Hong Kong on Tuesday announced plans to ease major social distancing measures, including reopening schools, cinemas, bars and beauty parlours after the Chinese territory largely halted local transmission of the deadly coronavirus.

The relaxation, which comes into effect Friday, will be a boost for a city mired in a deep recession following months of virus restrictions as well as anti-government protests that have battered the economy.

Authorities also unveiled plans to hand out reusable face masks to all 7.5 million city residents.

Hong Kong recorded some of the earliest confirmed COVID-19 cases outside of mainland China but despite its close proximity and links with the mainland it has managed to keep infections to around 1,000 with four deaths.

There have been no new confirmed infections in 10 of the last 16 days and the cases that have been recorded came from people arriving from overseas who are quickly quarantined.

"I hope these measures will be a silver lining for citizens," the city's leader Carrie Lam told reporters Tuesday as she spelt out the easing of curbs.

Older secondary students will start returning to classes from May 27 while younger children will resume school in the first half of June.

But a ban on more than four people gathering in public or eating together in restaurants will be stepped up to eight.

Many businesses that were ordered to close will be allowed to open once more, albeit with restrictions in place.

Bars and restaurants will be permitted to operate but must ensure a distance of 1.5 metres between tables. Live music performances and dancing however will remain banned.

Cinemas can start showing films to reduced crowds while gyms, beauty, massage and mahjong parlours will re-open with hygiene protocols in place such as the use of masks, hand sanitiser and temperature checks.

Nightclubs and karaoke bars must stay closed.

Hong Kong's economy dropped an 8.9 percent on-year contraction in the first quarter of this year -- the worst decline since the government began compiling data in 1974.

Retail sales figures released Tuesday showed a 37 percent plunge over the same period, another record dip.

Even before the pandemic, tourism and retail had taken a hammering from the US-China trade war and months of political unrest last year.

At Tuesday's briefing Lam and other officials also sported a new type of mask made of fabric that they said would be distributed to all residents in the coming weeks.

When the virus first emerged, Hong Kongers started panic-buying masks as anger grew against the government for failing to stockpile enough supplies.

Since then local production has been ramped up and masks are plentiful in pharmacies and shops.

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