HONG KONG – Hong Kong officials are pushing to convince the world that the Chinese territory remains the go-to place in Asia for finance after three years of strict Covid-19 restrictions and political upheaval.

The city’s advantage, officials say, is its super-connector role to mainland China. Looking at the guest list for a summit that kicked off on Tuesday to tout its comeback, they could be right. Hong Kong’s new leader, Mr John Lee, is hosting top bosses from all of the biggest global banks, including Goldman Sachs, Morgan Stanley, JPMorgan Chase & Co and HSBC Holdings.

But there’s no denying that it has lost ground, in particular to Singapore, where money and talent is pouring in.

China’s economic slowdown, spurred by its zero-Covid approach and a crackdown on private enterprise, raises further risks. In the latest Global Financial Centres Index, Singapore was ranked as Asia’s top financial centre, overtaking Hong Kong which slid to fourth globally.

Finance Secretary Paul Chan refutes claims the city is losing its status, outlining in a blog post in October all the ways in which it still tops Singapore, including stock market capitalisation, bond issuance, hedge fund and private equity assets.

Hong Kong is not only a global hub, but also “our country’s international financial centre”, he said.

Hong Kong’s share of regional initial public offerings is hovering near the lowest in more than two decades amid a global slump in IPOs. Concerns about the impact of Beijing’s zero-Covid strategy and a property crisis have weighed on the stock market. In the third quarter, Hong Kong Exchanges and Clearing recorded its sixth consecutive profit decline as overall IPOs for the year have slumped 74 per cent.

In an interview with Bloomberg Television, HKEX chief executive Officer Nicolas Aguzin said while it has been a “tough year” for IPOs, the pipeline is “still good” with about 140 companies having submitted their applications.

China’s property crisis is also hitting the city’s bond market. So far in 2022, Hong Kong has slid to fifth in terms of issuance in Asia, excluding Japan, down one spot from 2021.

According to Mr Chan, Hong Kong is the biggest hub in Asia for arranging international and mainland China offshore bond sales, accounting for 34 per cent of the issuance in the region.

The rich are fleeing

Hong Kong’s asset and wealth management industry has also seen a sharp slowdown. Assets managed in the city rose just 2 per cent in 2021 after a 21 per cent jump the year before, according to figures from the Securities and Futures Commission. In the more high end of the market, private wealth and banking assets slid 6 per cent to HK$10.6 trillion (S$1.9 trillion).

Part of the problem is that many are choosing to set up wealth offices in Singapore, including well-heeled Chinese who are concerned over Beijing’s tightening grip on Hong Kong.

Mr Cheah Cheng Hye, co-chairman of Hong Kong’s Value Partners Group , said in September that his firm is “following the money” and plans to hire and relocate staff to Singapore.

The number of high-net-worth individuals in Hong Kong – defined as individuals with more than US$1 million in investable assets – fell 3.1 per cent to 182,000 in 2021. The drop could be driven by market performance, regulatory changes in mainland China and emigration from Hong Kong, KPMG said in an October report.

Even so, Boston Consulting Group predicted in a report earlier in 2022 that by 2026 Hong Kong could supplant Switzerland as the world’s biggest cross-border financial centre, with Singapore running third.

Hong Kong’s share of global foreign exchange trading has slid to 7 per cent from 8 per cent, according to a survey by the Bank for International Settlements. Singapore, meanwhile, grabbed 9 per cent. Hong Kong’s smaller share was probably due to Covid-19 restrictions in the first half of 2022 that “dampened economic and financial market activities”, the survey said.

Mr Chan said in his blog that Singapore has “relatively more inherent advantages” as it serves the South-east Asia region. However, Hong Kong has a strong foundation as a major US-dollar exchange centre and as centre for the Chinese yuan, with 75 per cent of global offshore yuan payments processed in the city, he said.

But pay’s still good

In terms of salaries, Hong Kong still shines. Wages for director and chief officer-level positions are more than 60 per cent higher in Hong Kong, compared with Singapore, according to data compiled by Bloomberg from a 2022 survey by recruitment firm Robert Walters.

In 2017, the difference was about 25 per cent. Wages are being pushed up across the board for those who have stayed as firms vie for the remaining talent.

Mr Lee vowed in his first policy address in October to “trawl the world for talents” after the local workforce shrank by about 140,000 in the past two years. Hong Kong’s labour force is hovering near the lowest in a decade, though numbers have recently ticked up again.

A survey by the Hong Kong Investment Funds Association showed more than a third of fund-management companies moved some or all regional and global roles to other places. Nearly 70 per cent of the respondents said it was “extremely difficult” or “difficult” to hire and retain expatriates in the city, according to the July poll.

Ahead of the summit, Hong Kong relaxed some of its Covid-19 measures, including its quarantine regime for incoming travellers. In his first policy address as a leader, Mr Lee in October introduced a bevy of measures to attract talent, including visa, tax and stamp duty concessions, as well as a US$3.8 billion financing vehicle to help businesses set up.

Hong Kong, the least affordable property market in the world, is in a rare downturn, as interest rates rise and residents have left in droves. In the residential market, Goldman Sachs forecasts a 30 per cent decline over two years, while Bloomberg Intelligence said office vacancies could reach a record in 2023.

In Hong Kong’s central business district, billionaire Li Ka-shing’s Cheung Kong Center skyscraper has seen empty office space spike to 21 per cent, according to Midland IC&I. Empty premium office space has tripled in three years to an all-time high, according to CBRE Group Inc.

In Singapore, property prices and rents have skyrocketed so much that authorities have had to implement cooling measures. BLOOMBERG