Hong Kong might not widely reopen until early 2024 because of its stringent Covid-19 policies, the city’s European Chamber of Commerce said in a draft report that Asia Financial has obtained.
The limited effectiveness of locally developed vaccines is forcing mainland China to maintain tight restrictions on travel, the chamber said in the draft, which has not yet been made public.
Hong Kong’s policies could trigger an exodus of foreign companies and staff and jeopardise its role as a financial hub, business leaders have warned.
“We think that our duty and obligation to our members beyond listening, conveying, and lobbying is to help them to understand and to make appropriate plans going forward in the next few years,” the report said.
The most likely scenario for Hong Kong would be that it would not reopen until China rolls out its mRNA vaccine across its 1.4 billion population, which could take until late 2023 or early 2024, it said.
“The limited effectiveness of Sinovac and other locally developed vaccines is forcing the Mainland authorities to be extra careful and keep the country closed to avoid any major outbreaks,” the authors added.
If that was the case, the chamber said there was a risk of a “cascade effect” of business leaving the Asian financial hub.
“We anticipate an exodus of foreigners, probably the largest that Hong Kong has ever seen, and one of the largest in absolute terms from any city in the region in recent history,” the report said.
While Hong Kong has succeeded in keeping the virus under control for much of 2021, it has become one of the world’s most isolated places. Travel restrictions and intermittent lockdowns have accelerated a ‘brain drain’.
Hong Kong saw a surge of infections in January, which authorities have been struggling to control.
Given the scenario, multinational firms would increasingly relocate China-focused teams to the mainland or shift their Asian regional teams to Singapore or Seoul, the chamber said.
“While there is always an expectation that this exodus will bring a replacement, such replacement is likely to come from the Chinese workforce,” the report said.
Hong Kong could lose its appeal as an international business hub as well as its potential to contribute to China’s economy.
“The current view of the international business firms in Hong Kong is that the shape of the organisations in Hong Kong is changing and evolving from Regional Headquarters to local sales representation offices,” the chamber said.
The departure of international talent could also undermine the city’s “potential to maintain world class universities”.
Mental health cases will continue to grow, especially among the younger population, the chamber warned.
- George Russell