Hong Kong has lost ground to regional rival Singapore, according to a Financial Times analysis of property prices, air traffic and other indicators, underscoring the challenge the Chinese territory faces as it reopens to the world after years of containment from the pandemic.
In recent weeks, John Lee, the chief executive of Hong Kong, has launched a campaign to convince the world that despite Covid-19 and brutal security measures, the Chinese territory is not only open for business, but remains Asia’s main financial center.
But data shows Hong Kong has paid a price for strict pandemic restrictions and quarantines, while Singapore has made gains.
“Singapore is on track to become the financial center of Asia. . . it needs time. It won’t happen in a year. But if I were the Singapore government, I’d be very happy with where things are going,” said Michael Marquardt, Asia CEO of investor services firm IQ-EQ.
Hong Kong’s regional importance is reinforced by its location on the doorstep of mainland China. The city has only just reopened to tourists after three years when many international airlines suspended their services.
In contrast, Singapore was one of the first Asian countries to reopen its borders during the epidemic. Hong Kong lost its position as the region’s busiest airport to Singapore last year, according to Sobie Aviation.
According to aviation statistics, every month since January 2022, more aircraft have arrived in Singapore than in Hong Kong. Those arriving in Singapore have now reached 70 percent of their pre-epidemic levels, while arrivals in Hong Kong are just over half of their pre-epidemic levels.
Despite the reopening, severe labor shortages in Hong Kong are preventing routes from fully returning. Qantas has delayed the launch of its Hong Kong-Melbourne service until the middle of the year.
“The airport is much busier, but still a fraction of it [of before Covid-19]” said Kristian Odebjer, president of the Hong Kong Swedish Chamber of Commerce. “There are severe bottlenecks in terms of ground staff. I think this is holding Hong Kong back.”
Chinese leader Xi Jinping’s crackdown on tech entrepreneurs has increased Singapore’s appeal as a destination for the wealthy elite – and their foundations.
Since mid-2021, Singapore’s holdings of foreign currency deposits have increased by more than $100 billion, an analysis of FT bank data shows that holdings of Singapore dollar deposits will remain unchanged. Deposits in Hong Kong banks have been falling since the start of 2022, stopping only in November when the Chinese city lifted quarantine restrictions.
According to the Singapore-based data analysis company Handshakes, the number of family offices in Singapore – privately owned companies that provide wealth management services – increased from a handful in 2018 to 1,500 by the end of last year. Hong Kong, eager to make a comeback, is hosting an “invitation-only” meeting of the world’s wealthiest family offices next month.
The perception that Beijing has become increasingly anti-business and anti-private wealth is “the main reason why Chinese billionaires are migrating from the mainland or Hong Kong to Singapore and other places,” said Zhiwu Chen, professor of finance at the University of Hong Kong. .
“They used to be able to park in Hong Kong, but now they are moving to Singapore,” said Kevin Au, director of the Center for Family Businesses at the Chinese University of Hong Kong.
It is difficult to quantify how many people have moved from Hong Kong to Singapore, and banks, wary of upsetting Beijing, remain reluctant to say how many staff they moved there during the peak of the outbreak.
Some were expanding in Singapore even before the pandemic, especially after a tough new security law was introduced in Hong Kong in 2020 following protests and riots. BlackRock doubled the size of its Singapore office in 2022, while Wells Fargo moved its Asian headquarters from Hong Kong to Singapore the previous year.
All this contributed to the fact that rents in Singapore rose by 40 percent in the fourth quarter of last year compared to the same period two years earlier. As 140,000 Hong Kongers joined immigration schemes such as those offered by the UK, rents in Hong Kong fell 10 percent in the fourth quarter from an all-time high in the third quarter of 2019.
This also affected the demand for office space. At the end of last year, the number of A-rated office spaces in downtown Singapore was 2.3 percent, compared to 11.1 percent in Hong Kong.
Hong Kong’s proximity to China remains a huge attraction for investors. In terms of capital market activity, Hong Kong is still far ahead of Singapore, with stock market turnover and market capitalization more than seven times its rival.
In terms of wealth management and advisory services, Singapore is rapidly closing its gap with Hong Kong. In 2021, Singapore’s assets under management increased by 16 percent to $4 billion, while Hong Kong’s only increased by 2 percent to $4.6 billion.
In a broader sense, Hong Kong’s openness and China’s abandonment of the zero Covid policy, the IMF predicts that Hong Kong will grow by 3.9 percent in 2023, which is faster than Singapore’s 2.3 percent.
Some Hong Kongers were still able to return. “There will be those for whom the political situation in Hong Kong has become unbearable [for]they want to move and stay away, but there will be those who may change their minds and the economic conditions in the UK or the US may not be as good as they expected,” said Hong Kong demographer Stuart Gietel-Basten. Kong University of Science and Technology.