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Post-Covid Hong Kong: no longer “Asia’s World City”

Samuel Ng


Source: Freedom House

Emerging from the pandemic, Hong Kong struggles to re-market itself after a difficult three years of protests, political oppression, and Covid restrictions. Unlike previous crises where it has had Chinese support, this time it has Chinese direction.

Over the past decades, Hong Kong has prided itself as “Asia’s World City”. The city has attracted international businesses, foreign corporations, tourists and expatriates alike. Hong Kong has also served as a not-so-metaphorical gateway to mainland China, where many Western businesses established their Asia-Pacific headquarters and a substantial number of Chinese corporations are listed on the Hong Kong Stock Exchange.

Its blended character, attributable to its time as a dependency under Great Britain, is a cosmopolitan mix of Eastern and Western values, systems, and culture. But this almost romantic and sugar-coated image of Hong Kong is not without taint. Just as one may see Hong Kong as a diverse melting pot, another may see a city that is awkwardly trapped between the Western world and China – the latter ringing increasingly true following the last few tumultuous years. In a post-Covid era, Hong Kong once again finds itself awkwardly positioned between China and the world, but this time as Beijing’s experiment.

Hong Kong under zero-Covid


Hong Kong’s decision to pursue a zero-Covid policy was made in Beijing. As a semi-autonomous region Hong Kong officially has the power to chart its own pandemic response, though in light of China’s recently extended reach this power is not without strong influence from central authorities in Beijing.

The newly-appointed Health Secretary Lo Chung-mau aptly summed up China’s role in pushing Hong Kong to adopt zero-Covid: “we are a part of China, and [it] is our obligation to make sure that we won’t cause a major outbreak in the rest of China”.

The city’s zero-Covid strategy, a diluted version of the mainland’s previous rendition, stands in stark contrast with the rest of the world, which has loosened and removed rules and resumed normalcy. Hong Kong continues to keep pandemic restrictions in place, despite heavy government promotion of pre-Covid status, and Chief Executive John Lee recently claiming, “no restrictions whatsoever.”


This anti-pandemic approach clearly does not support Hong Kong’s own interests, and has been blamed for downgrading the city’s status internationally. The 2022 Global Financial Centres Index saw the city dropping from its historical position of third most “global” financial hub to fourth place, ceding ground to its main Asian rival Singapore. Economically, Hong Kong is facing its potentially second largest budget deficit ever, and has experienced negative economic growth for three years since 2019.

Zero-Covid has also seen waves of residents – including talent, foreigners and locals – emigrating from the city. Data collected by the Census and Statistics Department observed a net outflow of more than 200,000 people over the last two years. Of course, this mass exodus can be attributed to other reasons such as economic hardships and political concerns, but it is without a doubt that tight restrictions, snap lockdowns, and quarantine have driven many away.

U-Turning from zero-Covid


Following strong pressure from industry leaders and businesses, the Hong Kong government axed the much-criticised hotel quarantine requirement in September, months after Singapore and other major economies. The quarantine regime was seen as a crucial aspect in driving down Hong Kong’s economy and international attractiveness. At its maximum, the city required inbound travellers to undergo 21-days of isolation. Although quarantine has been scrapped, travellers must still undergo three-days of medical surveillance and are banned from certain premises.

This apparent U-turn from its two-year long zero-Covid approach has raised eyebrows. The belated scrapping of quarantine demonstrates the city’s and the Central government’s eagerness for Hong Kong to re-engage with the world.

This insistence on rejoining global society strikes an interesting juxtaposition with efforts by Beijing to bring Hong Kong under its control, both economically and politically. Under the might of authoritarian repression, the city has been cleansed of dissent and opposition. Pro-democracy figures are either exiled or languishing in jail, independent news outlets have shuttered, Hong Kong’s common law is being dismantled systematically, and dissent only exists in private.

Simultaneously, China wants to highlight to the world Hong Kong’s attractiveness as a financial centre by re-opening its doors. Beijing’s conservative interpretation of the ‘One Country, Two Systems’ model has seen Hong Kong retain its primacy over other Chinese financial centres like neighbouring Shenzhen or Shanghai. Both are under close guidance by the Chinese Communist Party and are shackled by capital flow controls and information censorship.

Vera Yuen, an economics lecturer at the University of Hong Kong (HKU), notes that Hong Kong zero-Covid U-turn demonstrates that “China still needs Hong Kong”, especially as the mainland continues its zero-Covid policy indefinitely. Under the Greater Bay Area plan, Beijing aspires for the city to be deeply assimilated with the mainland economically and politically, with Hong Kong acting as a conduit for international investment and capital into China.

This 180-degree shift should be viewed through the prism of the mainland’s current economic woes. The collapse of the housing market, supply chain disruptions from anti-epidemic measures, and growing youth unemployment and discontent have all culminated into a brewing storm for the Beijing authorities.


China’s post-Covid experiment


The Central government is experimenting with Hong Kong. By opening one Chinese-controlled city first, Beijing can gauge the international appetite for investment into China. With Hong Kong long being the dominant gateway into China, the city has its (tattered) reputation behind it to attract foreign capital. However, no experiment is without risk. Hong Kong’s appeal has waned over the past few years as the city attempts to rebrand itself after the social upheaval, political crackdown, and strict pandemic measures.

Now, Russia’s war in Ukraine has also affected China’s Hong Kong reopening experiment. In another example of Beijing’s policies affecting Hong Kong’s reputation, the local government has refused to seize Russian oligarch Alexei Mordashov’s superyacht which entered Hong Kong waters in early October. This prompted the US State Department to make a thinly-veiled jab at the city’s cherished international status, highlighting the decreased appeal of the city for Western capital; “Hong Kong’s reputation as a financial centre depends on adherence to international laws and standards”.

The belated post-pandemic re-opening, draconian crackdown on opposition, and now China’s foreign policy vis-à-vis the Ukraine war have cumulatively soured any appetite among international investors looking at Hong Kong. As the world emerges from the pandemic, so does Hong Kong, but not as “Asia’s World City” but rather “China’s World City”.


 

Samuel Ng is currently in his final year of a dual Bachelor of Laws (Honours) and Bachelor of International Business at the Queensland University of Technology in Australia. He is also a Westpac Asian Exchange Scholar for Taiwan, previously studying at the National Chengchi University having undertaken units in Taiwanese international relations, diplomacy, and political history.


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