Hong Kong has taken a significant step toward becoming a leader in artificial intelligence with a strategic investment in homegrown unicorn SmartMore. This move, orchestrated by the Hong Kong Investment Corp (HKIC), a government fund managing HK$62 billion ($7.94 billion), marks a turning point for the city. It showcases a commitment to fostering a vibrant tech ecosystem and positions Hong Kong at the forefront of the global AI race.

The agreement between HKIC and SmartMore goes beyond being a simple financial transaction. It outlines a comprehensive plan to cultivate a skilled AI workforce and promote wider adoption of AI technologies within the Guangdong-Hong Kong-Macao Greater Bay Area. This collaborative effort signifies a long-term vision for propelling Hong Kong into the vanguard of the global AI landscape.

One of the cornerstones of the agreement is the establishment of an AI institute in Hong Kong by SmartMore. This institute will serve as a breeding ground for future AI specialists, offering master’s and doctoral programs in collaboration with a local university. The first cohort of students is expected to begin their studies next year, laying the foundation for a generation of experts equipped to handle the complexities of AI.

This focus on education is echoed in HKIC’s broader efforts. By partnering with other government bodies, the HKIC seeks to streamline fund selection as it prepares to deploy capital across key areas like Web3 and B2B fintech. This strategic approach ensures that investments are directed toward nurturing talent and fostering innovation in critical technological domains.

The selection of SmartMore as the recipient of the HKIC’s first investment is deliberate. Founded in 2019 by visionary entrepreneur professor Jia Jiaya, SmartMore embodies the city’s aspirations to become a high-tech hub. The startup’s decision to consider Hong Kong for a potential future initial public offering further strengthens this narrative, demonstrating confidence in the city’s financial markets and its ability to support the growth of innovative companies like itself.

The economic benefits of this strategic move are multifaceted. The establishment of the AI institute will create new job opportunities, attracting skilled professionals and researchers to Hong Kong. Additionally, the development and deployment of AI technologies has the potential to streamline various industries, leading to increased efficiency and productivity across the board.

Furthermore, the HKIC’s investment in SmartMore sends a powerful message to the global investment community. The government’s proactive approach in fostering technological innovation demonstrates a commitment to creating a favorable environment for tech companies to flourish. This, in turn, could attract further investment and collaboration, solidifying Hong Kong’s position as a premier destination for AI development in the region.

However, Hong Kong’s foray into AI presents both exciting opportunities and significant challenges. The city faces stiff competition from regional powerhouses like Singapore and the Chinese mainland, which have already made significant strides in AI development. Attracting and retaining top AI talent is crucial to bridge this gap.

Building a robust AI ecosystem also requires establishing a secure and ethical data infrastructure. As AI continues to evolve, clear regulations around data privacy, bias mitigation, and algorithmic accountability will be critical.

The establishment of the HKIC in October 2022 marked a significant milestone for Hong Kong’s economic development strategy. This government-owned investment entity manages four major funds, with a specific focus on fintech, artificial intelligence, biotechnology, and high-end manufacturing. Its initial investment focus is expected to be on the second or third round of startup fundraising, a critical stage where many promising companies face funding shortfalls.

Learning from successful models like the Shenzhen Angel Investment Guiding Fund, established in 2017, the HKIC aims to play a vital role in nurturing a vibrant startup ecosystem in Hong Kong. This includes not only providing crucial funding but also fostering partnerships and attracting top talent to the city.

By addressing the challenges and capitalizing on its strengths — its strategic location, established financial expertise, and a burgeoning pool of tech talent — Hong Kong has the potential to harness the power of AI to propel its economy into the future and become a leader in the exciting world shaped by intelligent technologies.

The author is chairman of the Asia MarTech Society and sits on the advisory boards of several professional organizations, including two universities.

The views do not necessarily reflect those of China Daily.