Abstract: Artificial intelligence (AI) is undoubtedly transforming and reshaping classrooms and education systems around the world. This article synthesises insights from the thematic forum “From Testing to Competence: Leveraging AI Simulations to Strengthen Student Readiness for University Entrance”, held at Hong Kong Baptist University as part of the Asia Association of Test Publishers (ATP) 2025 Conference. The discussion focuses on how AI is transforming the Hong Kong education landscape, particularly the Hong Kong Diploma of Secondary Education (HKDSE), in its pursuit of global recognition. With the advent of AI tools, new opportunities, such as personalised learning, adaptive assessment, and innovative examination practices, have emerged, supporting and optimising educational practices. However, challenges related to educational equity, data privacy, and ethical governance pose significant concerns for students, teachers, researchers, and other education stakeholders. As new regulations and guidelines are introduced, it is vital to address the complexities that AI brings while recalibrating the evolving needs of students and teachers within specific educational systems. This article therefore argues that the future integration of AI in education, particularly within the HKDSE context, must strike a careful balance between innovation and regulation, personalisation and standardisation, and localisation and internationalisation. Ultimately, the sustainable development of education systems and practices in the AI era depends on the effective integration of technological innovation, teacher empowerment, ethical governance, and inter-institutional collaboration to ensure a fair, human-centred, and globally competitive education ecosystem.