VF Corporation went first. In January 2021, the parent of fashion brands The North Face, Timberland, and Vans said it was moving its regional operations out of Hong Kong. In recent weeks the pace of such announcements has picked up with more international companies in Hong Kong venting their displeasure with the territory’s draconian COVID policies and signaling their intention to move employees elsewhere. Pernod Ricard, a French drinks giant, has announced a review of its position in Hong Kong, as have Bank of America and the hotel group Mandarin Oriental. JPMorgan has shifted several managing directors out of Hong Kong of late. With staff unable to travel because of lengthy quarantines and flight bans, the firms’ message to Hong Kong is clear: if you don’t open up, we’re out.
The announcements accompanied a glut of articles in the business press that predicted a “brain drain” from Hong Kong as disgruntled foreigners decide that enough is enough. With so many white collar professionals seemingly heading for Hong Kong’s exits, one pressing question has emerged: where will they land? Last month, the American Chamber of Commerce in Hong Kong hunted for an answer. In its annual Business Sentiment Survey, the group asked its members which city posed the greatest competitive threat to Hong Kong. Tokyo hardly registered, scoring just 1% of the vote, and the Chinese cities of Shenzhen and Shanghai fared little better, taking just 6% and 10%, respectively. There was one overwhelming favorite: 80% of respondents picked Singapore.
On paper, at least, Singapore is the obvious beneficiary of Hong Kong’s troubles. The southeast Asian city-state has many of the same advantages that have long lured international businesses to Hong Kong. It is English-speaking. Setting up a company takes as little as 15 minutes. It has always been open to foreign workers, who can send their kids to world-class schools, dine at first-rate restaurants, and fly to almost anywhere from its famously efficient airport. Although Singapore pursued its own COVID-zero policy for much of the pandemic, since August last year it has been gradually reopening. Unlike in Hong Kong, it is now possible to travel in and out of Singapore without quarantining, including to the United States and Europe.
Sure enough, recruitment companies are reporting an uptick in business from executives in Hong Kong looking for new jobs in Singapore, though there’s no firm data on how many people have made the move. According to Emily Tan of Kerry Consulting, an executive-search firm, “we see an increase of at least 20% in the applicants to Singapore-based roles, with a combination of both expats and residents in Hong Kong.”
And yet Singapore is not quite as accommodating as it was before it shut its borders in March 2020. First, it has endured its own exodus of expats over the last two years. The trend was strongest among high-paid, white-collar workers fed up with being stuck on an island less than half the size of London and subjected to a raft of domestic regulations even as COVID numbers dwindled to almost nothing. Over 10% of them decided to leave. Singapore’s overall population declined by 4.1% in the year to June 2021, driven by this fall in foreign employees—a downturn that is considerably sharper than Hong Kong’s, where the population fell by 1.4%.
Second, as the Singapore government fought off domestic criticism that its lax immigration policy created disadvantages for Singaporeans in the job market, it tightened controls on who could enter the country. Last August, after a pandemic-related spike in unemployment, the ruling People’s Action Party increased the salary thresholds for the two visas covering white-collar jobs and technical jobs. The new rules make it more expensive to bring in staff from overseas, hampering businesses trying to do so. “We have to be very careful,” said one American executive in Singapore who asked to remain anonymous. “We have to try to keep our number of expats below a certain level, and we have reduced that number over the last two years. We can’t just put people on a plane.”
If the forces pulling people towards Singapore have been overstated, so have those pushing companies out of Hong Kong, which has advantages that are nearly impossible to reproduce elsewhere. The most obvious is its relationship with China and the opportunity to hitch a Hong Kong-based company to the mainland’s juggernaut of an economy.
Despite headwinds from the slowdown in its property market and President Xi Jinping’s crackdown on Chinese tech companies, the country’s economy grew by 8.1% in 2021 after China managed to keep its COVID cases low and its domestic market open. China’s economic outlook is considerably more vibrant than that of southeast Asia, which has felt the full force of the pandemic and whose reopening has been patchy: the region’s economy grew by just 3.1% in 2021, slower than forecasts predicted.
“For companies in Hong Kong, there is the prospect of the Greater Bay Area, and beyond that the massive Chinese market,” says Donald Low, a Singaporean professor at Hong Kong University of Science and Technology. “In the case of Singapore, who is it really serving? It’s southeast Asia, and I don’t think many people are saying southeast Asia is going to be hot as it comes out of the pandemic.”
Then there are variations between and within industries. For VF’s distribution business, one Asian trade hub is as good as another. Several database businesses have also moved to Singapore to escape the long arm of Hong Kong’s National Security Law, which threatened their ability to protect clients’ information from government snooping.
Yet even in sectors in which Singapore excels, like banking and financial services, the country’s appeal will be uneven. “Once you drill down to industry specifics,” Low says, “it’s not so easy for companies to relocate.” Measured by market capitalization, Hong Kong’s stock market is the fifth largest in the world. Singapore’s ranks 23rd. The divergence may grow as new rules from Chinese regulators make it more difficult for companies to list on foreign exchanges. If you are a bank or financial-services firm, says Low, “you just can’t serve these companies out of Singapore. There are these network effects that Hong Kong has built up over the last few decades that are not easy to replicate.” In the medium to long term, he says, current frustration over COVID regulations may seem “relatively trivial.”
For now, there seems to be a fissure between the sentiments of individuals and companies in Hong Kong. Among the American expats surveyed by the American Chamber of Commerce, 40% said they wanted to leave, chiefly because of COVID restrictions. But when asked about their businesses, they felt very differently. While 18% reported that the business environment had been poor over the last 12 months, 47% said it was either good or very good. Meanwhile, only 5% of the surveyed companies that are headquartered in Hong Kong said they were planning on moving their HQs elsewhere.
That disconnect reflects a broader picture in Hong Kong: as expat finance professionals abandon the city, local Hong Kongers and mainland Chinese are filling their spots. Visas for expat financiers fell to record lows in 2020, but the flow from the mainland is picking up pace. Foreign employees may be leaving, but many companies are realizing they can do just fine without them. “People I talk to are quite optimistic,” says Simon Cartledge, founder of Big Brains, a research firm in Hong Kong. “Nobody that I know in finance thinks their business is drying up.”
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