Hong Kong's exodus shrinks workforce in threat to financial hub status

Since August 2018, Hong Kong's labour force has dropped about 6 per cent to 3.75 million people, near a decade-low. PHOTO: AFP

HONG KONG (BLOOMBERG) - Finance executive Tam Sze and her family of four will soon leave Hong Kong, where she has spent her entire life, bound for Melbourne.

The senior manager at an international bank plans to look for a job once she gets there by early next year. Ms Tam is hopeful that she will be able to secure employment in the financial sector just as quickly as her friends who moved to the Australian city.

"Our determination to execute our plan came after what happened in 2019," said Ms Tam, citing anti-government protests.

She obtained the Australia Investor Stream Visa, which requires an investment of at least A$2.5 million (S$2.4 million). "For the growth of my kids, I decided to give it a try."

Ms Tam and her family are part of a growing exodus of residents that is shrinking Hong Kong's workforce and undermining the economic outlook for the once-freewheeling city.

The population outflow is making Hong Kong age faster, as the departure of younger workers and their children increases the proportion of retirees as a percentage of the population.

Since August 2018, Hong Kong's labour force has dropped about 6 per cent to 3.75 million people, near a decade-low, according to the latest official figures. In April alone, the total number of employed and those looking for work fell by about 33,700, the most on record based on data going back to 1990.

"Labour force and jobs are what keeps Hong Kong vibrant and its status as a major financial centre," said DBS Bank economist Samuel Tse.

The former British colony is struggling to revive its role as a global finance and commerce hub in the wake of the pandemic. Travel restrictions have prompted firms to move staff from Hong Kong to rival hubs such as Singapore.

In the latest sign of a brain drain, a survey by the Hong Kong Investment Funds Association showed that more than a third of fund management companies had moved some or all regional and global roles from Hong Kong to other places.

Trying to find talent to replace those who leave is proving hard.

"We have seen massive attrition out of Hong Kong," American Chamber of Commerce chairman Joseph Armas said in a Bloomberg Television interview this month. "The attraction of senior executives and senior talent to come into Hong Kong - this has been a struggle as well and is a great concern that we are trying to figure out how to deal with."

About 121,500 residents departed the city in the year ended June 30, leaving the population at about 7.29 million, according to government data released this month. That means the population fell 1.6 per cent, marking the third straight year of declines and the biggest drop in at least six decades.

The number coming in is dropping rapidly. Hong Kong handed out 32,248 work visas last year, down from 62,155 in 2017, according to the Immigration Department.

Only 5,701 visas were approved for international workers under the General Employment Policy in the first half of this year, compared with 20,314 in the first half of 2018. Visas for professionals from mainland China fell 10 per cent in the same period.

Persistent trend

A smaller labour force typically leads to lower gross domestic product and income levels of residents, said Dr Aries Wong Kin-Ming, an expert on Hong Kong's economy at Hong Kong Baptist University. The fiscal burden also rises because more tax revenue is needed from a smaller labour force to support welfare expenditure for the elderly, he said.

Even before the pandemic, there was concern about available workers. In a 2019 report, the government projected that the supply of local manpower would drop at an average annual rate of 0.6 per cent from 2022 to 2027.

The economy is already in trouble. GDP may potentially contract this year for the third time since 2019, according to the government.

Fitch Ratings warned in a report this month that Hong Kong's apparent prioritisation of national strategies and governance practices over economic competitiveness may undermine the city's role as an international financial centre.

"If these risks crystallise, it would leave the economy less dynamic, accelerate fiscal policy challenges associated with ageing and potentially contribute to downward pressure on the territory's credit rating," Fitch said in the report.

It is clear that Hong Kong is ageing quickly. The number of residents aged 29 and below dropped to 24.1 per cent of the total population midway through this year, from 27.8 per cent four years ago, according to data from Hong Kong's Census and Statistics Department. The percentage of residents aged 65 or above increased to 20.9 per cent from 17 per cent.

Women having fewer children means the situation is likely to worsen over time unless Hong Kong can import more labour. The birth rate in 2021 was 772 babies per 1,000 women, the lowest on record going back to 1971.

Yet, the pressure of younger workers wanting to emigrate is likely to continue. About a fifth of Hong Kong residents under the age of 35 wish to leave either to the mainland or overseas, according to a study by the Hong Kong Federation of Youth Groups last month.

Despite the risks of starting over in a new city, many see these outweighing the disadvantages of staying.

Ms Sarah Poon, a former marketing executive at a multinational corporation, left this month for London. She is studying for a master's degree, but intends to stay on for work and eventually achieve permanent resident status.

"While many people might be concerned about taxes or having to start from lower positions, I think this is a necessary sacrifice to enjoy diversity and equality in an environment," said the 24-year old, adding that at least 60 per cent of her friends are also thinking about emigrating. "I expect that my pay and benefits might be reduced, but I think it is still worth it."

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