Hong Kong businesses are facing a “compounded new normal” as the city confronts challenges on multiple fronts, according to the president of the American Chamber of Commerce in Hong Kong.
The ongoing Covid-19 crisis, along with the recent passing of the national security law and troubled U.S.-China trade relations, are among the list of top concerns for companies based in the Asian financial hub, Tara Joseph told CNBC’s “Street Signs Asia” on Thursday.
“Hong Kong over the last two years has had a compounded new normal. We’re dealing with Covid. We’ve got lots of change in the terms of Hong Kong being at an inflection point politically,” she said, referring to the new national security law China passed for Hong Kong last year and the overhaul to its electoral system last month. The changes could further curtail the city’s freedoms, critics say.
Joseph added these factors were further complicated by the China-U.S. friction — in terms of trade and politics. “All of those items are at the top of the list for businesses here,” she said.
The world’s two largest economies signed a phase one trade agreement in January, bringing some reprieve to the tensions of the last two years.
While the Biden administration has vowed to use “all available tools” to counter China’s unfair trade practices, it has yet to make clear its position on how it will handle tariffs with China that have hurt businesses in both countries.
“Let’s take sanctions, for example, tit-for-tat between the U.S. and China. Those add to risks of being here,” noted Joseph. She said companies in Hong Kong are “rethinking, potentially also re-rating and measuring risk here now.”
While Hong Kong has been able to contain the Covid-19 pandemic, Joseph argued the city’s restrictive travel and strict quarantine measures have caused businesses to re-evaluate their presence in the city for the long-term.
“The Covid issue and the quarantines bring it down to a personal level,” she said. Those living in Hong Kong have not been able to visit their families and “that starts to become a personal concern.”
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“That’s where we’re seeing people start to question how long they can stay here. And whether being here is going to be effective for them long term,” Joseph said.
And that could hurt Hong Kong’s reputation as a global financial hub.
“Hong Kong is also viewed as a place where you connect to travel, where you’re able to have freedom of movement. And if we’re not able to do that, it’s going to affect the competitiveness of the city. So that is a growing concern,” noted Joseph.