People in Hong Kong shopping in a mall with face masks
HONG KONG — “It's not the policy itself, but the lack of any rationale behind it that's made me choose to leave...” Steven (not his real name), an American senior executive of a strategic consulting firm who had been working in Hong Kong for seven years until April of this year.
More than two years on since the COVID-19 outbreak, the Hong Kong administration has been closely following mainland China's “Dynamic Clearing Policy”. The particularly strict social restrictions, vaccination policy and business operation limits, as well as the two to three weeks of quarantine imposed on arrival in the city, have pushed both local and international business circles to request the Hong Kong government to review the intangible and tangible economic costs behind the COVID-zero strategy.
In the meantime, many financial institutions have lowered their forecasts for Hong Kong's economic growth this year.
Tara Joseph, the former president of the American Chamber of Commerce (AmCham) in Hong Kong, decided to resign last November because of the enduring COVID-zero policy. “In the past, for Westerners, Hong Kong was Asia-lite — light and easy. People could come and go freely, start a business and invest simply. Not anymore.”
Umbrella movement prelude
From the Umbrella Movement in 2014 and the Anti-Extradition Law Amendment Bill Movement in 2019, to the implementation of the national security law in 2020, Steven has sensed Hong Kong’s dramatic changes over the past few years. Yet, social movements and politics are not what pushed him to leave. “The national security law won’t affect me much,” he reckoned.
It was mainly due to the tight COVID-zero measures that Steven has returned to the United States. Because of respiratory problems, it’s not suitable for him to wear a mask over long period. In addition, the quarantine has prevented him from traveling to the US, as he wished, more than once a year because “each time I re-entered Hong Kong, the quarantine in a designated hotel is lengthy and costs me an arm and a leg.”
Besides, the policies have been changing from day to day, making cross-border movement for businesses, especially the activities of multinationals, a nightmare. In recent months, several foreign newspapers have reported that numerous foreign companies, especially in the financial sector, plan to transfer some of their staff to Singapore, including Bank of America, Citibank, Société Générale, and JPMorgan Chase.
“The outflow of foreign companies and talent is obviously an immediate impact brought about by the COVID-zero policy,” said Gary Ng, an economist for Asia-Pacific region at Natixis, a French investment bank.
According to an online survey conducted by the AmCham of its 262 Hong Kong members last October, 44% of respondents believe that international travel restrictions are hindering their offices outside Hong Kong, while 76% of them are convinced that travel restrictions and the quarantine are making Hong Kong lose its competitiveness.
The loyalty factor
Meanwhile, it’s worth mentioning that the survey also revealed that 80% of respondents believe that the Hong Kong national security law has an impact on business operations, and among them 47% believed that employee morale was affected.
At the same time, according to the similar survey conducted by the European Chamber of Commerce (EuroCham) last February, 65% of the respondents believe that Hong Kong’s measures have affected business strategies and plans locally. The study pointed out that the former British colony may face the largest wave of departure of foreigners, probably one of the largest in Asia’s modern history.
In the early days of the COVID-19 outbreak, Steven didn’t mind the rigorous measures. Just as Gary Ng commented, economically and socially speaking, the pros of COVID- zero strategy were bigger than the cons. “Nobody knew how things would evolve and Hong Kong was relatively better off due to being capable of containing the virus."
The problem is that the Hong Kong government’s attitude hasn’t evolved with time. While other countries have all moved forward in their policies towards the coronavirus, such as loosening up the mask wearing or the border control, “Hong Kong seems to be stuck,” said Tara Joseph.
What bothers Steven most is the fact that Hong’s Kong’s COVID-zero policy isn’t so much about containing the pandemic, but about “showing loyalty to China and satisfying any request China might have – the only criteria of the Hong Kong government officials, as they have demonstrated in the pandemic.”
A man has his temperature checked before entering the cinema in Mong Kok, China as business are reopening
Turning into a Banana Republic
According to Hong Kong Census and Statistics Department data, as of 2020, the total employment of overseas companies in Hong Kong has indeed fallen for the first time, after increasing for six consecutive years, to 473,000.
“People feel like they are locked up in a prison and they can no longer bear this”
As a vibrant port of business, population mobility is a norm. The question is whether or not talents can be replaced. “No foreigners are willing to come now,” said Xiangyin Chen (pseudonym), the head of a German raw material manufacturer for Asia-Pacific region. He told the Initium that two of the ten foreign staff in his office have left Hong Kong. “It may not seem like a big number, but these people are expatriated from other countries for specific missions and positions. When these talents are gone, the loss is considerable.”
Because of the travel restrictions, his sales team has more or less suspended all international visits to customers or attendance of international meetings and exhibitions, added Xiangyin Chen. “We are thinking about moving out some of our staff here. If conditions do not improve, we’ll consider moving the Asia-Pacific office to another place all together.”
“People feel like they are locked up in a prison and they can no longer bear this,” said Steven. As a senior strategic consultant, he has noticed that many of his clients are re-mapping their business plan or even reducing their investments in Hong Kong. “They feel that Hong Kong has turned into a Banana Republic.”
Leaving for good
While the data from AmCham shows that the nuisances caused by COVID will prompt 25% of the American companies in Hong Kong to leave, EuroCham also makes clear that 49 % of European firms are considering leaving Hong Kong in the next 12 months, of which 25% said they would consider quitting completely.
Data from the Hong Kong Census and Statistics Department confirmed that in 2021, the number of regional headquarters of US, Japanese and German companies in Hong Kong have all dropped to a new low since 2018.
However, Tara Joseph reckons that COVID-zero isn’t the only reason why foreign firms are leaving Hong Kong. “I’d say the COVID-zero is the icing on the cake. Now that Hong Kong is not much different from China and that these multinationals have offices in both Hong Kong and the mainland, they definitely have to reconsider the allocation of their offices.”
Financial center status
In the face of the loss of talents and foreign capital, the Hong Kong administration says that it’s only a temporary phenomenon. Besides, the government has eased its COVID containment policies since April, so it expects that once the pandemic is over, everything will go back to where it was.
Steven is convinced of the contrary. He believes that Hong Kong’s attraction before was its reliable legal system and stable policy environment. “But as one can conclude from this pandemic, the government has become so insane, erratic and unpredictable”
Leaving Hong Kong is “a simple, yet not easy decision. Certain people’s confidence in Hong Kong, like me, has gone. Meanwhile, others have found new jobs, lovers and lives elsewhere. They will not come back.”
However, in Tara Joseph’s opinion, “if the goal of a businesses is just money, they may ignore the changes in Hong Kong. This is already the case for many multinationals in China.”
In addition, she also expects companies from China to fill Hong Kong’s vacancies. “Hong Kong has changed and is still changing. But it has not lost its status as an international financial center. I would not say that Hong Kong will disappear. It's just that it will become a different place. You either take it or leave it.”
