Hong Kong

National Security Law and U.S. Sanctions:  The imposition of the National Security Law (NSL) by Beijing in July of 2020 on Hong Kong has created some uncertainty regarding the business and investment climate in the city that could affect Hong Kong’s long-term attractiveness as an international business hub.  On July 16, 2021, the Department of State, along with the Department of the Treasury, the Department of Commerce, and the Department of Homeland Security, issued an advisory to U.S. businesses regarding potential risks to their operations and activities in Hong Kong.

Emigration of Expatriates and Local Residents Creates Talent Shortages: Throughout the pandemic, Hong Kong adhered to some of the world’s most stringent Covid-19 travel restrictions.  At one point during the pandemic, Hong Kong required up to 21 days of hotel quarantine for travelers, and inbound direct travel from the United States and many other destinations was impossible for nearly four months.  Hong Kong saw its population drop from 7.41 million in mid-2021 to 7.29 million in mid-2022.  More than 113,000 residents left Hong Kong during that period, a 1.6% population decline, marking the largest population drop in one year since the government began keeping such data more than 60 years ago.  The population drop is attributed to many factors, including the city’s strict Covid-19 policies as well concerns related to Beijing’s imposition of the national security law on Hong Kong in 2020.  Although Hong Kong currently has no quarantine requirement for inbound travelers, it still prohibits going to restaurants, gyms, and similar venues, and requires daily Covid-19 tests for three days after arrival.  Persons who enter restaurants, bars, and other public venues must use the government’s “Leave Home Safe” COVID-19 contact tracing app.

The Hong Kong government is keenly aware of talent shortages caused by an outflow of so many residents.  Hong Kong’s Chief Executive announced in his first policy address in October 2022 that the government would set aside US$3.8 billion to attract businesses to the city and launch an initiative to “entice talents to pursue their careers in Hong Kong.”

Macau

Gaming and tourism eclipse other sectors: The pandemic has significantly impacted Macau’s tourism and gaming sectors.  These market distortions had started to moderate in 2021 as Macau slowly opened to mainland tourists, but an outbreak in May and June of 2022 that necessitated a 14-day lockdown, has further clouded the future for Macao’s economy.  Gaming revenues that mirror historical averages (in 2019, Macau’s gross gaming revenue reached US$36.6 billion) are not expected to rebound until concrete measures to restore quarantine free travel to both mainland China, Hong Kong, and international travelers are announced.  However, there are opportunities in non-gaming sectors that do afford opportunities for U.S. firms including smart building, healthcare, and architectural/design services etc.  

Pandemic-driven restrictions push more expats to join exodus: After more than two years of living in the city with some of the world’s strictest pandemic travel restrictions, including mandatory quarantine for overseas arrivals, a substantial number of foreign professionals have decided to leave the city.  Macau saw a reduction of some 28,500 non-resident workers in the two years from the first quarters of 2020, down to168,000, of which non-resident specialized workers had dropped by 17 percent to 5,310 between December 2020 and January 2022, according to Macau’s statistics service. The broad-based shortage of talent will inevitably restrict Macau’s efforts in diversifying the city’s economy.