Hong Kong and the road into, and beyond, 2024.

We had such high hopes for 2023 in Hong Kong. Masks would be ditched, the borders would open, bars and restaurants would be overflowing with locals and tourists alike and life would come flooding back. We were sure that Hong Kong, in it’s unique, and oh-so-characteristic way, would bounce back, just like it always has before.

We were wrong…weren’t we?

It’s easy to be pessimistic, particularly after 3 years of so little optimism, so I am going to make the case for us not having been wrong although we may have been, just a touch, naive.

As we know, the masks did come off (did ever the hazy air of Hong Kong smell so sweet?) and the borders have opened. There are queues again outside of Chanel and Louis Vuitton, the Rugby Sevens came to town and Clockenflap is rocking our world not once, but twice, this year. Outwardly, Hong Kong is on the up again.

What about behind the fa?ade though? How are we really doing and where are the causes for celebration?

Hong Kong is heavily dependent upon financial services as a revenue generator and the sector, in line with other global financial centres, has faced a challenging year with little to no growth and job vacancies largely to cover replacement rather than expansion. Other sectors have fared better though. As of August 31st, Hong Kong's seasonally adjusted unemployment rate was 2.8%, the lowest jobless rate since June 2019. Growth sectors included food & beverages, construction, transportation, and insurance. Source: Census & Statistics Dept. Job Vacancies in Hong Kong increased to 81,464 in the second quarter of 2023 from 77,751 in the first quarter of 2023. Source: Tradingeconomics.com

The technology sector has been leading the charge in hiring though. The Hong Kong government’s 2023-24 budget signaled a clear commitment to establish Information Technology as an engine of economic growth. With talent being an essential driver for this growth Hong Kong is expected to require 100,000 IT workers by 2030 – double the current number. We have already seen a marked rise in demand for candidates with expertise in areas such as Project Management, Data (Engineering, science, analytics, and governance), Cyber Security and Digital Transformation.

Of particular note was the announcement last week of a number of strategic investments by foreign companies, mainland Chinese and international, into Hong Kong. The companies will invest an estimated HK$30 billion (US$3.83 billion) in the city, creating about 10,000 jobs according to Hong Kong’s Financial Secretary.

In addition, and something that, as company headquartered in the United Arab Emirates, we at Madison Pearl are particularly well placed to see, the growing economic and political ties between China and the Middle East is already paying dividends and we have been actively involved in helping both public and private entities expand their respective presences in both regions. In several cases helping companies set up from scratch as they move into new markets. For anyone with an interest in either region, we are always open to discussing how we can help with your own expansion plans.

Where though, does the Greater Bay Area project fit into all of this? GBA was, still is, the greatest potential driver for growth for Hong Kong. Taking the internal market from its current 7.5 million to people to over 80 million with a combined gross domestic product of US$2 trillion, it is an opportunity for local and international firms alike to capture market share in a fast-growing market. This is of particular interest to financial services providers. Stock Connect and Bond Connect are now well established for institutional business and Wealth Connect, which allows eligible residents in the Greater Bay Area to invest in wealth management through a cross-border channel has already been earmarked to receive a number of enhancements which will include an expansion of products, the lowering of thresholds for investors and the simplification of buying procedures. Launched in 2021, growth was initially slow due to the pandemic however Bank of China’s cross-border clients’ account openings in the first four months this year were five times those logged in the same period in 2022, and 44 per cent higher than the same period in 2019.

Of most interest to me, with my tech-head on, has been the joint announcement made by The Cyberspace Administration of China (CAC) and the Hong Kong SAR Government’s Innovation, Technology, and Industry Bureau (ITIB) of the signing of a memorandum of understanding agreeing to establish rules for data transfer within the Great Bay Area. Data-sharing has always been a sticking point for financial services providers, and a not-infrequent topic of discussion with my fintech clients. ?It is early days yet, and we are still waiting for more details, however the new arrangement is anticipated to significantly reduce compliance costs particularly for Hong Kong based companies looking to do business in the PRC.

More significantly, according to law firm Mayer Brown, “this MoU may potentially attract more companies with an eye to the PRC to Hong Kong, or back to Hong Kong, if the GBA arrangement positions Hong Kong favourably compared to other jurisdictions.”

So, with the growing job market, the formation of new technology hubs, increased investment and the liberalisation of cross-border trade and investment the future is looking bright for Hong Kong. We have already seen a marked increase in business since the summer of this year and are in consultation with several clients about their growth plans for 2024. We may not have raced back from the lows of Covid but, as Aesop wrote, slow and steady wins the race and I am, firmly, confident about the road ahead.

TL: DR – It’s been a slow start to Hong Kong’s recovery, but we have made progress and expect growth to continue.

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