Nearly 50% of foreign firms in Hong Kong plan to relocate staff

[HONG KONG] Nearly half of the European companies in Hong Kong plan to fully or partially relocate operations and staff out of the city, a new survey suggests, in the latest sign that the world's toughest Covid-19 travel and quarantine restrictions are eroding the appeal of Asia's main finance hub.

Around 25 per cent of responding companies said they planned to fully relocate out of Hong Kong in the next year, according to a new survey from the European Chamber of Commerce in Hong Kong, while another 24 per cent said they are planning to partially move out of the city. Roughly 34 per cent of firms said they were uncertain about their plans, while just 17 per cent said they had no desire to relocate over the next 12 months.

The negative results, which come amid a surprisingly chaotic coronavirus outbreak, are the latest measure of declining business confidence in a once-freewheeling city that has been increasingly isolated from the world over more than 2 years.

Covid-prevention measures have included hotel quarantines as long as 21 days for incoming travellers, the mandatory hospitalisation of those testing positive, regardless of symptoms, and the forced isolation of close contacts in spartan government-run units.

The strict approach to Covid, which followed sometimes-violent democracy protests in 2019, have unfolded alongside a national security law that has injected unprecedented levels of unpredictability into a city that was once known for stability and openness.

While a recent devastating outbreak of the Omicron variant has forced the government to relax some restrictions amid an exodus of expatriates and residents, the city has not given any signs that it plans to abandon the "dynamic zero Covid" strategy it has borrowed from China. The strategy aims to fully eliminate local cases rather than risk opening up.

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"Looking at the comparably overwhelming participation among our membership base, the result should serve as a stark warning that recent months and years took a toll on the European business community and their confidence," said Frederik Gollob, the European chamber's chairman. "Recent announcements have provided for some relief but it has largely been perceived as too little, too late. We need a clear plan back to normal in order to create positive momentum. Reinstating Hong Kong as 'Asia's World City' must be the aim going forward."

The survey was conducted between mid-January and early February as a fresh coronavirus outbreak was gaining pace and restrictions tightened further. It had 260 respondents representing companies across more than a dozen European business chambers. Roughly 70 per cent of the individuals worked at companies with less than 100 employees, while about 30 per cent represented bigger firms.

Spokespeople for the Hong Kong government did not respond immediately to a request for comment outside of normal business hours. In recent remarks, Hong Kong Chief Executive Carrie Lam acknowledged that the city's strict measures were having an impact on the city's weary residents as well as the finance hub's international reputation. "I have a very strong sense that people's tolerance is fading," she told reporters in a briefing on Mar 17. "I have a very good feeling that some of our financial institutions are losing patience about this isolated status of Hong Kong."

The grim results echo other surveys, including a recent one from the American Chamber of Commerce that found 44 per cent of respondents were likely to leave the city, with roughly 60 per cent saying that the city's international travel restrictions were the No 1 challenge to businesses. BLOOMBERG