Hong Kong targets young talent, tech sector in post-Covid push

IN THE wake of Covid-19 isolation, Hong Kong is taking a targeted approach to reviving its position as a global business hub – an image that waned during the pandemic as expats left in droves amid tough restrictions.

To draw back talent, the government has rolled out a special visa programme, which has hooked tens of thousands of applicants. It is also pitching the industry hard as a sandbox for innovation, particularly with tech and phenomena such as the metaverse and Web3, where it is taking a comparatively lighter regulatory touch.

In April alone, Hong Kong hosted more than a dozen exhibitions on technology, fashion, and a variety of trading sectors. These events attracted over 65,000 buyers from around 160 countries, according to the Hong Kong Trade Development Council.

On the virtual assets front, the government has been promoting new business opportunities to global finance leaders, diverging from the Chinese mainland, which remains on the fence about cryptocurrency due to risk concerns.

Meanwhile, many of the applicants for Hong Kong’s visa scheme are from the target group of young, highly educated and internationally minded individuals. As at end-April, 5,000 approved applicants have activated their visas by entering the city.

These new policies, coupled with the economic recovery from the pandemic, is helping Hong Kong get back on its feet. Now it has to keep the momentum going.

Web3 zeal

Between Apr 12 and Apr 15, more than 10,000 people attended the Web3 Festival at the Hong Kong Convention and Exhibition Centre, making it the largest Web3 event in Asia, topping the 7,000 attendees at the Token Summit held in Singapore in September.

“I have to admit that Hong Kong is more dynamic than Singapore,” said an industry insider named Xiaofei, who travelled from Singapore to attend the festival .

Web3, short for Web 3.0, is the idea of a decentralised Internet, based on blockchain technology. Along with the metaverse, it has become a tech industry buzzword. Both are believed to be integral to the next generation of the Internet. And Hong Kong is eager to be a frontrunner in the space.

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Hong Kong has been attracting industry insiders back from Singapore and other countries since late 2022, said Livio Weng, chief operating officer of HashKey Group, a digital asset management house and co-organiser of the Web3 Festival.

“I met with more than 100 people in Hong Kong recently and most of them said they would either move back to Hong Kong or set up a branch in Hong Kong,” he said.

Neo, an open-source community-driven blockchain platform, is an example. Its co-founder Da Hongfei told Caixin that the company intends to set up its main operations body in Hong Kong after attending the April event.

Compared to Singapore, the Hong Kong government has clearly expressed support for Web3, and has not changed its attitude even after the dramatic collapse of FTX, the world’s second-largest crypto trading platform, in November. Da thinks such consistent support is important for the industry.

At the Innovate Finance Global Summit in London in April, Hong Kong’s Financial Services and Treasury Secretary Christopher Hui said the city’s government has earmarked US$50 million in its 2023-24 budget for organising major international conferences to promote greater collaboration in virtual assets businesses.

Hui’s announcement is a part of the government’s efforts to become a regional hub for cryptocurrency – a goal that financial secretary Paul Chan stressed in January.

The special administrative region has launched a series of regulatory schemes to this end, including licensing requirement for operating a virtual asset exchange and incorporating stablecoin – a type of cryptocurrency – into the Hong Kong Monetary Authority regulatory framework. These rules could help address security concerns that have been the primary and long-time pain point for practitioners.

Prior to the Web3 Festival, the Institute of Web 3.0 Hong Kong was established on Apr 11, to help the government promote the Web3 ecosystem and contribute to the development of Hong Kong as a “leading global Web3 smart city and a secure and sustainable digital financial centre,” according to the institute’s website.

But not everyone is convinced that Hong Kong can achieve its goal, with some in the industry concerned that it will be hamstrung by the Chinese mainland’s tough stance against cryptocurrency. Some major players are staying put in Singapore in wait-and-see mode, said Weng.

Despite worries about the influence of the mainland, the proximity is also an advantage, given that most of Asia’s Web3 and blockchain talent is on the Chinese mainland, he said. “Other regions would be too far. It’d be difficult for technical staff to make a trip to Singapore. Coming to Hong Kong is much easier,” he added.

Talent crunch

After Hong Kong’s Covid-19 control policy was introduced in 2020, the inflow of talent slowed to a trickle. In two years, Hong Kong’s workforce shrank by around 140,000, Chief Executive John Lee said in his inaugural policy address last October. Over two-thirds of the departing workers were highly skilled professionals.

That month, Hong Kong released a package of policies to begin stemming the outflow and attracting new talent, including a special visa programme for young graduates in well-paid careers. This came as the financial hub faced a brain drain that not only strained its labour market but also threatened its economic recovery.

Since the programme was officially launched in January, the government has received more than 27,000 visa applications and approved 17,000 as at the end of April, according to Hong Kong’s Secretary for Labour and Welfare Chris Sun. Two-thirds of applicants are from the Chinese mainland.

An earlier record from March showed that half of the applicants are graduates of the top 100 universities globally, and have at least three years of work experience. About 22 per cent have an annual salary above HK$2.5 million (S$426,455), which are the two major requirements to qualify for the “Top Talent Pass Scheme” – this allows qualified applicants to work and live in Hong Kong for two years, without having to find a job in advance.

In addition, more than 8,300 dependent visas have been granted, as the scheme allows pass holders to bring spouses and children under 18 years of age with them to Hong Kong.

Despite the large number of applications filed and approvals granted under the scheme, there is uncertainty about how many will visa holders will become members of Hong Kong’s workforce.

Rong Zongxiao, a graduate from a top university who previously studied in Hong Kong, applied via the scheme in January and received approval within a week. But Rong works in the study abroad industry in Shanghai, and said he is not interested in moving to Hong Kong – at least for the time being – because the mainland has a bigger market for his line of work.

He added that “the international advantage of Hong Kong is still there”, with the lower tax rate making it an attractive place to expand his business.

To help ensure the success of the Top Talent Pass Scheme, Wendy Hong, a member of Hong Kong Legislative Council’s (HKLC) election committee, suggested that the government needs to communicate more with the applicants and present more opportunities to attract them to settle down in the city after the initial enthusiasm winds down.

Between 2010 and 2019, only 12 per cent of visa holders from the mainland became permanent residents of Hong Kong after working and living there for the required seven years. This was partially due to high cost of living, according to the 2020 Global Race for Talent report published by the HKLC.

Hong Kong ranked 14 on the 2022 World Talent Ranking released by the International Institute for Management Development, down three places from 2021 to below Singapore, which placed 12th in both years.