SEVERE COVID RULES: FOREIGN INDUSTRY EXITING HONG KONG?

The European Chamber of Commerce in Hong Kong has sounded a near death-knell for international business on the island if the Chinese government refuses to relax its Zero Covid strategy. The Chamber says many industries and businesses are toying with the idea of exiting the island this year or the next.

A survey conducted by the Chamber in January and February says: “Twenty-five per cent of the respondents affirm that they will fully relocate out of Hong Kong in the next 12 months given the current COVID-19 restrictions, 24% are planning to move partially, 17% confirm that they do not have any plans of relocation whereas 34% rest unsure. In addition, more than 50% of our sample face difficulties in attracting talent from overseas. Finally, 58% received public funding from the Hong Kong Special Administrative Region Government, yet this financial support has not been effective for the receiving companies.”

What is the critical reason for exiting the island? The survey reveals: “In summer 2021, the low vaccination rates among elderly people highlighted the limitations of the Hong Kong vaccination strategy. Against this backdrop, the Hong Kong SAR Government chose to follow the ‘Zero Covid’ or ‘Dynamic Zero Covid’ strategy .This indicated and led to severe consequences for businesses and residents as the one single biggest advantage of Hong Kong, its connectivity to the entire world and connector to mainland China, has been almost completely disabled.”

According to the survey, “65% of our respondents confirmed that COVID-19 restrictions have impacted their corporate and strategic planning in Hong Kong”. Forty per cent of the respondents cited “quarantine, travel restrictions not being able to see family” as the reasons behind the relocation plans. Twelve per cent said “Covid social distancing measures, school closures, etc.,” are making them leave. Fourteen per cent simply want to leave because of the “uncertainty”.

In a caution to the Chinese government, the Chamber said: “…the ongoing ‘Zero- Covid’ strategy has come at a very high cost for Hong Kong’s business community. The responses of our contributing firms portray a distressing landscape with companies facing half of the companies in Hong Kong experiencing unusually high staff turnover and/or planning to relocate their operations outside Hong Kong. Moreover, existing restrictions have hampered the corporate strategy or hiring plans for 2 out of 3 companies in Hong Kong.”

If the Chinese authorities are interested in not making the companies leave the island, the Chamber survey says, “we recommend that the HKSAR Government allows fully vaccinated and tested incoming travelers to isolate at home and expedites the adjustment of the Travel Regime to bring it in line with the government’s latest guidelines for self-isolation under the StayHomeSafe Scheme”. The survey feels that “such measures will improve the business environment of Hong Kong without undermining the city’s safety”.

The island’s administration is trying to relaunch its economy by lifting flight bans and cutting quarantine period. There was a time when businessmen were fed up with the government’s requirement that “most inbound travelers were made to self-isolate in hotel rooms, on their own dime, for three weeks, one of the world’s longest isolation periods. The quarantine requirements are now down to seven days but “an exodus is already playing out”, media reports said.

A similar survey by the American Chamber of Commerce in January, “found that 44% of expats and businesses are likely to leave the city, citing Covid-related restrictions”. The report said: “Hong Kong still holds business opportunities but an array of issues, especially draconian travel restrictions and worsening US-China relations, weigh on sentiment.”

Western media reports, based on feedback from the companies, “even without the Covid crisis, headhunters were having trouble bringing talent to Hong Kong because of Beijing’s growing oversight of the semiautonomous territory”. The implementation of the draconian national security law had also contributed to the companies’ uncertainty. The American report says “more than 80% of US firms in Hong Kong said they had been impacted by the national security law, nearly half saw staff morale take a hit, and said they lost employees who decided to emigrate”.

According to Bloomberg, Hong Kong Chief Executive Carrie Lam acknowledged that the “city’s strict measures were having an impact” on the city’s weary residents as well as the finance hub’s international reputation. She was quoted as saying: “I have a very strong sense that people’s tolerance is fading. I have a very good feeling that some of our financial institutions are losing patience about this isolated status of Hong Kong.”

The Chinese government has so far refused to react to the revelations of these surveys. However, the industry is getting a clear picture from the angry and frustrated reactions of the Chinese people to the unending restrictions.

For the last two years, millions of Chinese have experienced massive lockdowns whenever a handful of Covid cases were reported. They were forced to stay indoors, tracked digitally, made to undergo mass testing frequently. However, when the pandemic outbreak did not come under control, the restriction became severe with people unable to buy even basic groceries from nearby markets. The situation “prompted online rumblings from frustrated citizens, as questions about Beijing’s zero-Covid strategy break into the mainstream for the first time”.

Unruly scenes of protests by residents went viral on the social media platforms in Shenzhen and Guangzhou.

Even affluent cities like Shanghai are reverberating with protests. According to the media, “a stark example of the human toll of China’s stringent measures came on Wednesday, when an off-duty nurse died of an asthma attack in Shanghai after reportedly being turned away from several hospitals, including the one where she worked”. As the uproar over the incident increased, “Wu Jinglei, director of Shanghai’s health commission, offered his condolences and vowed to reduce the disruption to normal medical services, especially for emergency rooms, while hospitals are being disinfected”.

Bloomberg reports: “While a recent devastating outbreak of the Omicron variant has forced the government to relax some restrictions amid an exodus of expatriates and residents, the city hasn’t given any signs that it plans to abandon the ‘dynamic zero Covid’ strategy it has borrowed from China. The strategy aims to fully eliminate local cases rather than risk opening up.”