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

Hong Kong

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

Two days later, tens of thousands of rugby fans descend on the city’s largest stadium in the Hong Kong Sevens, the biggest (and usually most exciting) annual sporting event, which has been suspended since 2019 due to political unrest and, later, COVID-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 has finally reopened.

For most of the pandemic, the semi-autonomous Chinese city has maintained some of the region’s strictest restrictions, including one of the world’s longest mandatory quarantines for international arrivals. With the economy deteriorating and fears growing that Hong Kong will be left behind as the world progresses, the government finally opened the city’s gates in September and ended an official quarantine to bring relief to millions of people.

“We have been and will remain one of the world’s leading financial centers,” Hong Kong leader John Lee pledged at the summit on Wednesday attended by more than 200 investors from 20 countries. “You can take that to the bank.”

Speaking on Friday ahead of the Sevens’ launch, Hong Kong rugby union chief executive Robbie McCrobe hailed the tournament’s return as a “catalyst, a turning point”, emblematic that “Hong Kong remains a vibrant and resilient city”.

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

They said the past few years of isolation, coinciding with an ongoing political crackdown, had taken its toll. Despite what Lee and other leaders insist, reopening Hong Kong is not the same city the world knew before the pandemic — and the true impact of this change remains unclear.

In the past year, with many destinations reopening to travelers and restrictions loosening, Hong Kong appeared stuck in a different reality.

Restaurants, bars and gyms have often had to close or limit their opening hours. The apartment buildings were placed under closure for several days. At one time, public gatherings were capped by two people. And most residents have not left the city for years, unable or unwilling to spend up to three weeks in hotel quarantine at their own expense upon return.

Business was hit hard. The Sevens Championship makes up 95% of rugby union revenue in Hong Kong, so “we have three years of iterations and cuts,” McCrobe said.

Many frustrated residents chose to leave permanently; Last year, the city recorded the largest population decline since records began in 1961. Businesses have also begun to look to other locations – most notably Singapore, Hong Kong’s long-standing regional rival.

But Hong Kong authorities, eager to reopen the border with mainland China – which is still showing no sign of easing their strict no-coronavirus policy aimed at stamping out contagion – have been reluctant to ease restrictions for fear of a spike in cases and a lockdown. The Door.

Then, a severe outbreak of the disease due to the highly contagious variant Omicron at the start of the year put an end to Hong Kong’s hope of maintaining zero daily cases.

Under growing public pressure, the government lifted flight bans with certain countries and shortened hotel quarantines in March – but these small concessions have done little to lure people back.

According to media reports in August, some Wall Street banks warned that their executives would not attend Wednesday’s financial summit unless there was quarantine-free travel — a widely speculated factor behind the government’s eventual decision to scrap quarantines.

The city’s financial leaders sighed in relief at the news.

“We’ve been closing our doors for too long,” said Sebastian Paredes, chief executive of Hong Kong operations at Singapore’s DBS bank. “We are starting to open up to follow other parts of the world that have already opened up. This is tangible evidence of Hong Kong’s return.”

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

Alicia Garcia-Herrero, chief Asia-Pacific economist at French investment bank Natixis, agreed this week’s double big events were “a huge sign of Hong Kong’s transition from Covid restrictions to a new world”.

However, the remaining limitations constitute a competitive disadvantage.

International visitors must take Covid tests for seven consecutive days after arriving in Hong Kong, and for the first three days are prohibited from restaurants, bars and gyms. But the test doesn’t stop there – bars and clubs that don’t serve food require evidence of a negative rapid antigen test from all patrons.

The mask mandate – indoors and out – is also in effect, though photos of the financial summit show attendees seated at tables without face coverings. Among them is the city’s financial secretary Paul Chan, who was declared a “recovery” 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 Global Financial Leaders Investment Summit in Hong Kong on November 2, 2022.

McCrobe, Hong Kong’s head of rugby, said those rules “still largely prohibit the overseas travel market”. Before the pandemic, nearly half of Sevens’ fans came from abroad; This year’s figure, he said, is “negligible.”

The long period of isolation and financial difficulties have also created challenges for companies hoping to return. McCrube added that many people have left the sports and events sectors in the past few years in favor of more stable jobs, leaving the industry short of employment.

This partial reopening has left the city in an embarrassing Covid bind, said Vera Yuen, economics lecturer at the University of Hong Kong.

“If we want to open our borders with mainland China, our restrictions are too lenient…so they are not allowed,” she said. “But then, if we want to open up to the world, we are still very strict. We are now stuck in between, hoping to see better policies in the future.”

Others also warned of growing political challenges. “Clouds are definitely coming to Hong Kong from different angles,” said banker Garcia Herrero, referring to the West’s response to Beijing’s sweeping national security law imposed on Hong Kong in 2020.

Under this law, pro-democracy activists have been jailed or exiled, independent newsrooms have closed, and former lawmakers have been targeted. Meanwhile, the authorities changed curricula to emphasize China’s history and culture, and pushed for greater economic cooperation in the Greater Bay Area, a national plan to link south China’s Guangdong Province more closely with Hong Kong and Macau.

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

For the United States and the European Union, the National Security and Repression Act represents a “game changer in what has been agreed upon,” said García Herrero.

These escalating tensions could cause problems for Hong Kong’s trade and diplomatic relations with other countries. Hong Kong has more freedoms than other Chinese cities, and thus has long been seen as a gateway between the mainland and the West – a situation that appears increasingly precarious as civil liberties erode.

“The West will now understand that Hong Kong is not only part of China, but is closer to China than before,” said Yuen, an economics lecturer. The worst case scenario is that the West will treat Hong Kong like mainland China, and then Hong Kong will suffer from this kind of sanctions.

This convergence is likely to continue. In an effort to stem the brain drain, the government is spending HK$30 billion ($3.8 billion) to attract global companies and new talent – which Yuen said is expected to “attract a lot of mainland workers” who may be eager to escape the tougher job market. across the border.

Despite these geopolitical frictions, some argue that Hong Kong’s innate advantages will allow for a recovery – even if the city is headed 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 tax and existing financial infrastructure – “so even if the picture is a little sullied, there aren’t many other places to go,” said Garcia Herrero.

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

Passengers in the departure hall of Hong Kong International Airport after the government canceled the hotel quarantine, on September 26.

“We can call China and sort of maintain the situation as having a bit of autonomy, and (be) different from them, given the different Covid policies and governance regimes,” she said.

But both experts contend that the way forward is now fraught with new risks. International companies may come to Hong Kong, but they should be more careful with how much they invest in the city, given the threat of US sanctions and regional conflict.

Today, Hong Kong is increasingly under the control of Beijing, as China becomes more assertive on the world stage as leader Xi Jinping enters a third term in power surrounded by his loyalists. García Herrero said these escalating tensions between China and its adversaries have caused growing divisions “as the world’s globalization disintegrates” – effects that inevitably spill over into Hong Kong, which is caught in the middle.

“It will not, in my opinion, be what it was before in terms of Hong Kong’s opening up to both the West and the East,” she said.

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