International companies are increasingly pulling out of Hong Kong as Beijing tightens its control over the region, according to a report by the Wall Street Journal. Data from the Hong Kong government shows that the number of US corporations operating in the region has declined for four consecutive years, reaching a low of 1,258 in June 2022, the lowest level since 2004. Additionally, for the first time in three decades, there are fewer US corporations in Hong Kong than mainland Chinese companies with a regional headquarters there.
The appeal of Hong Kong to Western corporate giants has diminished in recent years due to its proximity to mainland China and its status as a global financial hub. Previously, operating in Hong Kong was considered a low-risk endeavor, but recent developments have changed this perception. Simon Cartledge, who runs a research and publishing company in the region, stated that there are now question marks over everything in Hong Kong.
The shift in Hong Kong’s status can be traced back to 1997 when the territory was returned to Chinese governance after 156 years as a British colony and a dependent territory of the UK. Under the agreement between Beijing and London, Hong Kong was granted a form of self-rule and judicial independence until at least 2047. However, the introduction of a national security law by Beijing in 2020 has raised concerns about the erosion of Hong Kong’s autonomy.
The national security law allows for the extradition of criminals from Hong Kong to the mainland and criminalizes activities such as secession, subversion, terrorism, and collusion with foreign actors. Combined with China’s alleged crackdown on foreign businesses, an economic slowdown in the mainland, and increasing tension between the US and China, these factors have compelled foreign companies to relocate from Hong Kong.
Western businesses are now viewing Hong Kong as an extension of China, losing its independent status and unique benefits. Rob Jesudason, the founder of Serendipity Capital, left Hong Kong for Singapore in 2019 and stated that this shift in perception is widespread among foreign businesses. Australian bank Westpac has already moved out of Hong Kong, and National Australia Bank is reportedly planning to follow suit. Furthermore, three US and UK due-diligence companies are relocating their employees out of the region. The Ontario Teachers’ Pension Plan, one of Canada’s largest pension funds, has shut down a stock-picking team based in Hong Kong, and California-based TTM Technologies has also moved out.
The withdrawal of international companies from Hong Kong has significant implications for the region’s economy and reputation as a business hub. US shipping giant FedEx is shifting some regional jobs from Hong Kong to Singapore, while office-furniture maker Steelcase has already relocated its regional executives there.
In conclusion, the increased control exerted by Beijing over Hong Kong, coupled with China’s economic slowdown and geopolitical tensions, has prompted international companies to withdraw from the region. This trend is reflected in the declining number of US corporations operating in Hong Kong and the shift in perception of the city as a risk-free destination. The ramifications of this exodus are substantial for both Hong Kong’s economy and its standing as a global business hub.