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Hong Kong is inviting back the (business) world. Will it accept?

The Chinese territory’s reputation as an international financial center has been tarnished by strict Covid rules and a national security law that critics say has crushed dissent.
Dark Skies Over Hong Kong
The Chinese territory of Hong Kong held a series of events this week to burnish its reputation as an international financial center.Marc Fernandes / NurPhoto via Getty Images

HONG KONG — After mass unrest in 2019, a pandemic that left it isolated from the world and the imposition of a national security law that has crushed dissent, Hong Kong is ready to turn the page. 

“Social disturbance is clearly in the past,” the city’s leader, John Lee, said Wednesday at the Four Seasons Hotel, where about 200 finance industry executives from around the world were gathered for a summit. “It has given way to stability, to growing business and community confidence in Hong Kong’s future. Law and order has returned; the worst is behind us.”

But the summit — meant to signal that the Chinese territory long known as a regional financial powerhouse is again open for business — has been shadowed by some awkward realities. 

Hong Kong’s border with mainland China, its main economic driver, remains tightly closed because of pandemic restrictions. Participants in the summit, many of them American companies, have been criticized by rights groups and lawmakers who say they are complicit in China’s harsh crackdown on pro-democracy figures and groups. And as the subject of U.S. sanctions himself, Lee is unable to hold an account with many of the very banks he was addressing.

John Lee, Hong Kong's chief executive, center, during the Global Financial Leaders' Investment Summit in Hong Kong, on Nov. 2, 2022.
John Lee, Hong Kong’s top leader, center, at the finance summit on Wednesday. Paul Yeung / Bloomberg via Getty Images

None of that seems to have dampened the mood at this week’s events, which started on Monday with a fintech conference and conclude this weekend with the return of a major international sporting event, the Rugby Sevens tournament.

Iñaki Amate, chairman of the European Chamber of Commerce in Hong Kong, was upbeat about the event and the pro-business atmosphere he encountered. 

“I have to say how positively surprised I was to see that there was a very good vibe,” Amate said Tuesday as he headed for a tour and welcome dinner at the M+ art museum. “It felt like people came out of a cave with a lot of energy and willing to start doing business again.”

The summit is part of a broader campaign to draw both business and tourists back to Hong Kong, an international financial center of 7.3 million that built its reputation as a travel hub and a bastion of freedom in Asia. That image has been tarnished by strict Covid restrictions and the national security law, both cited as reasons for leaving in a mass exodus of residents and expatriates. 

Despite official efforts, not many people are coming to replace those who have left. According to government statistics, about 319,000 people arrived in Hong Kong last month, down 97% from 10.8 million in October 2019. Companies have reported difficulties recruiting and retaining talent.

And even as Hong Kong eases Covid restrictions, bad news keeps coming. The economy shrank 4.5% in the third quarter, extending a recession. Airlines are pulling out of the city, once a global aviation hub. According to a report in September, Hong Kong has lost its status as Asia’s top financial center to Singapore.

There are also daily court developments stemming from the 2019 anti-government protests, in which more than 10,000 people have been arrested. In the last two months alone, Hong Kong has put a 90-year-old Roman Catholic cleric on trial over a legal aid fund for protesters; jailed five speech therapists over “seditious” children’s books; jailed two people for sedition after they clapped to support defendants in court; and convicted the democracy activist Jimmy Lai on fraud charges that the United States condemned as “spurious.” 

Millionaire media tycoon Jimmy Lai.
Hong Kong media tycoon and democracy activist Jimmy Lai, 75, was convicted last month on fraud charges that the United States called “spurious.”Anthony Wallace / AFP - Getty Images file

More than 200 people, including Lai, have also been arrested under the national security law that Beijing imposed in 2020 in response to the protests. The U.S. has spoken out repeatedly against the law, which criminalized subversion, secession, terrorism and collusion with foreign forces. Hong Kong and Chinese officials say it was necessary to restore stability.

While it may not be realistic to expect businesses to turn away from China’s huge market, global business leaders “need to recognize that there’s a new situation in Hong Kong, there’s a new reality,” said Brian Kern, the lead researcher for a report on doing business in Hong Kong that was published last month by the Hong Kong Democracy Council, a nonprofit group based in Washington. 

The group’s website appears to have been blocked in Hong Kong since shortly after the report’s release.

Businesses “need to develop policies and guidelines and due diligence processes so as to guard against perhaps inadvertently doing things that are against the U.N. principles on business and human rights,” Kern said. 

Image: Hong Kong Police Bans Annual Tiananmen Vigil For The Second Straight Year
Police were out in Hong Kong on June 4, 2021, to prevent an annual vigil for victims of the Tiananmen Square massacre in Beijing.Paul Yeung / Bloomberg via Getty Images file

Officials have indeed seized on the summit as a public relations win for Hong Kong. An article in the Chinese state-backed nationalist tabloid Global Times on Thursday said the gathering “served as a strong rebuttal to the hype and bad-mouthing of the city’s status.”

Hong Kong is “not going anywhere” as an international financial center, said Allan Zeman, chairman of the Lan Kwai Fong Group, a Hong Kong-based real estate developer. 

“If you’re an international bank, you cannot exclude China from your mix,” he said.

Zeman is among the business leaders who welcomed the national security law after the protests of 2019, which disrupted transportation and sometimes turned violent.

“Business likes stability,” he said. “Business is not about politics.” 

John Lee at the Global Financial Leaders' Investment Summit in Hong Kong on Nov. 2, 2022.
The finance summit drew about 200 participants from more than 100 companies around the world. Paul Yeung / Bloomberg via Getty Images

Kern argued that businesses that assert the national security law isn’t meant for them are “playing a bit of a dangerous game.”

“I think that everybody in Hong Kong needs to worry about it and ask themselves what their relationship is to it and assess the risks involved,” he said.

Last week, Hong Kong fell out of the top 20 in a global rule of law index compiled by the U.S.-based nonprofit World Justice Project, which cited the national security law. Officials countered that Hong Kong is still ranked higher than some Western countries, and that it ranked sixth for order and security.

Lee said Hong Kong still had strong rule of law and an independent judiciary, emphasizing the “one country, two systems” principle of governance under which Hong Kong, a former British colony, returned to Chinese rule in 1997.

“Hong Kong remains the only place in the world where the global advantage and the China advantage come together in a single city,” he said.

Lee also pointed to a report in September in which Hong Kong topped Singapore as the world’s freest economy. But the Fraser Institute, the Canadian think tank that produced the report, noted that Hong Kong’s overall rating had fallen and said its ranking was based on 2020 data and did not reflect “more recent interference from China.”

People use their mobile phones outside a closed down business in Hong Kong on Nov. 1, 2022.
Outside a closed-down business in Hong Kong on Tuesday. Peter Parks / AFP - Getty Images

Lingering Covid restrictions

While keeping relatively quiet on the national security law, businesses have been much more vocal about the Covid restrictions and given Lee credit for easing them. Many in Hong Kong breathed a sigh of relief in September, when Lee announced an end to mandatory hotel quarantine for overseas arrivals that at one point extended to 21 days

“We’re starting to see more common sense” in the way the government balances Covid prevention with economic concerns, Amate said.

But other restrictions linger, including a vaccine pass to enter bars and restaurants and compulsory mask wearing even outdoors. Though overseas arrivals no longer have to quarantine, they are prohibited from visiting bars and restaurants for the first three days, and those who test positive for the virus may still be sent to government quarantine facilities. 

Officials have relaxed some of these rules for the summit attendees, allowing them to visit private dining rooms and leave immediately on their own private jets if they test positive. Hong Kong’s financial secretary, Paul Chan, was allowed to attend the summit this week despite testing positive for the virus upon his return from Saudi Arabia, as officials considered him a “recovered case.”

Even Hong Kong’s biggest optimists concede there is a lot of work to be done, namely reopening the border with mainland China.

“As long as we remove the travel restrictions, business and leisure travelers are going to come back,” said Heiwai Tang, an economics professor at the University of Hong Kong, “and then we’ll be back to normal I would say very quickly.”