The Balance of UGC Grants and Tuition — How HKU's "Public Money + Fees" Revenue Model Works

The bottom line: The University of Hong Kong (HKU) runs on two main sources of recurrent income — University Grants Committee (UGC) block grants (about HK$7.04 billion in 2023–24, or 41.7% of consolidated income)^※ and tuition fees (about HK$5.65 billion the same year). After a 27-year freeze, local-student fees began a three-year phased increase in 2025/26 (HK$42,100 → HK$49,500, up 17.6%), while the 2025–28 grant triennium was simultaneously cut by about HK$2.8 billion. With those two lines pulling in opposite directions, non-local tuition has kept climbing at more than 8% a year.

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# What is the UGC, and how does it decide how much HKU gets?

The University Grants Committee (UGC)^※ is the statutory body through which the Hong Kong SAR Government allocates public funding to the eight publicly funded universities. Established in 1965, it covers HKU, CUHK, HKUST, CityU, PolyU, HKBU, Lingnan University and EdUHK. According to the UGC's own explanation^※, the government provides recurrent funding to each university as a "block grant", with the total normally set every three years (a "triennium"); within that envelope, universities allocate resources flexibly under the principle of "institutional autonomy". Because the triennial cycle locks in overall resources, in any single year the UGC usually only adjusts for salary movements — which gives universities medium-term financial certainty.

The block grant has three components: teaching (about 78%), research (about 20%) and professional activity (about 2%)^※. The teaching component is calculated from the number of government-approved funded places, level of study (associate degree to postgraduate), mode of study and subject category. The research component is allocated increasingly competitively, based on each institution's research assessment performance and its success in winning external competitive research funds.

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# How large are the 2022–25 and 2025–28 triennial grants?

Note: The figures above all refer to the total recurrent block grant for the eight UGC-funded universities, in Hong Kong dollars.

On paper the 2025–28 triennium is about HK$68.1 billion, up in nominal terms from 2022–25 — but the 2025–26 Budget imposed annual efficiency savings increasing by 2% each year, cutting about HK$2.8 billion over the three years^※. On top of that, the eight universities were asked in one go to return HK$4 billion of their cumulative HK$11 billion in reserves^※ in 2025–26 — more than a third of their total General and Development Reserve Fund (GDRF) balances. The real fiscal squeeze is considerable.

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# What does HKU actually receive from government grants?

As the largest UGC-funded institution, HKU gets the single biggest share of the block grant each year. According to HKU's own annual accounts:

Notes: HKU's financial year runs from 1 July to 30 June. Figures are from the Group (consolidated entity) figures in HKU's extract of annual accounts, and include various government grants for designated purposes. The 2024–25 subvention fell about HK$400 million from the previous year, partly reflecting the write-off effect of the HK$4 billion reserve repayment.

HKU's official annual accounts list "Government subventions" as the single largest income source — in 2023–24 that was HK$7,038,863 thousand^※, about 41.7% of consolidated income for the year.

Government subvention is still the biggest single line, but it has fallen from more than half of total income in earlier years to around two-fifths, while tuition and investment income keep growing. In 2024–25, tuition income (HK$6,755 million, about HK$6.75 billion) edged just past government subvention for the first time — the most significant shift in the structure of HKU's funding sources in recent years.

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# Why were local fees frozen for 27 years, and how much will they rise now?

Local undergraduate tuition at the eight universities has stood at HK$42,100 a year since the 1997/98 academic year^※ — a 27-year freeze. The policy logic: the government uses public money to subsidise local students through their degrees, treating local tuition as a social-policy lever rather than a cost-recovery mechanism.

But with institutional costs (staff pay, facilities maintenance, research investment) rising steadily, the government's 18% cost-recovery target (set as policy in the early 1990s)^※ has in practice slipped to 12.5% (estimated for 2024/25)^※ — meaning local students' fees now cover only about one-eighth of the cost of teaching them.

On 20 June 2024 the Hong Kong Government announced^※ that local fees would rise in three annual steps from 2025/26 to 2027/28:

The cumulative increase over the three years is about 17.6% — yet even at HK$49,500, the local cost-recovery rate is expected to climb only to 13.4%^※, still short of the 18% target. The policy implication: public subsidy of local higher education will remain substantially larger than fees for a long time to come.

The government also stressed that existing grants and loan schemes remain unchanged, and that eligible students will not be prevented from studying by financial difficulty.

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# Why do non-local fees keep jumping every year?

In stark contrast to the frozen local fee, HKU's undergraduate tuition for non-local students has climbed year after year at more than 8%:

Note: HKU's non-local undergraduate fee was uniformly HK$171,000 in 2024/25 and rises to HK$204,000 in 2025/26. Some high-cost programmes (e.g. the Bachelor of Dental Surgery) carry higher fees. All figures are the standard rates for UGC-funded places; self-financed programmes are priced separately.

The UGC requires that fees for non-local students on funded places at least cover the full direct cost of provision^※ — a market-pricing logic, meaning fees have to move up with institutional costs. The cap on non-local admissions has already been raised from 20% to 40% of funded places for 2024/25, and will rise further to 50% from 2026/27^※. The overall pot of non-local fee income will keep expanding and is the main engine of HKU's rapid tuition-revenue growth.

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# What is the Matching Grant Scheme, and how does it multiply donations?

Since 2003 the UGC has run a series of "Matching Grant Schemes" (MGS) on the following principle: for every HK$1 a private donor gives to a university, the government matches it with additional grant money at a specified ratio. Every round has sharply boosted the universities' fundraising drive.

Across the five MGS rounds (2003–2011), the fifth round matched the first HK$45 million of donations 1:1, and at HK$1 for every HK$2 beyond that, with a maximum of HK$220 million per institution^※. Over the five rounds the universities together received about HK$4.9 billion in government matching funds, leveraging some HK$9.2 billion in private donations. The UGC Chairman called the MGS "an effective incentive to nurture a culture of giving"^※. In 2019 a Research Matching Grant Scheme (RMGS) was added, dedicated to research fundraising. A new round of the RMGS launched in May 2025, with a commitment of HK$1.5 billion running to April 2029^※, and participation has been extended to self-financing institutions.

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# How do the two tracks of the "public money + fees" model shape HKU's finances?

It helps to see HKU's recurrent income as running on two legs. Government subvention is stable and predictable but under downward pressure; tuition income splits into two further tracks — local (policy-priced, low cost recovery) and non-local (market-priced, high cost recovery). In 2024–25, tuition and programme fees together reached HK$6,755 million (about HK$6.75 billion)^※, overtaking government subvention for the first time in the University's history to become the largest single income source. The overall picture across the two lines:

With the grant cut of about HK$2.8 billion for 2025–28^※ and a local fee that was frozen for decades (and is now only nudging up), HKU must offset the fiscal pressure by admitting more non-local students and raising their fees — a structural move toward "less reliance on public money, with market-based fees and philanthropic donations filling the gap".

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# How wide is the "two-track price gap" between frozen local fees and the non-local premium?

The gap between local and non-local tuition is the most visible institutional scar of the "public money + fees" model:

• 2025/26: local undergraduates HK$44,500^※ vs. HKU non-local undergraduates HK$204,000^※ → local : non-local = 1 : 4.6
• Even after all three fee increases take full effect (local rate at HK$49,500 by 2027/28), if non-local fees keep compounding at the current 8%-plus pace the ratio will widen to more than 1:5.

The institutional logic behind this gap: local fees are subsidised by public money to fill the difference — a deliberate policy tool for keeping local participation in higher education affordable. Non-local students, by contrast, must pay the full direct cost themselves, as the UGC's rules explicitly require. Neither price is a market equilibrium — both are administered prices set under different policy goals.

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# See also

• HKU finances at a glance — the full picture of consolidated income/expenditure, surpluses and net reserves over the years
• Endowment and investment management — endowment accumulation and the long-term investment pool
• Benefactors and named donations — major gifts and naming donations down the decades

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