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Hong Kong: a city on hold 

Published 28 February 2022 in Asian hub • 5 min read

Despite all that Hong Kong has gone through in the last three years, the city’s core business strengths remain, says Tara Joseph, the outgoing head of the city’s American Chamber of Commerce. But faced with closed borders, a stilltobedigested national security law, and the aftermath of its anti-government protests, it may take years before once again it can capitalize on them fully. 

 

 

Hong Kong has undergone a lot in the last two-and-a-half years: protests, the Beijing-imposed national security law and a strict zero-Covid policy. How is it holding up as an international business center? 

 

It’s been an intense period for Hong Kong. The combination of protests, political change and Covid has had a severe impact on everybody.  

But as an international business center, Hong Kong still has some key advantages. While people can’t travel and connect, money can still flow, and China is too big a market for people to abandon.  

Despite all of the difficulties that still loom over the place, many people will sit through this difficult period to engage in the delicate dance between politics and business and try to figure out ways to make business happen, especially in financial services and logistics. 

Coupled with this, we have the development of the Greater Bay Area – the economic integration of Hong Kong and Macau with the major cities of south China. Many people see this as a fresh opportunity to develop. 

 

Has the national security law had any kind of significant impact on how international business views Hong Kong? 

 

The law has had an impact on confidence and comfort. It affects confidence when it comes to the rule of law and in areas such as data security. It’s vague, which makes it difficult for companies and people to know how it could be enacted on business. It adds worries about how the court system may have to adapt, even though currently contract law and business law seem to be at the same international standards as they always were.  

It also adds concern that Western firms may be under more under the microscope in a way they weren’t before. The complete sense of safety and lack of risk in Hong Kong has given way to a new normal in which maybe there needs to be a Plan B – that perhaps there is some risk inherent in being in Hong Kong. It’s impossible to ignore it and it’s changed Hong Kong to being ever closer with China. This is the new reality. 

Hong Kong
“The Hong Kong government is now focused on mainland China, especially economic integration with the mainland. That doesn't mean there aren't opportunities for international businesses – there are plenty of opportunities”
Tara Joseph
How about Hong Kong’s zero-COVID policy – what impact is that having on business? 

 

The policy is painful and debilitating. Hong Kong is a city that is based around connectivity with China and with the rest of the world. When you cut that connectivity, it makes it difficult for people to feel comfortable, even more so when there seems to be no light at the end of the tunnel. It’s extremely difficult to know when this policy will end. 

One of the issues that AmCham and many other organizations have is what are the government’s KPIs beyond zero infections. Without these, how can we strategize and plan? [Lacking these] poses a strategic risk for companies and makes for a personal battle for people who haven’t seen their families or clients for a long period of time. That’s exhausting. 

 

Between the national security law and its COVID-19 policy, have we seen a fundamental change in Hong Kong’s attitude towards international business? 

 

Yes. The Hong Kong government is now focused on mainland China, especially economic integration with the mainland.  

That doesn’t mean there aren’t opportunities for international businesses – there are plenty of opportunities. But a huge adjustment is needed to adapt to this new normal, and maybe those who have been in Hong Kong for many years and remember Hong Kong from a different vantage point aren’t comfortable with this. 

Quite possibly newcomers, or people who are devoted to mainland China, may see the benefits and opportunities that lie ahead more clearly. Also, if people can see beyond the US China trade friction and political friction, then it’s hard to imagine a world where the US and China aren’t trading. There are too many advantages for these two giant economies not to trade. 

 

That makes it sound like one way or another Hong Kong will remain a gateway to China? 

 

Like many people, I believe that Hong Kong has an incredible position when it comes to business.  

Even in this difficult period, there are still some businesses finding opportunities. We’ve seen some relaxation in the financial services ownership rules in China which have opened up opportunities with fields associated with that in asset management and wealth management, and also in logistics. 

When it comes to the Greater Bay Area, there are opportunities in retail, real estate, education and healthcare. 

China is a huge market, and Hong Kong is part of China. Its core underlying strengths still exist, but it may take a while for companies to be able to take full advantage of them. If it can get through this very difficult period, many people still expect that business can shine again. But it’s going to be a difficult few years. 

Expert

Tara quote

Tara Joseph

Tara Joseph has been president of the American Chamber of Commerce in Hong Kong since February 2017, fostering commerce between the US, Hong Kong and China at one of Asia-Pacific’s most influential business NGOs. Before joining AmCham, she worked as a journalist for Reuters for 22 years in London and Asia. She will be leaving her post in May. 

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