Beijing’s ‘trust issue’ with Hong Kong and what the city can promise in its 5-year plan

In the final part of the series previewing the Hong Kong 5-year plan and policy address set for September 16, Natalie Wong and Matthew Cheng delve into how national security intersects with sectors like finance and technology. With the recent sentencing of former leaders of Hong Kong's Tiananmen Square vigil concluding a significant high-profile subversion case, some experts argue that Hong Kong should now focus on economic growth while downplaying national security concerns.

However, this narrow view overlooks how national security is intrinsically linked to economic development, insiders familiar with government thinking have noted. The upcoming inaugural five-year plan will feature a dedicated chapter on national security, rebutting detractors' claims that it only concerns law enforcement or combating "soft resistance."

Authorities are expected to introduce institutional safeguards across key areas, with a particular emphasis on finance and technology—both classified as China's 11 critical domains. For Hong Kong, strengthening safety nets in these domains is crucial for the city to consolidate its role as an international financial center and evolve into a global innovation hub. Success will depend on leveraging Hong Kong's strengths to align with China's five-year goals of technological self-reliance and renminbi internationalization.

In finance, safeguarding renminbi internationalization is a critical area. Hong Kong, through its role in offshore renminbi liquidity support and the development of a fixed-income ecosystem, has played a vital part in China's global financial strategy. Finance sector lawmaker Ronick Chan Chun-ying, an adviser to Bank of China (Hong Kong), suggests that the city should accelerate the diversification of offshore renminbi products, including derivatives, to attract global capital.

He emphasizes the importance of demonstrating China's confidence in Hong Kong's regulatory environment, warning that illegal investment channels and money laundering could undermine China's trust. Recently, Hong Kong authorities have strengthened oversight, including requiring brokerages to conduct internal checks and banks to verify the legitimacy of the funds their customers are depositing.

When it comes to technology, Beijing's aim for technological self-reliance entails taking ownership of every layer of China's tech infrastructure. To aid in this, tech entrepreneur-turned-lawmaker Johnny Ng Kit-chong recommends leveraging Hong Kong's technology park at the Lok Ma Chau Loop to develop secure and controlled cross-border data channels.

Ng stresses the need for a secure platform where mainland data can circulate within Hong Kong with proper limitations. A successful trial in the Lok Ma Chau Loop could pave the way for other cross-border data flow initiatives.