HK retains competitive edge despite pandemic

Global companies, investors give city's business environment vote of confidence

Hong Kong, which is recovering from a fifth wave of COVID-19, remains a magnet for international enterprises and investors, who have voiced confidence in the city's business environment and new opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area.

The latest wave of infections, which has resulted in more than 1 million cases, is finally easing in the city. The Hong Kong Special Administrative Region government has decided to gradually relax COVID-19 rules over the next three months, while continuing to safeguard the health of citizens.

Experts believe that companies and individuals who have left Hong Kong temporarily will eventually return as the outbreak subsides, due to the ease of doing business in the city.

Although a few businesses have left Hong Kong, the number of companies arriving continues to grow.

According to a Hong Kong Census and Statistics Department survey, the number of businesses in the city with parent companies located outside it rose from 8,225 in 2017 to 9,049 last year. Even with the exclusion of companies from the Chinese mainland, the number is still considerably higher than that in 2017.

A survey by InvestHK, the Hong Kong government's direct investment promotion agency, found that companies arriving from 90 locations worldwide have set up in Hong Kong, showing a high level of confidence in the city's institutional strengths.

United States companies, in particular, boast the largest number of regional headquarters in Hong Kong, although those from the mainland are quickly catching up.

In a report released last month, the International Monetary Fund also reaffirmed Hong Kong's position as a major global financial center and emphasized that the city's financial sector has continued to expand robustly, even during the pandemic.

John Siu, managing director of the Hong Kong office for global real estate services company Cushman & Wakefield, believes that the city's fundamentals as an international financial hub－its free flow of capital, well-established legal system, low tax rates and favorable business environment－remain unchanged despite the recent surge in COVID-19 cases.

He said the stringent measures implemented to contain the virus will not jeopardize the city's attraction to international businesses in the long run.

"In fact, we have consistently seen expansions or new setups in the banking and finance sectors, such as asset management companies, financial technology service providers, crypto traders and hedge funds, in Hong Kong in recent years," he added.

According to DBS Bank, which is based in Singapore, Hong Kong's financial competitiveness will remain strong in the long term thanks to its offshore renminbi business.

Samuel Tse Ka-hei, economist of Group Research at DBS Bank (Hong Kong), said: "It is easier for companies to arrange their capital to flow in and out from the mainland through Hong Kong, compared with other economies. Renminbi deposits remain ample and rose by 28 percent year-on-year by the end of 2021."

According to the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, about 76 percent of global renminbi payments were settled through Hong Kong last year.

The city faces a brain drain due to pandemic prevention measures, but Tse believes this is a short-term factor.