Zero-Covid policy is undercutting Hong Kong’s appeal

Hong Kong will not lift its zero-Covid policy until late 2022 at the earliest. The reopening of borders with mainland China, a priority, requires alignment with Beijing’s zero-Covid policy, which is likely to remain in force this year.

Thus, stringent international border restrictions will be maintained, hindering international connectivity and depressing inbound tourism.

As a result, Oxford Economics anticipates Hong Kong’s zero-Covid policy will hinder the economic recovery and weigh on its attractiveness as a global financial hub.

In addition to travel curbs, US-China tensions and the implementation of the national security law have weighed on sentiment, raising the risk of a brain drain and of companies leaving Hong Kong.

This would have negative implications on foreign investment and job creation, presenting a challenge to the city’s medium- to long-term growth outlook. Notably, after the launch of a British national (overseas) visa scheme, there’s been a significant flow of Hong Kongers to the UK.

But an influx of mainland talents and Chinese companies may help mitigate the impact. For now, Hong Kong will maintain its global financial hub status, concludes Oxford Economics.

”There are no major capital outflows from the banking sector,” it notes. “While firms are relocating staff and certain departments, there’s been no exodus of companies. We still think Hong Kong will be able to leverage its position as a key gateway in and out of China, but the current lack of international connectivity and the implementation of the national security law will weigh on foreign business confidence.”