What Hong Kong’s coming AI institute must do to make a difference

Hong Kong stands at a crossroads in the global artificial intelligence (AI) landscape. With advanced digital infrastructure, world-class universities and proximity to the mainland’s fast-moving AI industry, the city is well-positioned to serve as a bridge between East and West AI ecosystems. The 2025 budget has set aside HK$1 billion (US$128.4 million) for the establishment of an AI Research and Development Institute, which is set to launch next year.

Recent AI studies provide a sobering backdrop to the role of such an institute. Despite billions poured into generative AI, most enterprises have failed to translate investment into meaningful revenue gains. A study by the Massachusetts Institute of Technology last month revealed that 95 per cent of generative AI applications had failed to yield significant revenue acceleration.

Tools such as ChatGPT might boost individual productivity, but they rarely reshape business performance. Enterprise-grade systems are often abandoned before reaching production, largely because they fail to integrate systemically into the workflows and adapt to the organisational context.

A McKinsey study earlier this year echoes the point, indicating that only 1 per cent of firms globally have achieved true AI maturity, meaning that AI is fully integrated into workflows and drives substantial business outcomes. The main bottleneck is not frontline staff but leadership. Employees might be ready, but leaders are not.

Closer to home, Microsoft and LinkedIn’s 2024 Work Trend Index found that Hong Kong was an enthusiastic adopter, at a rate above global averages. But the majority do so through “bring your own AI” without organisational support. This both deprives companies of strategic benefits and exposes them to data security risks.

Meanwhile, generative AI development has made rapid strides on the mainland, with open-source models tuned for cost efficiency, customisation and practical applications. The global AI market is now multipolar, with no single platform likely to dominate. This puts Hong Kong in an enviable position to bridge Chinese and Western technologies, but only if it has the vision and the mechanism to do so.

  

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