China takes AI pole position as Hong Kong sharpens its edge as a specialised innovation hub
China has moved into a leadership role in artificial intelligence while Hong Kong is taking shape as a focused innovation hub for finance and applied AI. A new Global AI Competitiveness Index from think tank Deep Knowledge Group points to governance and regulatory clarity as core drivers behind this momentum.
Low-cost, high-efficiency AI models from start-ups like DeepSeek, combined with coordinated national support, have pushed China into the front pack with the US, the European Union and Japan. The index, now in its fourth edition and developed with input from Hong Kong's Financial Services Development Council (FSDC), assessed around 25 jurisdictions and grouped them by their AI approaches instead of issuing a strict ranking.
Three models defining AI competitiveness
- China: State-led strategy - Centralised direction blends industrial policy with ideological alignment, accelerating deployment and scale.
- US: Innovation-first model - Private-sector capital and competition take the lead, with government support largely enabling market dynamics.
- EU: Rights-based regime - Comprehensive oversight prioritises safety and accountability via measures like the AI Act (overview).
"It's challenging to say which one is better, but mainland China caught up very quickly in the last few years, with coordination and a national strategy for AI," said Patrick Glauner, professor of AI at Deggendorf Institute of Technology and a co-author of the report.
China's top leadership has placed technological self-reliance at the centre of the next five-year plan. Governance has become a competitive lever: countries with clear national strategies and aligned regulatory frameworks are positioned to lead in research and build durable economic resilience, said Dmitry Kaminskiy, general partner at Deep Knowledge Group.
Hong Kong: specialised hub with global reach
Beijing has positioned Hong Kong as an international base for innovation and technology with AI at its core, according to FSDC's King Au King-lun. The city counts 500 AI organisations, 290 companies and 183 investors active across finance, healthcare and public services, the report found.
Hong Kong's stock exchange is turning into a key gateway for AI firms seeking global capital. Initial public offering volume rose 23% in the first quarter, signalling investor appetite and a maturing pipeline.
"The AI industry in Hong Kong has bright prospects for growth, as many mainland China AI companies will be active in the city," Kaminskiy said. He expects AI to ripple across sectors, with the strongest immediate effect in finance.
"Hong Kong's AI story is bigger than the city. With financial strength, technical capability and a push for ethical innovation, it can become a visible player in the AI era," said Au.
Why this matters for executives
- Cost-performance advantage: Models like DeepSeek's reset AI unit economics. Plan for faster iteration cycles and lower inference costs in your P&L.
- Speed-to-market: A state-led approach can compress timelines from pilot to scale. Expect shorter windows to defend or gain share.
- Capital strategy: Hong Kong's public markets and investor base provide funding optionality for AI-heavy roadmaps and spin-outs.
- Regulatory edge: Clear national strategies and rules reduce uncertainty. Map your compliance to both local requirements and major regimes such as the EU AI Act and the NIST AI RMF (framework).
How to use Hong Kong in your AI plan
- Finance growth: Evaluate Hong Kong listings or follow-on raises for AI units and JV vehicles. Track IPO windows as the 23% Q1 volume bump continues.
- Build with the ecosystem: Partner with local AI firms and investors among the 500+ organisations to accelerate pilots in finance, healthcare and govtech.
- De-risk compliance: Structure deployments to meet both mainland and Hong Kong requirements while maintaining portability to US/EU markets.
- Talent and costs: Combine mainland engineering scale with Hong Kong's financial and governance expertise for measurable productivity gains.
Signals to watch next
- Updates to China's five-year plan execution on AI and semiconductor self-reliance.
- EU AI Act rulemaking timelines and guidance affecting export, safety and liability.
- Hong Kong IPO pipeline for AI-native and AI-enabled firms.
- Price/performance curves of low-cost models such as DeepSeek's new releases.
- Cross-border data transfer standards that affect training and deployment.
Executive checklist
- Pressure-test your AI roadmap against the three governance models; pick a primary and secondary route for market access.
- Set up a Hong Kong presence or partnership for capital access, pilots and regulatory engagement.
- Adopt a procurement playbook favouring efficient models and clear SLAs on accuracy, latency and TCO.
- Stand up an AI governance office that maps controls to the EU AI Act and NIST AI RMF; assign a single accountable leader.
- Identify two near-term use cases in finance (risk, compliance, client service) with 90-day payback potential.
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