IN FOCUS: As expats exit Hong Kong and mainlanders enter, businesses and communities are counting the costs

HONG KONG: Mr Andrew Liu is calling time on his life in Hong Kong after six years.

The Taiwanese senior finance manager and his family are relocating to France at the end of September, joining the swelling ranks of expats who have been departing the city in recent years.

While the 36-year-old’s move is a natural progression of his career role, the same can’t be said for many others leaving the territory, who have cited push factors like the tough curbs enacted at the height of the COVID-19 pandemic and the national security law imposed by Beijing in 2020.

The expat exodus has significantly impacted Hong Kong, cutting across sectors like F&B, property and education. Businesses catering to this clientele have been hardest hit, with some closing up shop while others pivot operations.

"Most of the restaurants in Central I bookmarked (on my mobile phone) are now closed," said Mr Liu, noting the striking changes as he shared his firsthand experience with CNA. 

“(You can easily tell the impact) from the frequency of shop closures, the smaller crowds I’ve noticed in Quarry Bay and other popular areas, and even the decline in the job market."

To be clear, the movement of people flows both ways - working professionals are still heading to Hong Kong to live and work. However, mainland Chinese are largely picking up the slack.

While presenting new opportunities for local businesses and attractions, the growing proportion of the mainland segment also raises further questions about the city’s cosmopolitan reputation that’s been slipping in global rankings.

CNA visited Hong Kong in late July, talking to local businesses and analysts and stopping by various districts to get the lay of the land.

COUNTING THE COSTS

Hong Kong was home to 270,000 non-Chinese permanent residents as of Jul 10, according to official data, referring to those not of Chinese nationality.

The non-Chinese population stood at less than half that count three years ago, at around 593,000, according to the territory’s once-a-decade census. While not directly comparable due to the inclusion of mobile residents - people who do not live there full-time - the figures indicate a net outflow of foreigners.

Analysts have cited key factors like the hefty toll exacted by strict COVID-19 curbs, along with the political shifts in the wake of the 2019-2020 mass protests and a subsequent sweeping crackdown by China in the form of the national security law.

They add that global financial hubs like Singapore and Dubai have also become more attractive to expats, especially with the pandemic and politics weighing particularly heavy on Hong Kong. 

Data from international relocation company Asian Tigers Group over the last four years bears out this trend. While inbound numbers remain similar, it has seen a near 50 per cent drop in outbound figures since 2020 - indicating a widening gap between expats moving in and out of Hong Kong. 

“In the past 20 years, people I met who’ve been here for more than 20 years who say ‘I’m leaving,’ it definitely (could be counted) within these 10 fingers,” Mr Ng Yew Beng, general manager of Asian Tigers Group, told CNA.

“But in the past three or four years, I need to use your fingers, toes, and that guy’s fingers,” he quipped, referring to the increased tally of departing expats. 

Many middle- to senior-level professionals packed up and left during the pandemic, and few have returned, said Mr Lee Quane, global head of business development at consulting firm ECA International (ECA).

He explained that for those in their late 40s or 50s, the upheaval in the city likely accelerated their decision to exit, and after the dust settled on relocation, it was likely difficult to imagine uprooting their families once more.

As more expats bid goodbye to Hong Kong, businesses have been counting the costs - even as they deal with other issues like diminished spending from local residents and the changing face of tourism.

Long-established restaurants serving expats are struggling with high rents and weak sales. Dining group Castelo Concepts liquidated and closed nine eateries in Hong Kong last year, while Outback Steakhouse has shuttered nine of its 19 branches.

Lan Kwai Fong, a renowned nightlife hotspot, has also been significantly impacted. Official statistics from May revealed that the bar segment was the weakest performer in Hong Kong's restaurant industry during the first quarter, with a 17.8 per cent decline, despite a 2.3 per cent overall increase in revenue for the overall sector.

Prajna Yoga in Kowloon, which has catered to expatriates since 2008, has also been affected. The number of expat students has halved and classes have been reduced from 80 to 72 per month to cut costs. The outlet did not provide actual student numbers.

"After COVID, people became more health-conscious and sought to promote wellness, which initially seemed like a good opportunity. However, as people moved out and faced dissatisfaction with their situation here, my (expansion) plans did not succeed," said co-founder Kishore Kumar.

"After COVID, people became more health-conscious and sought to promote wellness, which initially seemed like a good opportunity. However, as people moved out and faced dissatisfaction with their situation here, my (expansion) plans did not succeed," said co-founder Kishore Kumar.

An already struggling property market has also observed the outflow of expats.

"During the early phase of the pandemic, rental demand dropped, but now, with the market rebounding, rental rates have risen to levels not seen in six and a half years," said Ms Mavis Lee, senior principal district sales director at Centraline Property Hong Kong.

But the proportion of expat renters has declined - they now account for about a quarter of her clientele, half that in 2019.

Data from online property platform Spacious.hk shows a 70 per cent increase in the rental price of a 54 square metre one-bedroom flat in Prince’s Terrace, Mid-Levels, which is popular with expats. It is now HK$36,000 (US$4,600) compared to a year ago.

For those living in Hong Kong, the changing landscape hits close to home.

"It affects me when I see places near where I live closing, like the noodle shop I used to frequent," shared Ms Margaret Griffin, a 61-year-old publication editor who has worked in the city for over 30 years.

And polls suggest more people - locals and foreigners alike - are mulling an exit. According to a survey by recruitment agency Robert Walters conducted between July and August 2023 and released in September of that year, over half of Hong Kong’s professionals are considering leaving the city.

The survey interviewed 107 professionals across various sectors, including tech, finance and construction. Of those polled, 16 per cent wish to move as soon as possible, while 37 per cent are contemplating a move within the next three to five years.

Another survey conducted by the Hong Kong General Chamber of Commerce (HKGCC) in April 2023 found that about 75 per cent of businesses faced talent shortages. Seventy per cent cited emigration as a major contributor to the loss of talent. Respondents comprised nearly 200 HKGCC companies.

MAINLANDERS FILL THE GAP

At the same time, mainlanders are increasingly setting their sights on settling in Hong Kong, presenting both opportunities and challenges to the former British colony.

“When people say expat numbers are down, they generally mean non-Chinese expats, but there’s actually been a significant increase in Chinese expatriates coming to Hong Kong,” Mr David Hui, regional managing partner for APAC & Middle East at executive search firm Heidrick & Struggles, told CNA.

The city’s overall population rose to 7.5 million in 2023, an increase of 30,500 or 0.4 per cent from the previous year and its second year of growth since the COVID-19 pandemic, according to the Census and Statistics Department.

While the government attributed the growth partly to Hong Kongers returning from abroad, it also revealed that about 80 per cent of the net inflow came from mainland China through the "one-way permit”, a scheme introduced in the 1980s that allows mainland residents to settle in Hong Kong or Macao.

Mainlanders have also been largely answering the call as Hong Kong rolls out the red carpet for global talent.

The Top Talent Pass Scheme (TTPS), the Quality Migrant Admission Scheme and the Technology Talent Admission Scheme (TechTAS) are among the initiatives implemented by the Hong Kong government to attract professionals and boost its international standing.

More than 130,000 people have arrived in Hong Kong through these schemes as of June, and approximately 120,000 of their family members have also settled in the city. Most successful applicants are from mainland China, accounting for approximately 95 per cent and 78 per cent of TTPS and TechTAS applicants respectively.

Ms Sonali Gidwani, a management consultant based in the UK, is struggling to find a job in Hong Kong due to the increasing importance of Mandarin or “putonghua” in the local job market.

“Many expats don't go to schools where Cantonese and Mandarin are taught properly … so as a result, the job opportunities are not very good (there) for people who don't speak Cantonese and Mandarin fluently, because the main clients are from China,” said Ms Gidwani, whose family were originally from India but have now lived in Hong Kong for three generations. 

For instance, Prajna Yoga is tweaking its promotional efforts so they’re tailored to the mainland audience. “I started Chinese advertisements and am planning to add a Chinese section to our website and social media postings,” said Mr Kishore the co-founder.

At The Pontiac, an LGBTQ-friendly cocktail and dive bar in Central, well-heeled expats like bankers and lawyers used to be their target audience. But now, more attention is being paid to reeling in the mainland dollar.

She added that the bureau recently helped at least four international schools bid for locations in Hong Kong.

"International schools, in addition to providing a good education service, are still businesses, so they’re not going to do this unless they know there’s demand."

On the property front, Ms Lee from Centraline Property Hong Kong shared that mainlanders returning from abroad have filled the gaps left by departing expatriates. Latest official data showed that private home rents hit a five-year high in July, although home prices fell by 22 per cent during the same period.

As the mainland factor gains prominence, businesses have been quick to adapt.

"Many bars and restaurants have closed, and our clientele has shifted significantly. The client base is now more mainland Chinese, which is why apps like Little Red Book (Xiaohongshu) and Dianping are becoming increasingly important," noted the establishment’s co-founder Harsh Roopchand.

“It's the reality of the matter,” he told CNA, noting the increased use of Chinese payment platforms like Alipay and WeChat Pay, and the need for more Mandarin-speaking staff.

Ms Lau from Invest Hong Kong notes that many new arrivals from the mainland are ethnic Chinese who previously worked in Silicon Valley, but now see opportunities in Hong Kong and the Greater Bay Area.

She added that fresh mainland arrivals will likely adapt well to Hong Kong’s cosmopolitan environment.

“They (the mainland expats) are aspiring to an international lifestyle and international opportunities, which is why they would want to come to Hong Kong. Otherwise, why move here? They could happily stay in their hometown, right?” said Ms Lau.

RETAINING THE COSMOPOLITAN MIX

At the same time, the growing mainland segment adds to questions about the city’s status as a cosmopolitan hub. Analysts have said that it fuels the perception that Hong Kong is becoming more of a Chinese city and less of an international one.

The territory has also slipped in global rankings.

Despite recent improvements in liveability due to the lifting of COVID-19 curbs, Hong Kong's allure for Asian expatriates has waned. Its ranking plunged from 17th globally in 2013 to 77th spot today, according to the latest annual Location Ratings Report from ECA International, released in January.

For comparison, Singapore was ranked the most liveable city for Asian expats in the report for the 20th year running. Tokyo was second, tied alongside the cities of Wellington and Adelaide.

Factors considered by ECA in making the assessment include the availability of health services, housing and utilities, infrastructure; climate, personal safety, socio-political tensions and air quality.

Professor Anthony Cheung, an advisor in public administration at the Education University of Hong Kong’s Department of Social Sciences and Policy Studies, told CNA that Hong Kong’s main value remains the “gateway to China”, attracting foreign companies to establish head offices there. 

Among the outcomes of a reform-focused meeting in July by the top brass of China’s Communist Party was a pledge to “improve relevant mechanisms”, to allow Hong Kong as well as Macao to play a greater role in “China’s opening to the outside world”.

But political challenges have altered the perception of Hong Kong being a gateway to China, conceded Prof Cheung, who served as Hong Kong’s transport and housing secretary from 2012 to 2017. He added that Hong Kong needs to find a way to stand out on its own merits.

“To be special, Hong Kong must not just be a stepping stone or a launch pad for the West to China, or vice versa,” Prof Cheung said. He emphasised that the city’s strategic value depends on how the West perceives Hong Kong's ability to uphold the “one country, two systems” framework.

“There must be something that Hong Kong is good at on its own, not just because of the mainland China factor.”

Prof Cheung believes the territory’s people flows are not a cause for alarm, pointing out that Hong Kong has always been an immigrant city.

He highlighted Hong Kong’s history of immigration in the 1950s, the reports of brain drain throughout the decades, and the emigration wave of the 1980s. But people came back, the professor noted.

The question now is whether the latest departures will come back, Prof Cheung said, noting that some believe the city's political landscape, freedoms and rule of law have changed. 

Other analysts have also cautioned that Hong Kong’s struggles are part of a broader international trend. "The world is less global now, and that’s impacting how businesses manage their operations,” said Mr Hui from Heidrick & Struggles.

As the wider debate rages on, expats currently in Hong Kong reflect on their lived experience. To Ms Griffin, the editor who has worked there for over 30 years, the city has an enduring appeal.

“There's still great things about Hong Kong … the culture here is really interesting, and people are adjusting,” she said.

“I think a lot of it is just also what's going on across the board … rather than people leaving Hong Kong for good.”