But less than two years after starting his business in Hong Kong, Joseph decided in January that he could not see a future in the city and moved to Singapore. “Many potential investors are reluctant to invest in Hong Kong, as they no longer believe it is a safe place to start a company,” the 28-year-old, who asked to be named, told Al. Jazz. “I can see that the city has changed before my eyes. Hong Kong was one of the most cosmopolitan cities, but the COVID protests and restrictions mean that the advantage is waning. China is full of gray areas. “There is a lot of uncertainty in business, why do we want more?” As Hong Kong celebrates the 25th anniversary of its return to Chinese rule on Friday, the city’s position as an international financial and business hub is as dubious as it has ever been since tradition. Hong Kong marks 25 years since the city’s return to Chinese rule [File: Joyce Zhou/Reuters] Tens of thousands of people have fled the former British colony as Beijing’s tighter control and strict pandemic restrictions aimed at aligning with China’s “zero COVID” strategy dramatically reshape city life. More than 120,000 people, locals and expatriates, left in 2020 and 2021, with tens of thousands more expected to follow this year. In a survey conducted by the US Chamber of Commerce in Hong Kong last year, more than 40 percent of expatriates said they planned to leave or thought about it, largely because of concerns about a draconian national security law imposed by Beijing in 2020. strict COVID Restrictions restricting international travel and a bleak outlook for the city’s future competitiveness. At the same time, fewer professionals are moving to the territory, with the number of work visa applications falling from 41,592 in 2018 to 14,617 in 2020, according to government figures. From its humble beginnings as a fishing village, Hong Kong has become an international business hub with a vibrant stock market that often ranks alongside Singapore, London and New York. Following the concession of Hong Kong to Britain under the Nanking Treaty, which ended the First Opium War in 1842, the region became a regional center of economic and commercial services. During the 1970s and 1980s, the city moved away from manufacturing to financial services as factories, originally staffed by cheap laborers from mainland China, sought cheaper labor abroad. Under the “Open Door” economic reforms initiated by Chinese President Deng Xiaoping in 1978, the city’s unification with China deepened, prompting strong international investment and trade. Five years later, the Hong Kong dollar was officially pegged to the US dollar, as uncertainty about the future of the then colony resulted in a sharp devaluation of the currency. Under the terms of Hong Kong’s return to China, Beijing has promised to maintain the city’s way of life for at least 50 years. [File: Dylan Martinez/Reuters] Under the terms of Hong Kong’s return to China in 1997, Beijing promised to maintain the city’s way of life, including civil liberties and civil liberties not available in mainland China, for at least 50 years, according to the principle ” one country, two systems “. . These freedoms, however, were rapidly curtailed amid a sweeping crackdown on dissent that virtually wiped out the city’s pro-democracy opposition and forced the closure of independent media and dozens of civil society organizations. Incoming Hong Kong CEO John Lee has pledged to boost Hong Kong’s reputation as a global financial hub, without setting a timetable for opening the city to the world. Li, a former security chief who ran unopposed in Beijing-controlled elections, hailed the national security law to restore order and stability and described the “one country, two systems” tradition as “extremely succesful”. But for international companies, the uncertainty created by the law, which has resulted in more than 200 arrests and brought significant changes to the city’s UK legal system, has become a major source of concern, according to Michael Davis, a former law . Professor at the University of Hong Kong. “Unclear national security legislation raises significant uncertainties about acceptable conduct for international companies,” Davis told Al Jazeera. “The pressure on the courts that accompanied the enforcement may have eroded confidence in the rule of law, which has historically been the city’s hallmark of attracting international business.” Davis said international companies are also under pressure to support Beijing’s policies “while at the same time these companies are under pressure in democracies where they operate not to support such repressive policies, with the risk of being excluded from the market.” Strict quarantine rules in Hong Kong have caused migrants to flee the city [File: Bloomberg] For Joseph, who led a logistics company in Asia before starting his own company, Hong Kong’s declining popularity is undeniable. “Hong Kong has had many advantages, such as easy cash inflows and outflows, and the legal system is close to the UK common law system,” he said. “It was politically and judicially stable. At that time my former company could choose [to set up the Asia headquarters] “between Singapore and Hong Kong, and we chose Hong Kong as it was the gateway to China.” Hong Kong’s strict restrictions on COVID, which once included 21 days of mandatory quarantine in hotels for incoming travelers, have further damaged the city’s charm. Despite being dubbed the “World City of Asia”, the region remains one of the few places outside China to be quarantined on arrival, while its “cut-off” policy of suspending COVID-related flights regularly leaves travelers. trapped abroad. “This [policy] “It escalates the cost for expatriates to visit their families in foreign countries,” Vera Yuen, a lecturer in economics at the University of Hong Kong, told Al Jazeera. “The quarantine requirement was amended seven days later, but the circuit breaker policy was complied with. It was too late to detain these people in Hong Kong, especially compared to much of the rest of the world, where quarantine measures are no longer in place. As uncertainty prevails, another outbreak may again lead to more stringent measures. “They decided to move to a place that gives them more personal freedom.” Many locals have also lost hope in the city. Ip, a 30-year-old financial worker, said he planned to move to the UK in the near future due to the “increasingly undesirable environment”. “I work for a British company, but many British and European colleagues have resigned and returned to their home countries,” Ip told Al Jazeera, asking to be identified only by her last name. “I think Hong Kong companies will lose their international character. “In the long run, the asset management industry may see lower demand due to fewer asset inflows. Combined with a questionable [national] “Education here for my future children and the lack of innovation in the city for the last 25 years, I want to leave Hong Kong,” Ip added. Hong Kong’s financial system increasingly integrated with mainland China [File: Brent Lewin/Bloomberg] Whatever the future of Hong Kong, there is no doubt that it will be more closely linked to China. Already, more than half of the companies listed on the Hong Kong Stock Exchange (HKEX) are from the mainland. Yuen, a finance lecturer, said China hoped to use Hong Kong to achieve economic goals, including the internationalization of the renminbi (Chinese currency) through “hosting bonds in RMB and as an offshore RMB exchange center”. “The Hong Kong stock market is increasingly dominated by companies on the mainland,” he said. In 2014, Shanghai-Hong Kong Stock Connect was launched to provide mutual access to shares between the Hong Kong and mainland markets, followed by an expansion two years later to include Shenzhen, allowing mainland investors access to smaller companies in Hong Kong. In 2018, a change in the rules on weighted voting rights led to a wave of company registrations in mainland China, including the e-commerce giant Alibaba Group in November of the following year. Last year, Wealth Management Connect was launched to provide access to investment products between Guangdong Province, Hong Kong and Macao. While Hong Kong’s freedoms and international character have suffered, the city’s growing alignment with China has been accompanied by growing wealth. The city’s economy has more than doubled since 1997, with gross domestic product (GDP) reaching $ 368 billion in 2021 – although GDP shrank by 4 percent in the first quarter, year-on-year, as constraints of the pandemic affected development. Davis, a law professor, predicted that Beijing would invest in Hong Kong to create a “dominant position” for mainland companies and “undermine the traditional dominance” of local and international businesses. For Joseph, the days of Hong Kong as a gateway for foreign companies to China are long gone. “If I wanted to start a company to do Chinese business, I would start a company in Shanghai,” he said.
