Lai was found guilty on two counts of conspiracy to commit collusion last month under a sweeping national security law that was imposed by Beijing in 2020 after huge and sometimes violent pro-democracy protests in Hong Kong.
The 78-year-old media mogul was also convicted of publishing seditious articles through his now-closed Apple Daily newspaper.
Lai is a British citizen and the UK government has condemned his "politically motivated prosecution" in an earlier statement calling for his release.
US President Donald Trump also said he had asked Chinese leader Xi Jinping to consider releasing Lai.
Lawyers will address three High Court judges on how to punish Lai starting from 10 am (0200 GMT), with arguments scheduled to last four days.
The court has yet to announce a date for Lai's sentencing. The rags-to-riches tycoon can appeal.
The judges wrote in their 856-page verdict that Lai "harboured his resentment and hatred of (China) for many of his adult years" and sought the "downfall of the Chinese Communist Party".
Hong Kong's national security law states that collusion offences "of a grave nature" will result in a prison term of between 10 years and life.
The colonial-era crime of sedition carries a maximum penalty of two years in jail.
Dozens queued up outside the West Kowloon court building over the weekend, with some telling AFP they hoped to get a seat in the public gallery to support Lai.
Judges began Monday's hearing by confirming the guilty pleas of two co-defendants, Chan Tsz-wah and Li Yu-hin.
The two men, along with six Apple Daily executives, had pleaded guilty as part of the same case and were also awaiting their sentences.
- Health concerns -
Lai has been behind bars since 2020, and authorities say he has been kept in solitary confinement at his own request.
Two of Lai's children, Sebastien and Claire, warned in recent months that their diabetic father had "lost a very significant amount of weight" and showed signs of nail and tooth decay.
The Hong Kong government has repeatedly denied those claims, insisting that Lai received "adequate and comprehensive" care while in custody.
Amnesty International said last month that Lai's conviction "feels like the death knell for press freedom in Hong Kong", while the Committee to Protect Journalists called it a "sham".
A government spokesperson said last month that Lai's case "has nothing to do with freedom of speech and of the press at all" and that he was using journalism as a front to commit crimes.
Hong Kong had arrested 385 people for various national security crimes and convicted 175 of them as of January 1, according to official figures.
Police made nearly 70 national security-related arrests last year, more than double the figure from 2024.
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