The number of American companies with regional headquarters in Hong Kong has fallen an 18-year low, bolstering arguments that the city’s national security campaign and COVID Zero strategy are eroding its appeal as a global financial center.
There were 254 American companies with regional hubs in Hong Kong as of June 1, compared with 282 a year earlier, according to new data from the Census and Statistics Department. That marked a 10% drop from the previous year, and the lowest number since 2003, when there were 242 American companies based in the city.
At the same time, the number of mainland Chinese firms rose by 5% on last year, totaling 252. Mainland Chinese and American companies now account for an equal share—17%—of regional headquarters in the city.
The data provides fresh evidence that the national security law imposed by China last year is impacting international business in the former British colony. The law allows Beijing to override the city’s once-prized legal system, often cited as a major lure for foreign firms.
U.S. President Joe Biden issued a business advisory in July warning American companies operating in the Asian financial hub of a “new legal landscape” under the security law that “could adversely affect” their operations. Two months earlier, more than 40% of members surveyed by the American Chamber of Commerce in Hong Kong said they might leave the city, with the new security law topping their list of concerns.
The imposition of the law collided with Hong Kong’s strict COVID-containment policies that require residents to spend as long as 21 days in a hotel quarantine, even if fully vaccinated. The European Chamber of Commerce has voiced its members’ frustration over doing business in that environment, which thwarts international travel. The number of French, German and Italian firms headquartered in the city also fell in the year leading up to June 1.
The city’s leader, Chief Executive Carrie Lam, said in her annual policy address that the security law, which bans secession, subversion, terrorism and colluding with foreign forces, and carries prison sentences as along as life, had got the city “back on the right track” and ushered in a “favorable era” for the city’s future.
When pressed last month on whether her government would ease pandemic controls, Lam made her priorities clear.
“Of course, international travel is important, international business is important,” she said. “But by comparison the mainland is more important.”
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