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Getting caught between a rock and a hard place – Part 1

(Picture copyright James Chu CFA)

As an international financial centre, business travel used to be important for the city of Hong Kong. That has changed since the COVID-19 pandemic.

In most cases, you cannot travel to Hong Kong unless you are a Hong Kong resident. And even if you are, you need to take a PCR test on arrival in the terminal building. And then you wait in the terminal building for results. Like what you see in this photo (taken when I was there back in late June). The setting somehow reminds me of the examination hall, especially when you are waiting for results with a lot of students. At least the test and the food are free.

If your test results are negative, you will then be transported to the main terminal building. After picking up your luggage, you then queue for the bus to get to the quarantine hotel that you have prebooked. Then you will stay inside your room. For a long time! You are not allowed go out, although you may get people to deliver things for you. I saw some delivering plastic models, mahjong games and even a tread mill to their friends and relatives who were quarantining.

If you are a Hong Kong resident travelling from the UK, currently you cannot get into Hong Kong unless you have taken full vaccinations. And that will still require you to be quarantined for 21 days. It was 14 days when I was there. But with the UK following a “Zen-like approach” (a phrase used by the Hong Kong press) to manage COVID-19 and cases rising above 30,000 per day, the UK has been re-classified as one of the highest risk countries since July. In fact, all countries except New Zealand are currently classified in the two highest risk categories, so people need to quarantine for either14 or 21 days on arrival (depending on your vaccination status and whether you are a Hong Kong resident).

There are certain exemptions for senior executives of international companies like global banks, though you still must stick to certain strict rules in movement and accommodation. Unless you are Nicole Kidman.

The approach taken by the government, as compared to another Asian financial centre Singapore, was deemed to be excessive by many firms. As reported in the media, some even threatened to relocate headquarters. Why is the Hong Kong government restricting travel? Some commentators think that is to do with China.

More specifically, China has closed its borders with Hong Kong for more than a year. To get the border re-opened, Hong Kong must demonstrate that it has got zero COVID cases over a reasonably long period of time. The government tried to relax entry requirements when cases fell, only to see infections imported from outside the city. With the Delta variant spreading in many countries, the Hong Kong government is reluctant to make travel easier which may raise infections, delaying any re-opening of the border with China.

Obviously, the government may change its approach when vaccinations get taken up by more residents in Hong Kong. Nevertheless, this situation illustrates the challenge in maintaining the highly delicate balance of the city’s relationship with China with that for the rest of the world. Hong Kong is increasingly caught between a rock and a hard place. Specifically, how can the city maintain its regional (and global) importance and align with China, especially when the Chinese government has been imposing surprising changes in domestic policies and priorities?

(To be continued….)

James Chu CFA

Head of Investment Solutions

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