Hard-line COVID-19 policies, largely following mainland China’s “zero-COVID” measures, have hammered Hong Kong’s attractiveness to foreigners and international firms since 2020 and there is no sign those restrictions will be easing anytime soon. More than 90,000 residents left Hong Kong last year and 13,000 high net worth individuals worth a combined $65 billion are expected to flee China and its special administrative region this year.
Equity valuations of HK-listed stocks have fallen steeply since mid-2021, wiping out tens of billions’ worth of the city’s mandatory retirement fund, leaving pensioners increasingly uncertain about their financial security. Additionally, intervention in currency markets is becoming more routine for the city’s monetary authority amid a bout of US Dollar strength that has disrupted the Hong Kong Dollar’s floating peg, threatening to drive up borrowing costs.
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Capital Continues to Flee Hong Kong on Strict COVID Measures
Back in November 2021, MRP noted that Hong Kong’s strict COVID-19 policy was damaging their status as a booming Asian financial hub. The number of US firms with a regional presence in the city had dropped to an 18-year low as Japanese and European businesses in Hong Kong were also looking to relocate employees and corporate HQs.
Per Reuters, the Asia Securities Industry and Financial Markets Association (ASIFMA) said a survey of members, including some of the world’s largest banks and asset managers, showed 48% were contemplating moving staff or functions away from Hong Kong due to operational challenges.
90% of those in the survey said that operating in Hong Kong is “moderately or significantly impacted by factors outside of their control—particularly the government’s current highly restrictive COVID-19 policies,” according to ASIFMA.
Unfortunately, those COVID restrictions largely remain in place and continue to curb Hong Kong’s appeal internationally. As South China Morning Post reports, Hong Kong mandates a seven-day quarantine for incoming travelers, loosely following mainland China’s zero-Covid approach, even as rival centers such as Singapore, London and New York have dropped all restrictions.
Some have claimed Hong Kong’s restrictions on travel are more focused on politics than public health – just another way the administrative district’s government is shifting their laws to be closer in concert with mainland Chinese law.
The latest data from Consultancy Henley & Partners predicts that 10,000 high-net-worth individuals will leave mainland China and 3,000 will depart Hong Kong this year, taking with them combined wealth of up to $65 billion. Per CNBC, Hong Kong lost 93,000 residents in 2020, followed by another 23,000 in 2021.
As of March, nearly half of all European businesses in Hong Kong, citing the local government’s extremely strict COVID-19 protocols, were considering relocating within the next year, according to a new report from the European Chambers of Commerce. Among the firms planning to…
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