Hong Kong business group warns of long road ahead after Covid-19 shift

Hong Kong has long been an important gateway between mainland China and the rest of the world. PHOTO: AFP

HONG KONG – One of Hong Kong’s top foreign business groups has warned that the city still faces challenges in trying to revive its reputation as a global financial hub, even after it ditched almost all its Covid-19 curbs.

In a sweeping overhaul of policies that kicked in on Thursday, residents and travellers alike will find their lives a bit easier. People coming into the city will not have to fill in a health declaration or take polymerase chain reaction tests after they arrive. Venues like bars and restaurants will not have capacity limits and will no longer require proof of vaccination for entry, while close contacts of Covid-19-positive people do not have to quarantine any more.

Hong Kong Chief Executive John Lee says the city has been preparing for the changes for six months. While the timing has puzzled some in the hub – the border with mainland China will soon reopen even as the latter struggles with a record wave of infections after abandoning its zero-Covid policy – health experts say any influx in visitors is unlikely to overwhelm the city’s healthcare system.

But even as the Covid-19 rule changes put Hong Kong’s battered economy on track to rebound over the course of 2023, there is uncertainty around when the benefits will start to flow as it will take time for travel to recover. At least one major foreign business group has warned that the city has a long road ahead to assure international investors of its attractiveness.

“We welcome the measures. Again a great step forward in the right direction,” said Mr Inaki Amate, chairman of the European Chamber of Commerce (EuroCham) in Hong Kong, adding that the city now just needs to remove a small number of rules, like its mask mandate. “Opening was the first step, but the hard work starts now to regain the trust from the rest of the world,” he said.

‘Very normal’

The dismantling of Covid-19 measures tells the world that “Hong Kong is very normal now”, Mr Lee said on Wednesday as he announced the changes.

But Hong Kong’s normal is remarkably different to before the pandemic. As well as nearly three years of strict virus curbs, an ongoing crackdown on dissent has seen scores of journalists, politicians and civil society figures jailed. It has sparked a population exodus, damaged the city’s status as a liberal finance centre and prompted concerns that its rule of law is deteriorating. 

Also, the apparent desire for Hong Kong officials to wait for the mainland to make changes is fuelling concerns about the appetite for making policy choices.

“If people are questioning Hong Kong’s autonomy and governing style, it will not disappear even if Covid-19 policy in Hong Kong is relaxed,” said Assistant Professor Liu Dongshu, who specialises in Chinese politics at the City University of Hong Kong. Combined with the city’s political situation, it “will continue to be a challenge for Hong Kong to win back people’s confidence in its competition with other places like Singapore”.

Singapore has been a major beneficiary of Hong Kong’s brain drain. While it is unlikely to topple Hong Kong’s standing in some areas – Hong Kong is home to nearly 44 per cent of hedge fund managers operating in the region, according to Preqin data – its ability to attract top talent underscores how the centre of financial gravity in Asia has been shifting.

China pivot

Still, Hong Kong has long been an important gateway between mainland China and the rest of the world. In 2018 – before the pandemic and before the pro-democracy protests that rocked the financial hub – mainland China accounted for about 76 per cent of the city’s total visitors. 

This means that it will be one of the biggest beneficiaries of China’s border reopening in January. Hong Kong may get a 7.6 per cent boost to gross domestic product as exports and tourism income climb, Goldman Sachs economists said in a note published before the latest Covid-19 easing.

Yet weakening prospects for global growth, ongoing Covid-19 uncertainty and geopolitical tensions will likely remain risks for Hong Kong’s outlook, said Hang Seng Bank chief economist Thomas Shik, who expects the economy to grow 2.5 per cent in 2023 after a 3 per cent contraction in 2022.

It is also unclear how quickly the economy will get its boost, as it may take some time to see the effects of policy shifts, Mr Shik said.

On Wednesday, Hong Kong’s leader cautioned that the border reopening will be gradual, and said he is aiming to come to an agreement with the mainland authorities and ask for approval from the central government by mid-January. BLOOMBERG

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