December 4, 2022

Hong Kong CNN —

At a glittering financial summit in Hong Kong this week, the city’s chairman triumphantly announced to a roomful of top Wall Street executives that the Asian hub was back in business. “The worst is behind us,” he declared.

Two days later, tens of thousands of rugby fans descended on the city’s largest stadium for the Hong Kong Sevens, their biggest (and usually boisterous) annual sporting event, which has been suspended since 2019 due to political unrest and later Covid-19. 19

The two high-profile international events sent a clear message: after nearly three years of border closures, mandatory quarantines and restrictions on business and social gatherings, Hong Kong has finally reopened.

For much of the pandemic, the semi-autonomous Chinese city maintained some of the region’s toughest restrictions, including one of the world’s longest mandatory quarantines on international arrivals. With the economy strained and concerns growing that Hong Kong would be left behind as the world moved on, the government finally opened the city’s doors in September and ended formal quarantine to the relief of millions.

“We were, we are and we will remain one of the leading financial centers in the world,” Hong Kong leader John Lee pledged at Wednesday’s summit, which was attended by more than 200 investors from 20 countries. “You can take that to the bank.”

Hong Kong Rugby Union CEO Robbie McRobbie hailed the tournament’s return as a “catalyst, turning point” before the Sevens kicked off on Friday, a symbol that “Hong Kong is still a vibrant, resilient city”.

But experts warn that while the attempt to revitalize Hong Kong is welcome and long overdue, it faces many challenges.

Recent years of isolation, coinciding with an ongoing political crackdown, have taken their toll, they said. Despite what Lee and other leaders insist, the reopened Hong Kong is not the same city the world knew before the pandemic – and the true impact of this change remains to be seen.

As many travel destinations reopened to travelers and restrictions were eased last year, Hong Kong seemed stuck in a different reality.

Restaurants, bars and gyms have often been forced to close or limit their hours. Residential buildings were cordoned off for days. At one point, public gatherings were limited to two people. And most residents didn’t leave the city for years because they were unable or unwilling to spend up to three weeks in hotel quarantine at their own expense when they returned.

Businesses have been hit hard. The Sevens tournament accounts for 95% of Hong Kong Rugby Union revenue, “so we’ve had layoffs and cuts for three years,” McRobbie said.

Many disaffected residents chose to leave permanently; Last year, the city experienced its sharpest population decline since records began in 1961. Businesses also began eyeing other locations — most notably Singapore, Hong Kong’s long-time regional rival.

But Hong Kong authorities, anxious to reopen the border with mainland China – which still shows no sign of easing its strict zero-Covid policy aimed at stamping out infections – have remained reluctant to extend the restrictions loosen up for fear the cases will increase and close that door.

Then a severe outbreak fueled by the highly contagious Omicron variant earlier in the year ended Hong Kong’s hope of maintaining zero daily cases.

Under mounting public pressure, the government lifted flight bans with certain countries and shortened hotel quarantines in March – but these small concessions did little to lure people back.

According to media reports in August, some Wall Street banks were warning their executives not to attend Wednesday’s financial summit if there were quarantine-free travel — a widely speculated factor behind the government’s final decision to end quarantine.

Financial leaders in the city breathed a sigh of relief.

“We’ve been closed for too long,” said Sebastian Paredes, CEO of Singaporean bank DBS’s Hong Kong operations. “We are starting to open up and follow the other parts of the world that have already opened up. And this is tangible proof that Hong Kong is back.”

Hong Kong says it’s open again for business.  Will the world buy it?

Alicia Garcia-Herrero, chief Asia Pacific economist at French investment bank Natixis, agreed that the week’s two big events were “a big sign that Hong Kong is moving from Covid restrictions into a new world”.

However, the remaining restrictions represent a competitive disadvantage.

International visitors must take Covid tests for seven days upon arrival in Hong Kong and are banned from restaurants, bars and gyms for the first three days. But the testing doesn’t stop there — bars and clubs that don’t serve food require all guests to show proof of a negative rapid antigen test.

There is also a mask requirement – ​​inside and outside – although photos of the financial summit show participants sitting at tables without mouth and nose covers. They included the city’s finance minister, Paul Chan, who was declared a “recovered case” by health officials after testing positive for Covid on arrival from a trip abroad on Tuesday.

Hong Kong Finance Minister Paul Chan delivers a speech at the Global Financial Leaders Investment Summit in Hong Kong on November 2, 2022.

Those rules “still largely ban the outbound travel market,” said Hong Kong rugby chief McRobbie. Before the pandemic, about half of the fans at the Sevens were foreign; This year, that number is “negligible,” he said.

The long period of isolation and financial hardship has also presented challenges for companies hoping to make a comeback. Many people have left the sports and events industry for more stable jobs in recent years, leaving the industry understaffed, McRobbie added.

That partial reopening has left the city in an uncomfortable Covid limbo, said Vera Yuen, an economics lecturer at the University of Hong Kong.

“If we want to open our border with mainland China, our restriction is too lenient… so it’s not allowed,” she said. “But if we want to open up to the world, we are still too strict. We are now in between and hoping for better politics in the future.”

Others also warn of growing political challenges. “Clouds certainly come to Hong Kong from different angles,” said banker Garcia-Herrero, citing the West’s response to the sweeping national security law Beijing imposed on Hong Kong in 2020.

Under this law, pro-democracy activists were imprisoned or exiled, independent newsrooms were shut down, and former lawmakers were targeted. Meanwhile, authorities have changed school curricula to emphasize Chinese history and culture and pushed forward Greater Bay Area Economic Cooperation, a national program to link southern China’s Guangdong province more closely with Hong Kong and Macao.

The law has drawn widespread criticism from foreign governments and human rights organizations, with the United States sanctioning Lee and other senior Hong Kong officials for their roles in the crackdown. Hong Kong authorities have repeatedly claimed the law restored order and stability after the city’s anti-government and pro-democracy protests in 2019.

For the US and European Union, the national security law and crackdown “represent a game changer from what was agreed upon,” Garcia-Herrero said.

These rising tensions could pose problems for Hong Kong’s trade and diplomatic relations with other countries. Granted more freedoms than other Chinese cities, Hong Kong has long been seen as the gateway between the mainland and the West – a position that appears increasingly precarious as civil liberties are eroded.

“The West would now understand that Hong Kong is not just a part of China, but closer to China than before,” said economics lecturer Yuen. “The worst case scenario is that the West would treat Hong Kong the same as mainland China, and then Hong Kong would suffer sanctions like that.”

And this convergence is likely to continue. To stem the brain drain, the government is spending HK$30 billion (US$3.8 billion) to attract global companies and new talent – which Yuen said is expected to “attract a lot of mainland workers” who may be interested escape an even worse labor market across the border.

Despite these geopolitical tensions, some argue that Hong Kong’s inherent advantages will allow for a revival — even if the city moves in a different direction than before.

Asia doesn’t have many other financial centers that can compete with Hong Kong’s open regulatory environment, low payroll taxes and existing financial infrastructure – “so there aren’t many other places to go, even if the image is tarnished a bit,” said Garcia- Herrero.

Yuen reiterated the point, saying the city’s proximity to China remains attractive to companies and investors hoping to tap the huge and lucrative mainland market.

Travelers in the departure hall of Hong Kong International Airport after the government's lifting of hotel quarantine on September 26.

“We can plug into China and sort of retain the status of having a little bit of autonomy and being different from them given different Covid policies and (systems of) governance,” she said.

But both experts acknowledged that the way forward now comes with new risks. International companies can come to Hong Kong, but be more careful about how much they invest in the city and consider the risk of US sanctions and regional conflicts.

Today’s Hong Kong is increasingly under Beijing’s control, and China is growing more assertive on the world stage as President Xi Jinping enters a third term surrounded by loyalists. These rising tensions between China and its rivals have fueled growing divisions “as the world deglobalizes,” Garcia-Herrero said — repercussions that inevitably spill over to Hong Kong, which is caught in the middle.

“In my opinion, Hong Kong’s openness to both the West and the East will never be the same again,” she said.