Why does Hong Kong need a 5-year plan – and will it crimp its free-market economy?

As Hong Kong prepares to unveil its first-ever five-year plan, the need for such a guiding document has come into question, particularly in light of the city's long-standing reputation as a bastion of free-market capitalism. Economist Heiwai Tang, an associate dean at the University of Hong Kong's Business School, argues that while markets are typically correct, they are not foolproof and can create long-term structural issues that markets alone cannot overcome, such as housing shortages, widening inequality, and limited upward mobility.

The government's decision to adopt a five-year plan, modeled on that of mainland China, comes as Hong Kong transitions from British colonial rule to a post-handover era, and as it navigates geopolitical tensions. The plan, which will be released by the end of September and reviewed internally by early September, aims to set the direction for the city's economic and social development in alignment with national strategy.

The plan is divided into six core pillars, each corresponding to themes in China's 15th Five-Year Plan, including the development of the Northern Metropolis, innovation and technology, people's livelihoods, regional cooperation, and the integration of culture, sports, and tourism. While China's plan includes over 20 quantitative indicators, the Hong Kong plan is expected to contain only macro indicators, while detailed implementation measures will be outlined in annual policy addresses and budgets.

This shift towards long-term planning comes as Hong Kong seeks to address issues that cannot be easily corrected by market forces alone and to provide policy continuity during the annual term of government. However, some question whether this move could dilute Hong Kong's identity as a free-market economy, potentially undermining the advantages it has long enjoyed.