Hong Kong, the Chinese territory of 7.5 million people, has one of the lowest COVID-19 death rates in the world; it has logged 213 fatalities since the pandemic began.
But the territory also has some of the toughest COVID-19 quarantine restrictions in the world—with most arrivals quarantining in hotels for as long as three weeks—and the government has offered residents no timeline of when the rules will be relaxed.
Now the world’s biggest banks and financial institutions operating in Hong Kong are pushing back.
The Asia Securities Industry and Financial Markets Association (Asifma)—the region’s largest financial industry lobby—has warned the government that the “highly restrictive” policies are jeopardizing Hong Kong’s status as an international financial hub and could hurt the city’s long-term economic prospects, the organization said in a Monday letter addressed to Hong Kong’s financial secretary, Paul Chan.
“We fear that if Hong Kong does not develop and communicate a clear and meaningful exit strategy from the current zero-case approach, Hong Kong risks losing its vital international status…[undermining] the territory’s and mainland [China’s] long-term interests and policy objectives in relation to the internationalization of China’s capital markets,” wrote Asifma in its letter.
Hong Kong has stressed that it will maintain its strict so-called COVID-zero policy of tolerating no infections in hopes of reopening its border with mainland China, which also abides by a COVID-zero stance, even if it risks alienating international businesses and travelers. “Of course international travel and international business are important for us, but…the mainland is more important,” said Carrie Lam, Hong Kong’s chief executive, in an Oct. 5 press briefing.
In a recent poll of Asifma’s 155 members, which include BlackRock, Deutsche Bank, and J.P. Morgan, nearly half said they are “contemplating moving staff or functions away from [the city] due to operational challenges” from the quarantine policies.
Nearly three-quarters—73%—of those surveyed are “experiencing difficulties [in] attracting and retaining talent in Hong Kong,” while 90% said that operating in Hong Kong is “moderately or significantly impacted by factors outside of their control—particularly the government’s current highly restrictive COVID-19 policies,” according to Asifma.
Hong Kong’s restrictive policies, however, haven’t yet hurt big banks’ bottom lines. London- and Hong Kong–headquartered HSBC logged a 74% jump in pretax profit to $5.4 billion in its third-quarter results announced on Monday. London-based Standard Chartered reported a net profit of $829 million in the second quarter that ended in June, a 51% increase compared with the same period last year. Hong Kong is Standard Chartered’s biggest market.
Still, lenders and asset managers operating in the territory are shifting resources away from the city. Some, like UBS, Credit Suisse, and J.P. Morgan, have expedited the relocation of bankers from Hong Kong to mainland China, in part due to the tight quarantine restrictions. Other businesses, like Wells Fargo, are eyeing a move to Singapore owing to geopolitical uncertainties and fears of more stringent compliance requirements.
Hong Kong’s tight COVID measures are especially burdensome now that other finance centers are opening back up.
Singapore, which stuck to a COVID-zero policy for all of 2020 and early 2021, began loosening restrictions in August, transitioning to a “living with COVID” framework. The Asian financial hub now allows for quarantine-free travel with 10 countries, including the U.S., U.K., and France.
Hong Kong’s economic growth is expected to reach 6.5% for 2021—a significant improvement from the 6.1% contraction in 2020—but Asifma stresses that the forecast doesn’t represent a “deep-rooted” economic recovery and that the city’s longer-term growth remains at risk, so long as the government sticks to its current policies.
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