Why Hong Kong’s elites must become risk-takers again

Hong Kong is crafting its first comprehensive five-year plan, a landmark document designed to outline long-term development. While reports have highlighted reforms and paradigm shifts, little focus has been given to the individuals who will drive this transformation: Hong Kong’s elite. Each choice made by these influential figures will decide whether the city thrives as an innovation powerhouse or succumbs to stagnation.

Historically, Hong Kong’s leaders have prioritized lucrative sectors such as finance, trade, and real estate, but as the global economy tilts towards technology and innovation, these sectors face growing challenges. To successfully adapt, Hong Kong needs a significant “power shift” – a radical overhaul of attitudes, incentives, and risk-taking across various sectors, including business, government, and academia.

The city’s past illustrates that the behaviour of its elite significantly influences its path. Migration waves have repeatedly reshaped Hong Kong’s elite class, driving economic renewal. After World War II, Shanghainese industrialists fleeing civil war not only relocated but also brought capital, technical expertise, and an entrepreneurial spirit that spurred Hong Kong’s industrialization.

The industrious migrants from Guangdong in the 1960s and 1970s did not arrive as elites but their labor fueled the city’s export success. This era demonstrated that elite-led value creation hinges on an ecosystem capable of incorporating and mobilizing new social groups. Today, the city’s elite comprise mainland professionals, affluent families, and international talent, all essential for advancing Hong Kong’s technological edge.

The resilience of Hong Kong lies not in static infrastructure, but in its ability to reinvent its economic drivers. As the city prepares for a technology-driven future, its elite must be willing to embrace the disruptive potential of such change, rather than clinging to their existing wealth. The Northern Metropolis, a proposed new development zone, could serve as a pivotal test for this transformation.

More than just a land plan, this initiative is a critical measure of whether elites can shift from rent-seeking to risk-taking. It resembles a future tech hub, yet traditional business elites traditionally built their fortunes in low-risk, asset-heavy sectors like real estate and utilities. Transitioning to high-tech research and development, which requires venture capital and lengthy incubation periods, is understandably daunting for these elites.

Without significant changes to the system, the project may struggle to become a hub for technological advancement. Singapore serves as a compelling comparison. It tops the Elite Quality Index (EQx), a political economy index that assesses how well elites generate sustainable societal value across 151 countries. Singapore’s elites, supported by a state that co-invests and shares risks, have enthusiastically embraced advanced manufacturing, deep-tech, and biomedical innovation.

Hong Kong must learn from this model. According to Tomas Casas-Klett, co-creator of the EQx, the essence of a society’s vitality lies not in its wealth, but in the quality of its elite. High-quality elites foster innovation and take risks, thereby expanding the economic pie; low-quality elites focus on preserving rents and maintaining legacy monopolies.

Hong Kong’s regulatory bodies and civil service must change. Traditional bureaucracies often present a skewed risk-reward dynamic: pioneering unproven technology policies yields little personal gain, while any failure incurs intense criticism. To function as an innovation hub, public institutions must move from passive regulation to becoming active risk takers.

Similarly, tertiary institutions must adapt. While Hong Kong is home to prestigious universities and brilliant minds, institutional incentives primarily reward academic publications and citations, while things like patents, policy-relevant work, and applied research are undervalued. This conservative culture stifles entrepreneurial endeavors.

Hong Kong must re-align its incentives. The first step involves reframing land allocation and development policies within the Northern Metropolis. The government should tie land access directly to specific key performance indicators (KPIs) related to tech incubation, research and development spending, and the recruitment of global talent.

By making the creation of value more profitable than simple land speculation, private sector capital will be funneled towards technological innovation. Next, public sector KPIs need to be restructured to foster a "calculated risk" mindset. Regulatory sandboxes can be introduced, allowing civil servants to test innovative frameworks without fear of political repercussions.

Additionally, career pathways for tech professionals to transition into mid-senior levels of government could introduce much-needed dynamism into policy-making. Lastly, the culture within universities must be transformed. The University Grants Committee should prioritize research on policy, industry, technology transfer, patents, and partnerships.

Universities need visionary leaders who can reshape culture and navigate entrenched resistance to change. They must be capable of translating groundbreaking discoveries into viable ventures and leading with courage in a climate resistant to innovation. By aligning the financial capital, institutional power, and intellectual creativity of Hong Kong’s elite, the city can encourage a move away from preserving existing wealth towards taking calculated risks in pursuit of innovation. This necessary "power shift" is essential for Hong Kong to secure its long-term prosperity.