HONG KONG – Six months after Hong Kong reopened to the world, the city still has a steep climb to reclaim its place as Asia’s premier finance and tourism hub.

Hong Kong, led by former policeman and now Chief Executive John Lee, has been pushing hard to revive the city’s reputation with high-level events, new visa programmes to lure top talent, tax concessions for the wealthy, and free airline tickets for visitors.

But the Hong Kong of old – self-proclaimed as Asia’s World City – will be hard to resurrect. Tens of thousands of highly skilled workers left to escape the city’s Covid-19 regime and a crackdown on freedoms after Beijing imposed a national security law in 2020. The city suffered its biggest workforce decline on record last year, causing major labour shortages.

The state of global markets and concerns over recessions have not helped either. Tensions between China and the United States have dented the city’s allure and the recent banking crisis, including the collapse of Credit Suisse Group, has further heaped pressure on the financial industry.

Big banks including Goldman Sachs Group have made deep cuts in jobs focused on dealmaking in China and Hong Kong as part of global cuts.

Largely following China’s strict approach to combating Covid-19, the city’s quarantine measures crippled the finance industry and triggered an outflow of bankers. Singapore has been the big winner with a boon in hedge funds and family offices, and dethroned Hong Kong as Asia’s top financial centre last year, according to the Global Financial Centres Index.

Hong Kong is now seeking to revive the industry, in part by opening up for crypto firms and seeking to attract more family offices with tax breaks.

The following metrics provide a glimpse of the progress.

Financiers return

The outflow of bankers and other professionals is showing signs of reversal. In the first five months, Hong Kong approved about 3,700 new visas for financial services workers via the four established visa programmes. That pace is almost equal to pre-pandemic levels, according to Immigration Department data. 

On top of the traditional routes, there is also the Top Talent Pass – a new visa programme to attract skilled workers. It attracted some 84,000 applications as at May, of which about 49,000 were approved, according to Mr Lee. 

While the programme is helping, any immediate boon will be slow to materialise since financial institutions generally need time to lay out new strategies and the banking turmoil has sapped confidence, according to Ms Josephine Chung, director of Hong Kong-based consultant Compliance Plus, which advises on compliance and licensing for financial institutions. 

IPOs slide 

Once the world’s largest market for initial public offerings (IPOs), Hong Kong’s dealmaking machine remains in the doldrums. 

Last year, the city’s exchange saw a 70 per cent plunge in fundraising from 2021. This year has not been much better, even though tensions between the United States and China had many in the city betting that Chinese firms delisting in the US would turn to Hong Kong.

Companies debuted a total of US$2.24 billion (S$3 billion) of shares as at end-June, down 17 per cent from a year earlier, according to data compiled by Bloomberg. That marks the slowest first half since 2003, when the city was affected by the deadly Sars virus.

Officials have sought to revive business by lowering the listing threshold in terms of size and revenue for advanced technology firms, while also courting potential issuers in the Middle East. 

But President Xi Jinping’s tightening control over the nation’s technology industry – and businesses as a whole – poses a risk. Mainland China firms dominate IPO fundraising, raising 97 per cent and 98 per cent of the total amounts in 2020 and 2021. This year, the 16 largest initial public listings have been China-based, raising 88 per cent of the total. 

Home prices

The border reopening has lifted market sentiment with expectations that mainland Chinese would return to buy properties in the city. Home prices have risen 6.3 per cent so far this year, but they are far from recouping last year’s 16 per cent slump, data from Centaline Property Agency shows.

The recent recovery could also be short-lived. The market is showing signs of weakness as interest rates rise. Home sales in May were 35 per cent lower than a year earlier, according to government data.

Moody’s Investors Service expects residential prices to be largely flat in the second half of the year as a result of rising rates, capital market volatility and higher home completion.

Hello, Hong Kong

Hong Kong’s bid to lure back tourists has been disappointing. Stung by a lack of workers, the city has had problems even handling the small number of visitors, with reports of mainland tour groups having to eat noodles while standing on the sidewalk.

The number of visitors rose to almost 13 million in the first half of the year, up from the 2021 trough of 72,000. Before the pandemic hit, the city attracted some 60 million visitors a year.  

One of the city’s main tactics in luring back visitors has been conferences. A string of mega events have returned, including Art Basel and the Rugby Sevens.

BLOOMBERG