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Hong Kong Exodus May Threaten City's Global Financial Status


FILE - A general view of the Hong Kong's central financial district, March 11, 2021.

A record exodus of Hong Kongers over the past 12 months is raising concerns that the island's status as a global financial hub may be at risk.

More than 113,000 residents left the territory in the past year, marking a 1.6% population decline. It is Hong Kong's biggest population drop since record keeping began more than 60 years ago.

From 2020 to 2021, 89,200 people — or 0.3% — left the city, and 20,900 people decamped from 2019 to 2020. The city's population has now dropped from 7.41 million in mid-2021 to 7.29 million in mid-2022, according to the latest data from Hong Kong's Census and Statistics Department.

This exodus over the past year is mainly due to Hong Kong's strict COVID-19 policies and political unrest, multiple China experts told VOA.

"It doesn't really surprise me, given the extraordinary circumstances of COVID and the recent political changes — it certainly is creating a different environment," Johns Hopkins political science professor John Yasuda told VOA Mandarin in an interview, adding that changes have brought a lot of uncertainty to Hong Kong. "The financial community, understandably, doesn't like uncertainty."

At one point during the pandemic, Hong Kong required up to 21 days of hotel quarantine for travelers. Last week, Hong Kong cut the required quarantine period to three days from one week.

Following the 2019 pro-democracy protests in Hong Kong, Beijing introduced a new, wide-ranging national security law in 2020. The vaguely worded law criminalizes any acts deemed as secession, subversion, terrorism and foreign collusion, with these crimes punishable by a maximum sentence of life in prison.

A Hong Kong government spokesperson previously told VOA that the recent population decline was due to a lack of new arrivals in the city.

Liu Pengyu, the spokesperson of China's Washington embassy, told VOA Mandarin that the national security law has had a positive impact on Hong Kong.

"The lawful rights and freedoms of Hong Kong residents and foreign nationals in Hong Kong have been better protected in a safer environment," he wrote in an email. He added that many Hong Kongers "believe the national security law has improved the business environment" in the city.

Tara Joseph, former president of the American Chamber of Commerce in Hong Kong, was part of the exodus, moving back to the United States in August 2021 after living in Hong Kong for about 20 years.

Hong Kong's strict COVID-19 policies made it hard for people to plan their lives, said Joseph, who worried about the political situation.

Political concerns disproportionately weigh on native Hong Kong residents because noncitizen residents, or those with dual citizenship, can leave the city and go elsewhere when they, or their employers, want.

"Many Hong Kong people had emigrated or built up residency in other countries for a rainy day. And that rainy day arrived," Joseph told VOA Mandarin. In many cases, "these are people who left China to go to Hong Kong for the freedoms that Hong Kong provided. And now they've had to leave Hong Kong as well. It's a huge change for many people."

Joseph previously worked as a Reuters correspondent in Hong Kong. Now based in California, she'll start working at the Committee for Freedom in Hong Kong in September.

The recent exodus includes top talent in finance, who are moving to places like Singapore and London, Joseph said, adding that it's now difficult to replace them for Hong Kong posts. "There is a brain drain and an outpouring of talent from Hong Kong," she said.

International companies are also quietly leaving the city as the recent changes make the city less appealing for doing business, according to Joseph.

"It's kind of a quiet leak, as opposed to companies standing up and saying, 'We're out of here,'" Joseph said.

There were 254 U.S. businesses with regional hubs in Hong Kong as of June 2021, the last time Hong Kong's Census and Statistics Department reported this data, compared with 282 in 2020.

Still, academics like Yasuda at Johns Hopkins and Victor Shih at the University of California, San Diego, don't think Hong Kong's status as a global financial center is at risk for now.

Yasuda isn't convinced that major financial institutions are ready to give up on Hong Kong, because no place else has comparable access to the mainland Chinese market.

"When you're dealing with finance, you go where the money is. There's a lot of bluster about politics, but I think it's a bit too early to say," Yasuda told VOA. "There is sort of a wait-and-see posture."

One reason is because there are plenty of mainland Chinese workers to support Hong Kong's financial sector, according to Shih.

"The financial sector has always been a plutocratic sector, if you will, that is divorced from the vast majority of people in Hong Kong," Shih told VOA in an interview.

Hong Kong issued about 2,600 work visas to overseas financial workers in 2021, down nearly 50% from 2019, about the same as the 2,300 visas issued to mainland applicants for financial positions, according to Nikkei Asia, a Japanese financial news outlet.

And if Hong Kong is losing stature internationally, it is becoming China's financial magnet. According to the Nikkei, from 1997, when Hong Kong reverted from British to Chinese control, until today, the number of Chinese companies listed in Hong Kong has jumped from 101 to 1,370.

While the exodus of Hong Kongers may hurt other sectors in Hong Kong, Shih says the financial sector will likely stay intact for the near future.

"Any knowledgeable investor will know in their heart that things are quite different these days," Shih told VOA Mandarin in an interview. “But at the end of the day, they want to make money this year."

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