End of Hong Kong’s Covid quarantine fuels hope of looser China rules

Hong Kong’s leader John Lee — best known for overseeing a severe and unpopular security crackdown — sent champagne corks flying around the city’s offices on Friday.

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

The decision laid the foundation for Hong Kong to make a comeback, said business people, 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?

After top Beijing officials responsible for Hong Kong policy gave the territory their public blessing, its abandonment of Covid-19 controls has fuelled hopes the mainland will soon start to ease its own restrictions — seven days of quarantine plus three days of home monitoring for arrivals — which have worsened China’s economic woes and spooked global investors.

“Hong Kong [can be] a pilot project on border [reopening and] can let mainland Chinese authorities review the impact and relevant data,” said Tam Yiu-chung, Hong Kong’s sole delegate to the National People’s Congress Standing Committee.

Tam said China’s policies in practice had already become more targeted. “I think further relaxation of Covid restrictions will be the direction ahead for mainland China,” he said.

There has been some indication of a piecemeal easing of travel curbs on the mainland. One Shanghai-based manager at a state-owned enterprise said they have been told they could start applying for foreign business trips next year.

However, other analysts cautioned against reading the reopening of Hong Kong as a sign of an immediate shift in Beijing’s stance.

“We cannot predict what is going to happen for mainland China’s zero-Covid policy based on what Hong Kong is doing,” said Yanzhong Huang, a 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 substantive policy loosening by Beijing will not occur until after the conclusion of China’s annual legislative session, expected around March next year, at the earliest.

Goldman Sachs has forecast reopening in China will be delayed until at least the second quarter of next year and then implemented only gradually. That is despite estimates that the policy will cost China about 4 to 5 per cent of gross domestic product this year.

Xinran Andy Chen, a senior analyst at China consultancy Trivium, said Beijing had realised Hong Kong lacked the necessary conditions to keep pursuing the same zero-Covid strategy — including the local units that mobilised community-based testing and lockdown campaigns in mainland cities.

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

The cost for Hong Kong has been steep. The city has slashed its growth forecast for 2022 to between minus 0.5 per cent and 0.5 per cent, and seen a net total of more than 120,000 residents leave this year.

After years of forcing incoming travellers to quarantine in a hotel, at one point for three weeks, the policy change was a relief for Hong Kong’s international businesses.

“It is close to being a game changer, the mood among our members is euphoric,” said Frederik Gollob, chair of the European Chamber of Commerce in Hong Kong. “There is a clear signal now there is a push to reopen Hong Kong.”

Despite getting rid of quarantine, however, several senior business figures said travel would not return to pre-pandemic levels, because tourists coming into Hong Kong cannot visit restaurants and bars for the first three days. They are also subject to a week of Covid tests.

The government will also need to remove the threat that a positive Covid test leads to isolation in a government facility. “If there is a slight chance of testing positive and then you send the CEO of Goldman Sachs to [a government isolation facility], it wouldn’t work,” said Wolfgang Ehmann, a senior adviser to German Industry and Commerce.

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

Hong Kong hopes to attract the top global chief executives of banks and fund houses to a financial forum in November, coinciding with the return of the Rugby Sevens tournament, previously one of the region’s top corporate networking events.

Before Friday’s announcement, just two bank chiefs had publicly committed, Standard Chartered’s Bill Winters and HSBC’s Noel Quinn. Both lenders make the bulk of their income in Hong Kong. When contacted by the Financial Times, multiple global banks and fund managers declined to say whether they were sending their international chief executive to the event.

Gary Ng, a senior economist at Natixis in Hong Kong, said the reopening might even cause a short-term hit to the economy, with cooped-up residents rushing to travel and no significant inbound tourism to compensate. “The relaxation . . . will not be enough to pull Hong Kong’s economy out of a looming recession,” he said.

Hong Kong’s border with the mainland, which previously facilitated most of its economic activity, remains effectively shut, despite attempts by pro-government business to persuade mainland officials to offer executives smoother entry into neighbouring Guangdong province.

Across the border, Chinese citizens — most of whom have been effectively barred from leaving — watched as Hong Kongers regained their ability to roam the globe. “Congrats, [Hong Kongers]! Sigh, how I envy this,” wrote one user from Guangdong on Weibo, a Chinese social media site.