COVID regulations remain strict . . .
Hong Kong has long maintained a reputation as an international business hub and an entry point to mainland China – and the rest of Asia. However, international travel to the city has been severely restricted since the outbreak of COVID-19 and the strict regulations imposed by Beijing to achieve its “zero-COVID” policy. Throughout much of the COVID period, arrivals have been required to quarantine for 21 days, generating a backlash from many in the finance industry and prompting expatriate families to leave the city. Domestic business ties to the mainland are also stronger than ever, due partly to the less stringent travel restrictions and the growth of China-based businesses.
Still open for business . . .
While the economic development of mainland China and the growth of its domestic market have increased competition for Hong Kong, with Shanghai and Shenzhen seeing almost 16 times more in IPO value than Hong Kong in the past year, Hong Kong still has much to offer. Despite the turbulence caused by the 2019 protests and 2020 COVID restrictions, the territory has retained its third-place rank in the World Bank’s Ease of Doing Business index. This is due primarily to its remarkably low corporate income tax rate, at only 16.5 per cent. And Hong Kong’s rise to fourth place in the Global Financial Centres Index in 2021 is attributable to its deep capital pools, popular stock market, and access to mainland China.
An evolving relationship with Canada . . .
Canada’s investment relationship with Hong Kong has waned in recent years. According to data from the Asia Pacific Foundation’s Investment Monitor, Canadian investment in Hong Kong fell in 2019 and has not returned to pre-2019 levels, despite the resurgence of Canadian investment in other Asia Pacific economies. In 2021, Hong Kong only received C$206 million in Canadian investments, less than half of what it received in 2020 and almost C$30 million less than it received in 2019. This could be due to several factors, including the push for diversification that many companies embraced following supply chain crises experienced during the pandemic and the increasing attractiveness of other economies in the Asia Pacific.
- Al Jazeera: As Hong Kong sinks deeper into isolation, foreign firms despair
- Bloomberg: Chinese firms are dominating key parts of Hong Kong’s economy
- EuroCham in Hong Kong: EuroCham survey on the impact of Covid-19 on the business community