Hong Kong is enjoying strong economic growth, but care will need to be taken to limit asset price bubbles and unsound lending practices in the banking sector. Property prices rose sharply in 2009-10, and domestic monetary conditions will remain very loose for most of 2011-12 as a consequence of the Hong Kong dollar's peg to the US dollar. The fiscal position will remain healthy: Hong Kong is expected to record a budget surplus throughout the forecast period. Revenue growth is set to expand steadily in 2011-15, and there will thus be scope for increases in spending on social programmes, reflecting growing pressure from voters to address the relatively high rates of poverty and income inequality that exist in the territory. A desire to alleviate these problems also lies behind the government's decision to introduce a minimum wage, which came into effect on May 1st. Some business leaders have argued that the minimum pay rate will cost jobs, but the fact that it has been set at the low hourly rate of HK$28 (US$3.60) suggests that its impact on employment is likely to be modest.

The Chinese government will continue to grant Hong Kong preferential access to mainland markets in terms of trade and investment, notably under the Closer Economic Partnership Arrangement (CEPA). As the territory's laisser-faire approach to economic policy is eroded in the forecast period, the Hong Kong government will adopt an increasingly active industrial policy to support priority sectors (including health, education, testing and certification, and environmental, cultural and innovation services). Support is most likely to come in the form of preferential access to certain resources, notably land. There is, however, a risk that such measures may prove ill judged or could serve mainly to benefit well-connected property developers.