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Hong Kong says it is open for business again. Will the world buy it?


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Hong Kong

At a dazzling financial summit in Hong Kong this week, the city’s leader triumphantly told a room packed with top Wall Street executives that the Asian hub was back in business. “The worst is behind us,” he declared.

Two days later, tens of thousands of rugby fans poured into the city’s largest stadium for the Hong Kong Sevens, its biggest (and usually drunkest) annual sporting event, which had been suspended since 2019 due to political unrest and, later, Covid-19. 19

The two high-profile international events sent a clear message: After nearly three years of border closures, mandatory quarantines and restrictions on businesses and social gatherings, Hong Kong was finally reopening.

For much of the pandemic, the semi-autonomous Chinese city maintained some of the strictest restrictions in the region, including one of the world’s longest mandatory quarantines for international arrivals. With the economy collapsing and concerns mounting that Hong Kong was being left behind as the world moved on, the government finally opened the city’s gates in September, ending the formal lockdown to the relief of millions.

“We were, are and will continue to be one of the world’s leading financial centers,” Hong Kong leader John Lee promised at Wednesday’s summit, attended by more than 200 investors from 20 countries. “You can take that to the bank.”

Speaking on Friday before the start of the Sevens, Hong Kong Rugby Union CEO Robbie McRobbie hailed the tournament’s return as a “catalyst, a milestone”, a symbol that “Hong Kong remains a vibrant city. and tough.”

But experts warn that the push to revive Hong Kong, while welcome and long-awaited, faces many challenges ahead.

Recent years of isolation, which coincided with an ongoing political crackdown, have taken their toll, they said. Despite what Lee and other leaders insist, the Hong Kong that is reopening is not the same city the world knew before the pandemic, and the true impact of that change remains to be seen.

Last year, as many destinations reopened to travelers and eased restrictions, Hong Kong seemed trapped in a different reality.

Restaurants, bars and gyms were frequently forced to close or limit their hours. Residential buildings were put under lock and key for days. At one point, public gatherings were limited to two people. And most residents didn’t leave the city for years, unable or unwilling to spend up to three weeks in hotel quarantine at their own expense upon return.

Businesses were hit hard. The Sevens tournament accounts for 95% of the Hong Kong Rugby Union’s revenue, so “we’ve had three years of redundancies and cutbacks,” McRobbie said.

Many disillusioned residents chose to leave permanently; last year, the city saw its steepest drop in population since records began in 1961. Businesses have also begun to look elsewhere, most notably Singapore, Hong Kong’s longtime regional rival.

But Hong Kong authorities, eager to reopen the border with mainland China, which still shows no signs of easing its strict zero-Covid policy aimed at stamping out infections, have been reluctant to relax restrictions for fear cases will rise. step up and close that door.

Then a severe outbreak fueled by the highly contagious Omicron variant earlier in the year ended Hong Kong’s hope of maintaining zero daily cases.

Under mounting public pressure, the government lifted bans on flights with certain countries and shortened hotel quarantines in March, but these small concessions did little to attract people.

According to media reports in August, some Wall Street banks warned that their executives would only attend Wednesday’s financial summit if there was quarantine-free travel, a widely speculated factor behind the government’s final decision to lift the quarantine.

The city’s financial leaders breathed a sigh of relief at the news.

“We have been closed for too long,” said Sebastian Paredes, chief executive officer of Hong Kong operations at Singapore bank DBS. “We are starting to open following the other parts of the world that have already opened. And this is a tangible demonstration that Hong Kong is back.”

Attendees at the Global Finance Leaders Investment Summit in Hong Kong on November 2.

Alicia Garcia-Herrero, chief Asia Pacific economist at French investment bank Natixis, agreed that the week’s two big events were “a great sign that Hong Kong is moving away from Covid restrictions into a new world.” “.

However, the remaining restrictions represent a competitive disadvantage.

International visitors must be tested for Covid for seven days in a row after their arrival in Hong Kong, and for the first three days they are not allowed to enter restaurants, bars and gyms. But the testing doesn’t end there: Bars and clubs that don’t serve food require proof of a negative rapid antigen test from all patrons.

A mask mandate is also in place, indoors and outdoors, though photos from the finance summit show attendees sitting at tables without face coverings. Among them was the city’s finance secretary, Paul Chan, who was declared a “recovered case” by health authorities after testing positive for Covid upon arrival from a trip abroad on Tuesday.

Hong Kong Financial Secretary Paul Chan delivers a speech at the Investment Summit of World Financial Leaders in Hong Kong on November 2, 2022.

These rules “still largely bar the foreign travel market,” said McRobbie, Hong Kong’s chief of rugby. Before the pandemic, about half of Sevens fans came from abroad; this year, that number is “insignificant,” he said.

The long period of isolation and financial difficulties has also created challenges for companies hoping for a comeback. Many people have left the sports and events sectors in recent years for more stable jobs, leaving the industry short-staffed, McRobbie added.

This partial reopening has left the city in an uneasy Covid limbo, said Vera Yuen, an economics professor at the University of Hong Kong.

“If we want to open our border with mainland China, our restriction is too lenient…so it’s not allowed,” he said. “But then, if we want to open up to the world, we are still too strict. Now we are stuck in the middle, hoping to see better policies in the future.”

Others also warn of mounting political challenges. “Certainly, the clouds are coming into Hong Kong from different angles,” banker Garcia-Herrero said, pointing to the West’s response to the sweeping national security law Beijing imposed on Hong Kong in 2020.

Under this law, pro-democracy activists have been jailed or exiled, independent newsrooms have been shut down, and former legislators have been targeted. Meanwhile, authorities changed school curricula to emphasize Chinese history and culture, and pushed for greater economic cooperation in the Greater Bay Area, a national plan to further link southern China’s Guangdong province with Hong Kong and Macau.

The law has been widely criticized by foreign governments and human rights organizations, and the United States has sanctioned Lee and other top Hong Kong officials for their role in the crackdown. Hong Kong authorities have repeatedly claimed that the law has restored order and stability after the city’s anti-government and pro-democracy protests in 2019.

For the US and the European Union, the national security law and the repression represent “a change in the rules of the game in what was agreed upon,” García-Herrero said.

These rising tensions could spell trouble for Hong Kong’s trade and diplomatic relations with other countries. Hong Kong is granted more freedoms than other Chinese cities, so it has long been seen as a gateway between the mainland and the West, a position that seems increasingly precarious as its freedoms are eroded. civilians.

“The West would now understand that Hong Kong is not only part of China, but closer to China than before,” said Yuen, the economics professor. “The worst case scenario is that the West would treat Hong Kong the same as mainland China, and then Hong Kong would suffer the kind of sanctions.”

And this rapprochement is likely to continue. In an effort to stem the brain drain, the government is spending 30 billion Hong Kong dollars ($3.8 billion) to attract global companies and new talent, which Yuen said is expected to “attract many workers from the continent” who may be eager to escape an even more dire job market across the border.

Despite these geopolitical frictions, some argue that Hong Kong’s innate advantages will allow for a renaissance, even if the city heads in a different direction than before.

Asia doesn’t have many other financial centers that can match Hong Kong’s open regulatory environment, low payroll taxes and existing financial infrastructure: “so even if the image may be tarnished a bit, there aren’t many other places to go.” where to go”. Garcia-Herrero said.

Yuen echoed this point, saying the city’s proximity to China remains attractive to companies and investors hoping to tap into the mainland’s vast and lucrative market.

Travelers in the departure lounge of Hong Kong International Airport after the government's lifting of the hotel quarantine on September 26.

“We can connect to China and maintain the status of having a little bit of autonomy and (being) different from them, given the different Covid policies and (systems of) government,” he said.

But, both experts acknowledged, the way forward now is fraught with new risks. International companies can come to Hong Kong, but be more careful about how much they invest in the city, considering the threat of US sanctions and regional conflicts.

Today’s Hong Kong is increasingly under Beijing’s control, with China becoming more assertive on the world stage as leader Xi Jinping enters a third term in power surrounded by loyalists. Those rising tensions between China and its rivals have caused growing divisions “as the world deglobalizes,” Garcia-Herrero said, effects that inevitably spill over to Hong Kong, caught in the middle.

“It will never be, in my opinion, what it used to be in terms of Hong Kong opening up to both the West and the East,” he said.


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