You won’t choose a market for your next expansion based on a single number. Growth is one part of the decision. Talent, taxes, regulations, operating costs, and customer demand all count too, and the latest Hong Kong economic outlook adds another perspective. The city already appeals to many founders because of its location, funding space, and access to regional markets. The latest figures build on that. Hong Kong now recorded 5.9% GDP growth in the first quarter of 2026, its strongest quarterly performance in nearly 5 years.
The numbers were actually from different sources. Exports (mainly AI and other advanced technology products), consumer spending, and business investment all picked up during the quarter. All this happened while many regions were still seeing weaker growth.
The report covers much more than economic growth. Let’s go through the main updates and see what they tell you about doing business in Hong Kong.
What’s Behind Hong Kong’s Latest Growth?
Doing business in Hong Kong 2026 means looking beyond the headline GDP number. Trade and business investment give you a better idea of how the economy is performing and your growth potential. Here is what the report says:
How does trade play a major role?
Hong Kong’s export sector has had a strong start to 2026. Total exports of goods grew 23.7% year on year in the first quarter, following a 15.4% increase in the previous quarter.
Trade was stable across the Mainland, the United States, ASEAN markets, and several other major locations. Shipments to the European Union also recovered during the quarter. Global demand for AI-related electronic products, along with buoyant regional trade flows in Asia, gave exports another lift.
The report also points to a few other changes across Hong Kong’s external trade.
- Service exports continued to grow by 3.5%, with travel, transport, financial, and business services all contributing to the increase.
- Around 70% of Hong Kong’s merchandise exports now come from AI-related goods (up from 41.5% in the same period last year), showing how much the city’s trade depends on technology.
- Goods exports also increased by 15.9% from the previous quarter (on a seasonally adjusted basis).
What’s happening in the investment market?
Businesses also increased their spending during the first quarter. Overall investment expenditure increased by 17.7% in real terms, following 11.7% growth in the previous quarter. More money went into machinery, equipment, intellectual property products, and construction, pointing to continued investment across the economy.
If you’re planning to incorporate or expand a business in Hong Kong, this means you’re entering a market where companies are still building, upgrading, and expanding. It’s a good sign as businesses tend to spend when they expect more work ahead.
What Startupr experts say:“From our experience helping founders incorporate in Hong Kong, we always recommend checking what support your business may qualify for before you finalize your budget. Many grants and incubation programmes support specific industries and stages of growth. For example, if you’re building an AI or digital technology startup, the Cyberport Incubation Programme offers up to HK$500,000 in financial assistance. It also provides rental subsidies, mentorship, and investor support. A little research before you incorporate could mean raising less money yourself.”
What Do Higher Costs Mean for Businesses in Hong Kong?
Hong Kong’s inflation picked up during the first quarter, mainly because of higher international oil prices. The government expects prices to continue rising gradually through the rest of the year, although inflation remains relatively modest compared with many other economies.
A few numbers help explain what’s happening:
- Underlying inflation increased to 1.4%, up from 1.1% in the previous quarter.
- Headline inflation reached 1.6%, while the government’s full-year forecast has been revised to 2.6%.
If you’re starting a business, higher costs usually show up long before you notice them in your profits. A supplier raises their prices, shipping costs a little more, or transport becomes more expensive. None of those changes seem like a big deal on their own, but together they leave you with less money to spend on hiring, marketing, or building your product.
The same thing happens to your profit margin. If your costs keep going up but your prices stay the same, you’ll keep less from every sale. Raising your prices isn’t always an option either, especially when you’re trying to win your first customers.
Hong Kong lets you overcome these situations using its highly competitive tax rates.
How do Hong Kong’s taxes work as a natural buffer?
Hong Kong has a low and simple tax system. The following is how it works:
| Tax | How you’re taxed |
|---|---|
| Profits tax | 8.25% on the first HK$2 million of assessable profits, then 16.5% on profits above that. |
| Capital gains tax | None on qualifying sale of capital assets. |
| Territorial tax system | In general, only profits arising in or derived from Hong Kong are subject to profits tax. |
It also doesn’t levy VAT or sales tax. Paying fewer layers of tax eventually lets your business invest in product development or your next stage of growth, even in case of prolonged inflation.
What Could Shape Hong Kong’s Economy Next?
Hong Kong kicked off 2026 with solid growth, and the government expects several of those trends to continue over the coming months. At the same time, it also mentions a few global impacts that your business can expect.
What could continue supporting growth?
- Strong global demand for advanced electronics and AI-related products will continue supporting Hong Kong’s goods exports.
- Service exports will remain steady, supported by visitor arrivals, cross-border financial activities, and continued demand for business services.
- Steady consumer spending and business confidence will keep demand growing.
What could slow growth?
- The conflict in the Middle East hasn’t had much impact on Hong Kong so far. The government says that could change if the unrest continues. Global financial markets may become more unpredictable, making the months ahead harder for your business to plan.
- Ongoing geopolitical tensions could also affect service exports by weakening regional travel demand.
- The Government expects inflation to remain relatively manageable as Hong Kong is mainly a service-oriented economy with low energy intensity. Stable energy supplies from Mainland China will also help reduce the impact of external shocks.
How Is Hong Kong Investing in Artificial Intelligence?
The latest economic report explains where Hong Kong’s economy stands today. The government’s recent plans give you a glimpse of where it’s putting its time, money, and attention next.
Artificial intelligence is at the top of that list, with new funding, research facilities, and regional partnerships all working towards the same goal.
The 2025-2026 budget and other initiatives fund computing power, industry programmes, and new institutions that support AI development. Some of the biggest announcements include:
- HKD 1 billion has been set aside to establish the Hong Kong AI Research and Development Institute. If you’re building an AI product, coming up with the idea is only the beginning. The institute aims to help more research move into products, services, and real-world AI applications.
- The AI Subsidy Scheme gives eligible organizations access to the Cyberport AI Supercomputing Centre. If you’re training an AI model, this scheme helps cover part of the computing power, making your resources easier to access for research and development.
- The Hong Kong Microelectronics Research and Development Institute (MRDI) focuses on third-generation semiconductor research. Its pilot facilities help your business test new technologies and move research closer to commercial use.
- One of the government’s biggest projects is the Northern Metropolis, which is being developed as a technology and innovation area. When the project expands, you will get easier access to research centres, technology companies and the Hetao Shenzhen-Hong Kong Science and Technology Innovation Co-operation Zone.
How does the Greater Bay Area help with AI development?
If your AI product grows into a smart device, robot, medical device, or drone, you’ll eventually need manufacturers to build it. The Greater Bay Area already has much of that manufacturing in place.
In 2025, advanced manufacturing made up 56.2% of Guangdong’s industrial output, while high-tech manufacturing added another 34.7%. It means you’re building in a region where advanced manufacturing is already well established.
Is Now the Right Time to Start a Business in Hong Kong?
Every business starts with a decision about where to build. Hong Kong’s latest Economic Report shows a city that’s still growing, investing in AI and innovation, and creating opportunities for technology businesses.
While no economy comes without challenges, Hong Kong continues to give founders plenty of reasons to consider it.
If Hong Kong is on your shortlist, getting your business set up properly from the beginning can save you a lot of time later. Startupregistry.hk can help you incorporate your company, open and maintain a business bank account, and ensure compliance, so you can concentrate on building your business.
Contact our team to learn more.
