Hong Kong’s status as a magnet for international financiers is cratering as firms struggle to coax traders and bankers to move to the once vibrant trading hub.
Seeking to fill jobs, headhunters are finding that they can only recruit candidates who are already in Hong Kong.
The crunch comes as the former British colony is dealing with a growing outflow of expatriates who are frustrated with the territory’s strict “zero COVID-19” policies.
Illustration: Mountain People
They are abandoning a territory where low taxes, ease of travel, top-class schools and a vibrant nightlife once proved a potent lure.
For some candidates, “no amount of money is going to convince a candidate to go to Hong Kong,” said Jason Kennedy, founder of London-based recruiting firm Kennedy Group, which hires traders for hedge funds with offices across Asia. “They would rather choose Singapore. It’s a lifestyle balance, even for traders.”
Business groups have been sounding a warning that Hong Kong’s status as a financial center is increasingly at risk, and all signs now point to an accelerating outflow of experienced bankers and traders.
Visas for financial services workers halved from 2018 to 2020 and probably declined further last year, Hong Kong government data through September showed.
Officials this month clamped down further as cases of the Omicron variant of SARS-CoV-2 were detected, forcing close contacts into government camps, closing schools and banning flights, on top of 21 days of mandated quarantine for incoming travelers.
Authorities have said that their top priority is to keep COVID-19 cases and deaths at a minimum, as well as first opening travel to mainland China.
For the territory’s economy, the stakes are high.
Hong Kong has more than 273,000 financial services jobs, and has long been the Asian hub for banking giants such as HSBC Holdings and Goldman Sachs Group.
It is also the largest US dollar funding center after New York and London, with banking assets equal to nine times its GDP, Hong Kong Monetary Authority data showed.
The American Chamber of Commerce in Hong Kong last week said that international travel restrictions are the top concern for companies in a survey.
The quarantine rules for travelers make it difficult for head offices to operate, with about 44 percent of respondents saying that they are likely to leave.
The biggest bank in the territory, HSBC, last year showed its continued commitment to Hong Kong by relocating one of its global coheads of investment banking, as well as its heads of commercial banking and wealth from London.
Still, one of them, global banking and markets cochief executive officer Greg Guyett, is for now stuck in London partly due to the quarantine rules.
The lender has also warned its Hong Kong traders that one of the main risks to business continuity is the territory’s quarantine policy.
Some of those who have chosen to briefly leave Hong Kong have experienced a whirlwind of calamities upon return.
One banker considering joining the exodus is Nicolas, who spoke on condition that only his first name be used.
He tested positive for COVID-19 in Europe last month and recovered, but tested positive again upon return to Hong Kong, and was placed in a hospital and then at a makeshift quarantine center at the Asia World Expo.
His two-year-old daughter also tested positive and was sent to hospital, while his wife was sent to Penny’s Bay quarantine center for two weeks as a close contact.
He is now considering leaving this year.
The brain drain extends beyond the finance industry.
A Beijing-orchestrated crackdown on freedoms in the territory that followed widespread protests in 2019 has caused an outflow of teachers, journalists, artists and intellectuals, which is likely to affect quality of life in the territory for years to come.
Even so, some headhunters in Hong Kong said that the territory would remain an attractive destination for some candidates and would always remain a financial hub because of its proximity to mainland China.
William Bown, principal of financial services at search firm Heidrick & Struggles in Hong Kong, said that he is speaking to candidates open to moving to the territory.
“If China is important to your business — and for most bankers in the region it is — you want to remain close,” he said.
In a speech this month, Hong Kong Chief Executive Carrie Lam (林鄭月娥) touted the territory’s international role, saying it was an “ideal destination” for international money, underpinned by “the rule of law, an independent judiciary, highly open and internationalized markets, a deep liquidity pool, and the free flow of people, information and capital.”
However, headhunters and consultants warn that the depletion of talent from Hong Kong is getting more acute by the month.
International financial firms that have for decades used Hong Kong as a gateway to China would be gradually decreasing their reliance on international staff, recruiters said.
As China has opened its financial markets, lenders have also been speeding up a relocation of bankers to the mainland from Hong Kong, partly spurred by quarantine restrictions.
The territory last year lost its third place in the global initial public offering rankings to Shanghai.
“We will likely see greater consequences if the flight ban and quarantine restrictions continue in six months’ time,” said Loretta Chan, Hong Kong-based partner at executive search firm Wellesley Partners. “We don’t foresee anything will happen immediately or even immediately after the bonus cycle, but certainly people are formulating contingency plans to leave Hong Kong permanently.”
One of the big winners, for now, has been Singapore.
The city-state is in close proximity to China and other key Asian markets, and also offers a top marginal tax rate of 22 percent that is far below levels in Europe and the US.
Hong Kong’s rate, by contrast, is about 15 percent.
For private bankers, being able to travel is key.
Trying to win new business in other parts of Asia is extremely difficult, as most clients want to meet in person before they make a decision to hand over hundreds of millions of US dollars, said two bankers working at European firms in Hong Kong, who asked not be identified discussing internal businesses.
Wall Street giants including Morgan Stanley, which runs one of the largest private banks in Asia, JPMorgan Chase & Co and Credit Suisse Group have all been adding staff in Singapore over the past year to serve a growing number of Chinese clients, some of whom are also moving money out of Hong Kong.
Singapore, which is largely seeking to live with COVID-19, is also serving as a way station for bankers struggling to get back into Hong Kong.
At least a dozen Hong Kong-based managing directors at banks, including Goldman, Morgan Stanley and UBS Group, have at least become temporarily stranded by the travel restrictions, people familiar with the matter said last week.
Those stuck include division heads in investment banking, wealth and asset management, and other functions, the people said.
Authorities in Hong Kong have made some concessions, and even delivered care packages to bankers stuck in quarantine to quell their anger.
JPMorgan chief executive officer Jamie Dimon was granted an exemption from the rules during a short trip in November last year, during his first visit to Asia in more than two years.
However, Hong Kong is now resorting to extreme measures to contain its latest outbreak, even ordering a cull of thousands of hamsters on concern over cross infections.
That does not bode well for the territory’s post-British experiment as a lively connection between the West and China.
“Hong Kong used to be a rare bridge between China and the rest of the world,” said Isaac Stone Fish, founder of Strategy Risks, which specializes in corporate relationships with China. “Over the last few years, Beijing has retracted one side of that bridge, and Hong Kong is now increasingly just connected to the mainland.”
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