wake of the global financial crisis in 2008, then chief executive Donald Tsang Yam-kuen did make a half-hearted attempt in 2009 to implement new industrial policies. He named six industries where Hong Kong enjoyed clear advantages and called for their development, but there was no serious follow-up. The government soon gave up, after the economy bounced back quickly on the back of property market and tourism recovery.

In 2015, then chief executive Leung Chun-ying created an Innovation and Technology Bureau, the smallest in government and led by an outsider with limited clout. Putting Hong Kong on the road to economic upgrading powered by technology proved to be an extremely uphill task.

Following the national policy of prioritising hi-tech development, former chief executive Carrie Lam Cheng Yuet-ngor poured billions into hi-tech development. Beijing incorporated into the 14th five-year plan its support for Hong Kong to develop into an international innovation and technology centre, but time ran out for Lam to follow through.

Lok Ma Chau, near Hong Kong’s border with Shenzhen, as seen in May last year. The national 14th five-year plan indicates clear support for Hong Kong’s development into an international innovation and technology hub, and includes the Shenzhen-Hong Kong loop as a major platform of cooperation in the Greater Bay Area.

Compared to its Asian peer economies – “four little tigers” lauded for sparking the East Asian economic miracle in the 1990s – Hong Kong is at least two decades behind in adopting technology as a key driver of growth. Many wonder whether Hong Kong can still catch up, or has “missed the boat”, as President Xi Jinping warned during his visit to Hong Kong in 2017.

The stars seem to have finally aligned. Moving in lockstep with national policies, the current chief executive has put building Hong Kong as an international innovation and technology hub as one of his priority missions. New policies are being set in place to “grab” talent and strategic enterprises.

A Singapore-style one-stop service unit has been set up to draw quality migrants and help them settle in. A new Hong Kong Investment Corporation with an initial seed fund of HK$60 billion has been set up, including a HK$30 billion co-investment fund to attract strategic enterprises.

The Innovation and Technology Bureau has been expanded to become the Innovation, Technology and Industry Bureau, with a view to targeting advanced manufacturing. Finally, a scientist with strong background in biomedical engineering research as well as tech entrepreneurship was appointed as the head of this enlarged bureau.

The leader of this bureau needs to be able to navigate the tech landscape of both mainland China and Hong Kong. Professor Sun Dong is well placed to spearhead Hong Kong’s new drive to move up the technology ladder.

In his budget for 2023-24, the financial secretary has set aside HK$6 billion for research and development in life and health sciences, and HK$3 billion for the development of artificial intelligence and quantum computing. After the budget, Sun, while acknowledging the hefty costs needed to set up an AI and quantum computing research institute, announced that a feasibility study will be carried out.

The bureau has set out in its technology blueprint quantitative targets for promoting hi-tech development. It aims to boost, by 2032, R&D spending to 2 per cent of GDP, the number of tech start-ups to 7,000, the number of unicorn enterprises to 30, the number of innovation and technology practitioners to 100,000, and the share of manufacturing’s contribution to GDP to 5 per cent.

These are very modest goals compared to the yardsticks of the tech giants, but very ambitious by Hong Kong standards. A fully fledged industrial policy has finally been developed, and the baby steps forward should not be taken lightly.