Formative assessment has been considered an essential concept for motivating and improving learning. However, implementing formative assessment has been confronted with challenges in Confucian-heritage culture (CHC) contexts such as Hong Kong and Shanghai, where the atmosphere of high-stakes tests dominates at policy and classroom levels. Whether formative assessment can lead to learning achievement in examination-oriented contexts remains an open issue. To unleash the potential benefits of formative assessment, CHC cities such as Hong Kong have been making great efforts to create conditions that can bring about the positive effect of formative assessment on learning achievement. To test this potential benefit of formative assessment in CHC contexts, the current study compared the impact of formative assessment on reading achievement in Hong Kong and Shanghai by including the mediation of motivation between formative assessment and achievement. Results of multi-group path analysis with the Programme for International Student Assessment (PISA) 2009 data showed: (a) a positive direct effect of formative assessment on achievement in Hong Kong and a negative direct effect in Shanghai, (b) a positive indirect effect through motivation both in Hong Kong and Shanghai, and (c) a total positive effect in both Hong Kong and Shanghai, but this total effect was more substantial in Hong Kong whereas trivial in Shanghai. The positive impact of formative assessment, particularly the relatively more significant total effect on the Hong Kong side, supports the potential of using formative assessment to enhance student learning in CHCs through local policy reform on assessment and teacher training on assessment literacy.