As Hong Kong sinks deeper into isolation, foreign firms despair

Business hub’s strict ‘zero COVID’ policy fuels questions about the future of ‘Asia’s World City’.

Hong Kong stock board
Hong Kong's ultra-strict quarantine rules are a source of growing frustration among the city's foreign business community [File: Jerome Favre/EPA] (EPA)

Hong Kong, China – Before the pandemic, Basil Hwang enjoyed a globe-trotting lifestyle synonymous with high-flying expat executives in Hong Kong, travelling to visit his family in Singapore two or three times each month.

These days, Hwang, who holds management positions at several Hong Kong-based firms, only manages to see his children twice a year – a result of the city adhering to some of the toughest quarantine rules on earth.

“They ask me every time I call, ‘Daddy when are you coming back?’” Hwang, who has three children aged between 12 and 16, said.

“If you are not seeing them for six months, you are missing out on a big part of their growth. I think my son has grown 3 or 4 inches just in the time I haven’t seen him.”

For Hwang, the prolonged separation has prompted soul-searching about his future in a city long renowned as Asia’s most cosmopolitan and connected business hub.

“Now I get to see my kids once every six months, and I do seriously wonder if that’s an acceptable compromise,” said Hwang, who also serves as vice chairperson of the Singapore Chamber of Commerce in Hong Kong.

“Business is fine. It’s more on the personal side where it’s really taking a toll.”

Hwang’s angst reflects a growing frustration and despair among Hong Kong’s foreign business community as the financial hub descends deeper into international isolation even as the rest of the world opens up.

The city’s “zero COVID” policy, which requires most arrivals to undergo 21 days of hotel quarantine, is prompting many expats to leave or draw up exit plans, placing a question mark over the long-term viability of the semi-autonomous territory’s claim to being “Asia’s World City”.

While hubs such as New York, London and Singapore have opened their borders, Hong Kong, which built its reputation on its connectivity, low tax rates, free-flowing capital and a British-inherited legal system, has doubled down on a zero-tolerance approach, hoping to persuade Beijing to resume cross-border trade and travel.

Hong Kong airport
Hong Kong’s strict ‘zero COVID’ policy has made travel in and out of the city an arduous task compared with other business hubs such as London, New York and Singapore [File: Tyrone Siu/Reuters]

The city’s growing isolation comes as the former British colony already faces questions about its future following Beijing’s imposition of a draconian national security law – a response to often violent pro-democracy protests in 2019 – that has wiped out practically all political opposition, dramatically curtailed civil society and silenced critical media.

Hong Kong Chief Executive Carrie Lam has insisted reopening the border with the Chinese mainland is the most urgent priority for Hong Kong’s economy and offered little indication of when or how the city might reopen to the world.

Authorities have repeatedly ramped up its pandemic controls, in recent days scrapping quarantine exemptions for diplomats and tightening discharge criteria for COVID patients, despite reporting only a handful of cases since May and just 213 deaths throughout the pandemic.

Despite the city’s efforts, Beijing has provided little clarity on the conditions – if any – under which cross-border restrictions might ease.

‘Constrained by Beijing’

Many observers view Hong Kong’s deadlock as driven more by politics than public health amid speculation China could keep its borders closed well into 2022, possibly until after a key Communist Party meeting in October at which Chinese President Xi Jinping is expected to extend his term.

“The problem with Hong Kong is because of the protests they have no latitude to make any decisions which are not OKed by Beijing,” said a source close to the financial industry who spoke on condition of anonymity due to the sensitivity of the situation.

“Carrie Lam is effectively constrained by Beijing, and Beijing’s view of the world at the moment is we’ve done better on COVID than everybody else, we’ve kept it out. The rest of the world is a mess, especially the West, so they are maintaining that. China doesn’t have the real need to open the border.”

The source told Al Jazeera they believed Hong Kong officials were sympathetic to the plight of foreign businesses, but had their hands tied by Beijing.

“I suspect that in the next six months to a year, if this continues in the way we think it is now, you are going to see firms start moving sizable amounts of people out of Hong Kong,” the source said, adding that firms were having to pay “through the nose” to persuade overseas talent to move to the city.

You went into a bank even 10 years ago, probably 30-35 percent of the population there would have been Western expats. Now that's probably 10 percent

by John Mullally, recruiter at Robert Walters

Last week, the Asia Securities Industry and Financial Markets Association, which represents the finance industry’s biggest names, including Goldman Sachs, warned in a letter to the government that Hong Kong risked losing its “vital international status” without a “clear and meaningful exit strategy from the current zero-case approach”.

On Monday, the Australian Chamber of Commerce in Hong Kong became the latest foreign chamber, after its American and European counterparts, to publicly criticise the city’s “zero COVID” stance, labelling it “out of step” with the world.

A Hong Kong government spokesperson told Al Jazeera the city’s “zero COVID” strategy reflects the “overall interest of the Hong Kong community, taking into account the aspirations of the public and the impact on the economy”.

“Hong Kong remains a competitive city globally and a major regional base for international companies despite current challenges related to the global pandemic,” the spokesperson said.

“Hong Kong continues to offer overseas businesses unparalleled access to Mainland China markets, which is our biggest competitive advantage, supported by the city’s low tax regime, stable financial markets, secure business environment, trusted legal system and world-class workforce.”

Hong Kong has for years enjoyed a reputation as one of the world’s premier business hubs due to its proximity to China, connectivity, low tax rates and British-inherited legal system [File: Bloomberg]

Yet the official narrative of Hong Kong’s competitiveness is at odds with how a growing number of foreign businesses and expats assess the facts on the ground.

John Mullally, regional director for southern China and Hong Kong financial services at recruitment agency Robert Walters, said the foreign business community’s sway over policy had waned over the last decade as the city became more closely integrated with the mainland.

“You went into a bank even 10 years ago, probably 30-35 percent of the population there would have been Western expats,” Mullally said, adding that his firm’s overseas recruitment had dried up completely in the last two years.

“Now that’s probably 10 percent. So the relative importance of what the expat business community wants in Hong Kong, both in terms of the amount of people and the influence they have, is significantly decreased.”

If not an exodus, there are at least signs of a steady flow out of the city. The number of regional headquarters operated by overseas companies in the city fell from 1,504 in 2020 to 1,457 this year, according to Census and Statistics Department data, although the overall number of overseas companies rose.

American firms accounted for most of the decline, while the number of mainland Chinese companies with a regional office – which are included in the data – rose from 238 to 252.

In August, the city recorded its biggest population decline on record, counting almost 90,000 fewer people – expats and locals alike – than the previous year.

Hong Kong Chief Executive Carrie Lam has insisted reopening the border with mainland China is the government’s priority [File: Peter Parks/AFP]

Still, some observers caution against declaring the death of Hong Kong’s international status, pointing to selling points, in particular its proximity to the vast Chinese market, that cannot be replicated by competing hubs such as Singapore.

Jack Hoysted, CEO of Stirling Henry Global Migration, said he did not believe many foreign companies would be tempted to leave if the city only remained closed for a number of months longer than other parts of the world.

“Let’s face it, why are people here in the first place? Because you get tremendous access to East Asia and particularly tremendous access to China and there’s always going to be a demand for that as soon as China opens up again,” Hoysted said.

“I really think it depends on how long it goes on for.”

Policy deadlock

For Hwang, the business executive and vice chair of the Singapore Chamber of Commerce, there is no doubt Hong Kong is “shooting itself in the foot”.

“The selling point of Hong Kong for China, or value of Hong Kong for China, is the ability to be open to the rest of the world when China cannot for policy reasons and Hong Kong is destroying its value to China by being closed,” he said.

For now, though, the businessman has yet to make any big decisions about his future.

“I cannot say that I have not seriously considered what I should be doing in this situation.”

Source: Al Jazeera