In his annual policy speech, Chief Executive John Lee reaffirmed a growth forecast of two to three percent for the year.

His announcements come as the global financial hub -- which beat estimates to grow by 3.1 percent in the second quarter -- navigates volatile trade tensions between Washington and Beijing and a dampened economic climate in mainland China.

Hong Kong was "moving through an irreversible economic transition, but it is an essential process for a stronger and more robust economy in the future", Lee said in a nearly three-hour address, stating his "ultimate objective" was to improve citizens' livelihoods.

Central to his plan is accelerating the development of the Northern Metropolis, a mega-project aimed at urbanising land near the border with tech hub Shenzhen in mainland China.

Lee said he would personally lead a new task force and introduce dedicated legislation to "fast-track" the initiative.

To reduce costs and construction time, Lee pledged to adopt building technologies from China and overseas.

The Northern Metropolis, first proposed in 2021, is envisioned to eventually cover a third of Hong Kong's total land area.

Activists and locals have raised concerns over its potential environmental impact as well as the strain it will put on the city's public finances.

- AI as 'core industry' -

Hong Kong's capital market has rebounded strongly this year, with dozens of companies from China piling into the city to raise overseas capital due to policy support from the Chinese government and optimised listing rules by Hong Kong regulators.

On Wednesday, Lee said the city's authorities would set up a task group to attract more Chinese enterprises to use the city for expanding their overseas businesses.

Lee also vowed to promote AI as a "core industry", saying the government would also use the technology to improve governance efficiency.

The government plans to establish an AI research hub, tender a 10-hectare site for a data centre cluster, and use AI to improve its own governance efficiency.

Hong Kong will also establish gold storage facilities to solidify the city's role as a "regional gold reserve hub", he added.