“I feel like the media is killing Hong Kong. It’s true that many talents have left, but others are filling the gaps, and the infrastructure built over decades does not collapse.”

After arriving at Hong Kong International Airport, reaching the International Finance Centre (IFC) building in the heart of the city’s business district took just 23 minutes—well under 30 minutes. Despite a flight delay that almost caused a missed interview, the surprisingly fast and convenient transportation system ensured a timely arrival. The Airport Express Line (AEL) operates every 10 minutes from 5 a.m. to 1 a.m., offering quicker, cleaner, and more efficient connections than any other airport-to-city rail system in the world.

Walking from Hong Kong Station to the Mandarin Oriental Hotel was easy. Major global companies, including JP Morgan, Standard Chartered, and HSBC, are interconnected by sky bridges, making the sudden rain typical of Hong Kong’s weather a non-issue and allowing access to indoor areas with just a short walk, even on hot and humid days. Selina Kim, a 28-year-old lawyer at a law firm in Hong Kong, remarked that only those outside the city view it with pity, emphasizing that relocating the established global financial and trade hub is virtually impossible.

A view of central area of Hong Kong Island, centered around the International Finance Centre (IFC). /Reuters

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◇ “Population Exodus? Not Really... Still a ‘Great Place for Business’”

Hong Kong, once seen as Asia’s financial hub, is now viewed as a fading region. Since the anti-government protests began in 2019, the implementation of the National Security Law and strict COVID-19 measures have resulted in a rapid rise in population outflow, with considerable net losses continuing to this day. Geopolitical tensions between the U.S. and China have further harmed Hong Kong’s economy, causing a sharp decline in its IPO market, which was once among the world’s top three and even surpassed New York in 2018.

According to Bloomberg Economics, Hong Kong’s recovery post-pandemic has fallen short of expectations, with GDP growth projected to slow from 3.2% in 2023 to 1.8% this year. Some evaluations suggest that Hong Kong’s status as an international financial hub is unlikely to be revived. However, the perspectives of those met on the ground tell a different story. Despite economic setbacks, the economy continues to function effectively, and the limitations of emerging alternatives are apparent.

Many people ChosunBiz spoke with still regard Hong Kong as a “great place for business.” The absence of complex taxes, low corporate tax rates, and legal tax optimization are significant advantages. More importantly, Hong Kong’s regulatory environment is non-discriminatory toward foreigners and locals, making it easy for foreign companies to establish operations here. The geographical advantages are also considerable, with major cities around the world accessible within five hours, according to local business operators.

Hong Kong serves as a gateway to mainland China. A “Double Taxation Agreement” exists between China and Hong Kong, allowing investors from Hong Kong to enjoy reduced withholding tax rates or even tax exemptions on profits earned in China, provided certain conditions are met. Because Hong Kong does not distinguish between foreign and local investors, it serves as a strategic hub for companies aiming to enter the Chinese market. This has led to a strategy of establishing parent companies in Hong Kong and subsidiaries in China, circumventing strict Chinese regulations for foreigners.

HSBC headquarters and Standard Chartered Bank located in the heart of Hong Kong. /Reuters

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◇ Global Interest Rate Cuts Signal a Bright Spot for Hong Kong’s Economy

One of the driving forces behind Hong Kong’s status as a global financial center is its currency. While emerging hubs like Singapore are on the rise, they cannot match this aspect. Since 1983, Hong Kong has maintained a fixed exchange rate of 7.75 to 7.85 Hong Kong dollars per U.S. dollar. This stability allows foreign companies and investors to exchange Hong Kong dollars for U.S. dollars without the risk of currency loss, solidifying Hong Kong as a major base in Asia.

In recent years, rising global interest rates have led to a stronger Hong Kong dollar, causing difficulties in its investment and real estate markets. However, following the U.S. Federal Reserve’s interest rate cut on Sept. 19, Hong Kong’s monetary authorities reduced the benchmark rate by 0.5 percentage points. On that day, the Hang Seng Index rose 1.8%, the technology index climbed 3%, and the real estate index increased by 2.6%. Investors expect a rebound in Hong Kong’s real estate sector post-rate cut, with Raymond Cheng, head of China property research at CGS International Securities Hong Kong, suggesting that the Fed’s aggressive cuts will help bolster the Hong Kong economy.

Hong Kong is also addressing its population outflow by attracting new talent. The region is welcoming a significant influx of wealthy immigrants from mainland China and has introduced the Top Talent Pass Scheme, a visa system for graduates from prestigious universities and senior professionals, since 2022. Recently, a new capital investment immigration program was launched, allowing immigration without the need for active involvement in business establishment or operations. This policy has reportedly received over 3,700 inquiries within just three months of its launch in March.

These policies are beginning to show positive results. According to the Hong Kong Census and Statistics Department, the population was recorded at 7,531,800 as of June 2024, reflecting an increase compared to the end of 2023 and marking the second-highest population level in history. Oh Gee-seok, APAC CEO of Qraft Technologies, which provides AI-based investment solutions in Hong Kong and South Korea, stated, “Hong Kong effectively utilizes its traditional advantages as a global financial hub, and its cultural similarities with Korea make it an ideal stepping stone for Korean companies targeting overseas markets.”

[Min Seo-yeon (Hong Kong)]

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