HONG KONG — Every few generations, Hong Kong, transforms itself, evolving from a swampy fishing village to a 19th-century colonial port, to a capitalist outpost and factory after the 1949 revolution in China, to a 21st-century financial center.
As the former British colony marks the 25th anniversary of its return to China, bewitched by pandemic curbs that ravaged business and a crackdown on its pro-democracy movement, Hong Kong’s leaders say it’s time to transform again. They say the city needs to become a leader in technology that relies more on ties to nearby Chinese manufacturing towns than on global trade.
The government of elected Chief Executive John Lee is under pressure to generate new sources of economic growth, looking beyond COVID outbreaks and antivirus controls that have devastated tourism and business and uncertainty over the legal environment following a crackdown on the pro-city democratic movement.
In April, during his election campaign, Lee pledged to “start a new chapter” for the city better known as one of Asia’s busiest ports and largest stock markets and to “strengthen its competitiveness” in technology and innovation, as well as trade and finances.
Lee did not provide details but pointed to the Greater Bay Area, a Chinese government initiative to connect Hong Kong with neighboring mainland cities, including Shenzhen’s technology and financial center and Dongguan and Foshan industrial powerhouses.
“There are great opportunities in the Greater Bay Area that have not yet been realized,” said David Graham, executive director of the British Chamber of Commerce in Hong Kong. “It’s a big opportunity for Hong Kong, and it will be very difficult to replicate it in other cities like Singapore or Dubai.”
In addition to the urgency for Lee to roll out a long-term strategy, executives frustrated with Hong Kong’s travel controls are leaving the city, business groups say. Some companies are moving to Singapore, Bangkok, Dubai, or other business centers for good.
“Hong Kong’s strength as a global connector has been greatly diminished,” said Joseph Armas, president of the American Chamber of Commerce in Hong Kong. Executives have moved to cities where ‘travel is possible’.
Armas appealed to Lee for a “concrete roadmap” to revitalize Hong Kong, which, along with mainland China and Taiwan, remains one of the few places where inbound travelers still have to undergo mandatory quarantines.
For Michael Chan, who runs a fashion goods company, restrictions have extended what used to be a week’s travel to factories in Bangladesh or China to a month or two, as there’s no point in quarantining weeks for a short work trip.
Chan has considered moving to Singapore temporarily, where the controls are much less strict.
“When I meet government officials, I often have to meet them in person and talk things over,” said Chan, a multi-quarantine veteran. “Unlike in the US,e I can just use Zoom for a video call.”
According to government figures, Hong Kong lost nearly 90,000 of its 7.5 million inhabitants in 2021—more than 100,000 people left in February and March this year during the city’s worst COVID wave.
The fear over Hong Kong’s travel restrictions “provides an opportunity for others to dive into our talent pool,” said Sally Wong, CEO of the Hong Kong Investment Funds Association.
Activists and foreign governments complain that the ruling Communist Party is crumbling the 50 years of autonomy Beijing promised after 1997. businesses, even as rent and other costs soared to record highs and inequality widened.
Hong Kong still has a skilled workforce, an efficient port, and a Western justice system that is considered impartial and trustworthy.
But its status as a global trade and business center is declining.
One in 20 companies surveyed by the US Chamber of Commerce in Hong Kong plans to relocate their global or regional headquarters out of Hong Kong, the chamber reported in January. It said half wasn’t sure if he was going.
Some companies want to see how law enforcement, the free flow of information, and people critical to commerce and finance can change. Two out of five companies surveyed said they feared they would lose free internet access, which is vital for a trading center that relies on the flow of information.
“There is a perception that foreign companies are less welcome,” the report said. “More than half of our respondents say the government is ‘unconcerned’ or ‘dismissive’ about business concerns.”
Until now, Hong Kong has been largely free from mainland censorship. The ruling party uses internet barriers known as the “Great Firewall” to prevent the Chinese public from seeing foreign websites operated by newsgroups, governments, and human rights activists. But the area’s main pro-democracy newspaper, Apple Daily, was shut down during the crackdown, and its publisher, Jimmy Lai, was sentenced to prison.
Kurt Tong, a former US consul general in Hong Kong and managing partner of The Asia Group, a consulting firm, said the city’s national security law, while used to quell dissent, has not impacted business so far. And the finances.
But the effect of the law and Beijing’s review of the area’s political system should be watched.
“People who care about Hong Kong’s financial system should think about that,” Tong said.
Hong Kong thrived as a trading port to China for decades, but in 2000 was eclipsed as the world’s busiest container port by facilities in mainland China. Two decades later, with a cargo volume barely 10% above the 2000 level, the port of Hong Kong ranks 8th in the world. Shanghai, Shenzhen, and three other Chinese ports are larger.
Hong Kong’s stock market, once Asia’s largest outside Japan, has grown steadily but has slipped behind regional rivals.
Companies traded in Hong Kong have a total market value of $5.4 trillion, compared to $8.2 trillion for the Shanghai Stock Exchange. According to the World Federation of Exchanges, companies on China’s second exchange in Shenzhen are worth $6.2 trillion.
Tong is one of those who believe that the recent setbacks in Hong Kong are only temporary.
“Its current status is that Hong Kong is a very important global center, one of the most important in the world. It plays a unique and crucial role in connecting the Chinese economy to the rest of the worldwide economy and channeling finance into both. dirDirectionssaid Tong.
The city, meanwhile, nurtures its role as a hub for innovation, setting up research centers that have helped incubate dozens of start-up companies.
A vice chancellor of the Chinese University of Hong Kong, Rocky S. Tuan, pointed to medical and biotechnology research as one of the city’s lesser-known strengths. Writing to the South China Morning Post newspaper, “Hong Kong offers access to capital, expertise, global regulatory recognition of clinical research data and a network of world-class universities.”
That could give the city an edge over regional rivals.
“Other cities in the region, particularly Singapore, maybe more of an Asia or Southeast Asia hub,” said Tommy Wu of Oxford Economics. “Hong Kong’s activities will be primarily focused on Greater China.”