The end of the Covid quarantine in Hong Kong fuels hopes for looser rules in China

Hong Kong leader John Lee – best known for overseeing a severe and unpopular security crackdown – threw champagne corks through the city’s offices on Friday.

In a brief announcement, Lee ended the quarantine policy that cut the city off from the rest of the world and throttled its economy for two and a half years. “We want to balance the need to fight the epidemic. . .[with the need]to boost Hong Kong’s competitiveness,” he said.

The decision lays the groundwork for Hong Kong’s comeback, businesspeople said, but attention has quickly turned to an even bigger question: What does Beijing’s willingness to let Hong Kong relax its rules mean for the mainland’s own zero-Covid policy?

As senior Beijing officials responsible for Hong Kong politics publicly gave their blessing to the move, the city’s abandonment of Covid-19 controls has fueled hopes that the mainland will soon begin to ease its own policies — seven days Quarantine plus three days of home arrival surveillance — which has exacerbated China’s economic woes and spooked global investors.

“Hong Kong [can be] a pilot project at the border [reopening and] Mainland China authorities can have the impact and relevant data reviewed,” said Tam Yiu-chung, Hong Kong’s sole delegate to the Standing Committee of the National People’s Congress.

Tam said China’s policy in practice has already become more purposeful. “I think further easing of Covid restrictions will be the direction for mainland China,” he said.

There was evidence of a gradual easing of mainland travel restrictions. A Shanghai-based manager of a state-owned enterprise said he was told he could start applying for overseas business trips next year.

However, other analysts warned against interpreting Hong Kong’s reopening as a sign of an immediate change in Beijing’s stance.

“We cannot predict what will happen to mainland China’s zero-Covid policy based on what Hong Kong is doing,” said Yanzhong Huang, public health policy expert at the Council on Foreign Relations in New York.

Huang, along with other experts including Sonny Lo, a political commentator, believes that any significant policy easing by Beijing will come after the conclusion of China’s annual legislative session, which is expected no earlier than March next year.

Goldman Sachs has forecast that China’s reopening will be delayed until at least the second quarter of next year and then phased in. Despite estimates, politics will cost China around 4 to 5 percent of gross domestic product this year.

Xinran Andy Chen, a senior analyst at Chinese consultancy Trivium, said Beijing has realized Hong Kong doesn’t have the necessary conditions to continue to pursue the same zero-Covid strategy as China — including local entities mobilizing community-based testing and lockdown campaigns would have been implemented in mainland cities.

“However, Hong Kong’s easing of Covid restrictions will mean that the border between Hong Kong and the mainland will remain strictly under Covid controls for the foreseeable future.”

Hong Kong’s costs were high. The city has lowered its growth forecast for 2022 to -0.5 percent to 0.5 percent, leaving a total of more than 120,000 residents this year.

After years of forcing incoming travelers to quarantine in a hotel for three weeks, the policy change is a relief for Hong Kong’s international businesses.

“It’s about to be a game changer, the mood among our members is euphoric,” said Frederik Gollob, Chairman of the European Chamber of Commerce in Hong Kong. “There is now a clear signal that there is pressure to reopen Hong Kong.”

Despite the quarantine being lifted, several senior businessmen said travel would not return to pre-pandemic levels as tourists coming to Hong Kong are unable to visit restaurants and bars for the first three days. They will also be subjected to Covid tests for a week.

The Government must also remove the risk of a positive Covid test leading to isolation in a government facility. “If there’s a slim chance of testing positive, then send Goldman Sachs CEO [a government isolation facility]that wouldn’t work,” said Wolfgang Ehmann, Senior Consultant of German Business.

“Overseas visiting delegations and companies will not move immediately, they will monitor the situation and see if it is stable.”

Hong Kong is hoping to lure the world’s top bank and mutual fund chief executives to a financial forum in November to coincide with the return of the rugby sevens tournament, previously one of the region’s premier corporate networking events.

Prior to Friday’s announcement, only two had publicly committed, Standard Chartered’s Bill Winters and HSBC’s Noel Quinn – both banks that derive the bulk of their revenue from Hong Kong. When asked by the Financial Times, several global banks and fund managers declined to say whether they would be sending their international chief executive to the event.

Gary Ng, a senior economist at Natixis in Hong Kong, said the reopening could even deal a short-term hit to the economy as locked-in residents travel in haste and no significant inbound tourism could compensate. “Relaxation. . . will not be enough to pull Hong Kong’s economy out of a looming recession,” he said.

Hong Kong’s mainland border, which previously enabled most of its economic activity, remains effectively closed despite attempts by pro-government businessmen to persuade mainland officials to offer executives smoother entry into neighboring Guangdong province.

Across the border, Chinese citizens – most of whom have been effectively barred from leaving the country – watched as Hong Kongers regained their ability to roam the world. “Congratulations, [Hong Kongers]! Sigh, how I envy it,” someone from Guangdong said on Weibo, a Chinese social media site.

https://www.ft.com/content/54245a20-99c0-4e18-b01d-6db561093cfb The end of the Covid quarantine in Hong Kong fuels hopes for looser rules in China

Adam Bradshaw

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