Thu. Jul 7th, 2022

A senior adviser to Hong Kong’s leader Carrie Lam has said that the city is not abandoning its commitment to mainland China’s tough zero-covid policy despite recently easing some restrictions, in comments that will disappoint the Asian financial center’s business community.

Bernard Chan, a member of Lam’s de facto cabinet, said Hong Kong would not drop what Beijing calls the “dynamic zero” elimination approach to managing Covid, nor would it abandon compulsory quarantine for international arrivals in the city “anytime soon”. Opening the city’s border with mainland China rather than internationally remained the priority for the territory’s leadership, he added.

Quarantine will remain because that’s still a very important tool. . . today we may have Omicron, who knows what’s the next variant, ”Chan said, adding that policy changes would depend on how China dealt with the virus.

His comments followed the city’s relaxation last week of certain travel restrictions and promise to begin lifting some measures to suppress the virus domestically, such as school closures. But Chan’s comments will add to the sense that the city remains in limbo, with no clear exit plan from the pandemic and the possibility that tighter restrictions could return.

The government has been accused of flip-flopping on its pandemic policies compared to rival international financial hubs such as Singapore, stoking fears of lasting harm to Hong Kong’s reputation as a global commercial center.

Chan countered that the government was simply adapting its policies to suit the different stages of the outbreak.

“We hope the Hong Kong government will further relax Covid measures soon,” Stewart Leung, chair of Wheelock Properties, one of the territory’s real estate conglomerates, told the Financial Times. “If the measures do not get relaxed gradually, the economy would suffer further,” he said.

Healthcare workers at a Covid-19 isolation facility in Hong Kong's San Tin district
Hong Kong built special Covid isolation facilities, but its latest outbreak quickly surged out of control © Anthony Kwan / Getty

In the first quarter of this year, the Chinese territory has experienced its worst coronavirus outbreak, reporting one of the highest daily death rates in the world, particularly among unvaccinated elderly residents. The government’s tight restrictions in response to the crisis have driven the city’s economy back into contraction.

Early in the surge, the government banned flights from nine countries, including the US and the UK, tightened social distancing to groups of two people and shut schools. Lam and senior officials also stoked confusion, and sparked an exodus of talent, after making a series of contradictory comments on mass testing the city’s population. The government also began building facilities with tens of thousands of beds to isolate positive cases.

The city’s international residents were also spooked by numerous cases of parents being separated from their children in hospitals and Covid facilities.

“There’s a lot of uncertainty,” a private banker with a European institution told the FT.

Last week, however, the government suddenly announced the easing of some of the restrictions following a visit by Beijing’s Covid tsar, Liang Wannian, who said Hong Kong should focus on protecting the elderly.

Hong Kong lifted the flight banscut quarantine for international arrivals to one week from two and promised to allow schools to reopen, but only full-time if children achieved rates of vaccination many believe will be challenging.

Ronny Tong, a member of Lam’s cabinet, told the FT that Liang’s support had helped Lam resist political pressure from pro-Beijing supporters to institute a lockdown and carry out mass testing in the city. China’s foreign ministry representatives in the city had also spoken to the government about the concerns of international business, two people familiar with the matter said. “The mainland was concerned Hong Kong’s status as an international financial center was being slowly eroded,” one said.

But although business leaders said the easing was a “step in the right direction”, multiple executives said it was announced too late to prevent damage to Hong Kong’s reputation as a business center.

“At this moment, talent is definitely leaving Hong Kong. Whether they would return would depend very much on Hong Kong’s upcoming Covid policies, ”said Danny Lau, honorary chair of the Hong Kong Small and Medium Enterprises Association.

The government has also yet to lift fully other stringent travel arrangements that have deterred airlines from flying to Hong Kong, which used to be Asia’s busiest airport.

Fiji's Mesulame Kunavula jumps for a ball during a semifinal match against Australia at the Hong Kong Sevens rugby tournament in 2017
Hong Kong’s annual rugby sevens tournament has not been held since 2019 because of the pandemic © Kin Cheung / AP

“It remains a question whether Hong Kong can soon resume connectivity with the rest of the world. . . We need to travel, ”a senior executive at a Hong Kong property developer said.

Passenger figures from February and March showed a net outflow of more than 129,000 residents in the period.

“We’ve lost some people and will not get them back,” the Asia head of an international bank in Hong Kong said. The person added that the city remained attractive to global business owing to its proximity to the mainland Chinese market, but would need to avoid any more dramatic policy reversals to restore confidence.

An international banker said the big concern was that on April 21, when social distancing measures were set to be relaxed, there would be a spike in cases. “Then we [might] have a rapid U-turn and schools get closed again, and restrictions come back in, ”the banker said. “Our message is. . . please have confidence, no U-turns. ”

The danger of such an about-face remains high, however. Lam has hinted that the government’s most feared anti-pandemic measures – mass testing and compulsory quarantine in specially built camps for those found positive – could be introduced once the latest outbreak subsides and case numbers become more manageable. The government suspended the exercise in March after it became clear it was neither logistically possible nor effective at controlling the outbreak.

Lam’s adviser Chan said the government was “fully aware of the frustrations and concerns” of business. But he said the situation was still evolving and there was no “complete solution”.

“Things might change again, you know, a few months later, because this has a lot to do with how China is going to address this,” he said.

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