Is Hong Kong back or moving backwards?

Michael Chugani January 30, 2024 22:02

Hong Kong's current economic misery reminds me of the gloom during the 2003 SARS outbreak, only far worse this time. During SARS, property prices plunged, bars and restaurants were deserted, and retailers slashed prices in a desperate bid to attract customers. Almost everyone wore facemasks even though the government did not require them to.

SARS disappeared months later as mysteriously as it appeared. Businesses and property prices gradually rebounded. Maskless people went out to breathe the air of optimism. Free-spending mainlanders flooded in when Beijing allowed them to travel without joining tours to reignite Hong Kong's economy.

I had returned to Hong Kong from the US just before SARS to take up a TV job. When the outbreak ended, government officials gleefully told me Hong Kong was back. They were right. Fast forward to December 2022 when Hong Kong belatedly joined the world in reopening by scrapping COVID restrictions except for the mask rule, which it also scrapped in February 2023.

Government officials again claimed Hong Kong was back. But this time their boast rang hollow. Gloom set in after a brief rebound. Property prices dropped. Developers shunned land sales. Businesses closed or struggled. The stock market nosedived. Many expatriates who left during COVID didn't return. Locals emigrated in droves.

A year on, property prices and the stock market are still languishing. The free-spending mainlanders who flooded into Hong Kong post-SARS have been replaced by low-end day trippers with tight budgets who come for free HK$100 coupons.

Government officials and politicians seem lost at sea trying to recharge the economy with harebrained ideas such as night markets. Hong Kong has long been and must be a global financial center to remain relevant. Night markets and mainland day trippers won't produce the many billions of dollars to refill Hong Kong's dwindling coffers.

Yet top government officials seem to think mainland budget travelers and a night economy are Hong Kong's salvation. One official even said it doesn't matter that mainland day trippers don't spend. They just need to come. What kind of economic logic is that?

The US was among the worst-hit countries during COVID. Now its economy is buzzing. Its stock markets are at a record high. Why? It had the good sense to be among the first to lift COVID restrictions and reopen to the world.

Countries such as Japan and Singapore have also quickly recovered. Japan is now a magnet for high-spending tourists, including Hongkongers. Tens of thousands of Hongkongers are also spending weekends in Shenzhen. Hong Kong now has the unenviable phenomenon of locals spending in Shenzhen and mainland day trippers flooding Hong Kong without spending.

Is the current crop of government officials devoid of ideas to bring back the magic that once made Hong Kong a shopping and food paradise which lured high-end tourists from the world over? It would seem so even though it's a fixable problem.

COVID did not make Hong Kong's many attractions suddenly disappear. But government campaigns such as Hello Hong Kong, Happy Hong Kong, and promoting courtesy and service lack the sparkle to impress foreign tourists. Travelers seeking night markets have far better alternatives such as Taiwan. I am now in Taipei and have seen more foreign tourists than when I was in Hong Kong recently.

Hong Kong's national security law has also deterred many Westerners from visiting. It doesn't help that the US State Department is urging Americans to exercise extreme caution when traveling to Hong Kong. Overcoming this image problem requires cool-headed sophistication. I have covered US politics in Washington DC for many years and know wolf warrior tactics tend to harm rather than help.

Does Financial Secretary Paul Chan Mo-po have what it takes to engineer a rebound in his upcoming budget? Conventional wisdom suggests he does not. With Hong Kong facing a budget deficit of over HK$100 billion, Chan briefly hinted at a capital gains tax, then ruled it out when the business sector warned of dire consequences.

He boasted that he expanded Hong Kong's circle of friends and told good Hong Kong stories when he attended the annual Davos gathering. Officials have urged everyone to tell good Hong Kong stories since John Lee Ka-chiu became chief executive.

It is well and good to tell good Hong Kong stories and to expand the city's circle of friends, but Hong Kong needs much more than that to revive its old magic so it can compete in a post-COVID world.

Hong Kong has always been able to reinvent itself when the going got tough. It morphed from a manufacturing hub into a global financial center when manufacturing moved to mainland China. It became a super connector between China and the world when China continued its opening up. It overcame every financial crisis that hit.

Has Hong Kong now lost the fighting spirit to always bounce back?

Michael Chugani

A Hong Kong-born American citizen who has worked for many years as a journalist in Hong Kong, the USA and London.