When Tony Lai opened his first Aji Ichiban snack shop in Hong Kong in 1993, a British flag fluttered over the government building and China’s gross domestic product per capita was roughly the same as Nigeria’s.
The chain is expanding to become iconic to tourists in the city, selling a range of East Asian snacks to residents and visitors. Over the years, it has withstood both recessions and typhoons.
But this month, after three of the most tumultuous and transformative years in Hong Kong’s history, Lai was forced to close all 20 remaining stores.
The reversal of the entrepreneur’s fate is emblematic of the new, battle-ridden Hong Kong. Since 2019, the city has witnessed the strongest anti-government protests on Chinese soil after Tiananmen Square, border control with zero covid, which devastated the economy, and repression against dissent, which dissects the city’s social fabric.
Together, they have shattered its tourism market, stifled its once-vibrant culture and displaced residents – which could lead to Hong Kong’s biggest peace crisis.
Authorities insist the situation is temporary. Tourists will return when the borders open, they say, and any outflow of locals will be easily filled by millions of talented professionals from the continent.
Hong Kong’s chief executive, John Lee, left, and his new cabinet members at a news conference earlier this month. Xi Jinping instructed him to launch the city into a “new era” © Kin Cheung / AP
Chinese President Xi Jinping, who will visit the city on July 1 to mark the 25th anniversary of the UK broadcast, has instructed the city’s new CEO, John Lee, to launch the city into a “new era.” Interviews with business leaders and data collected by the Financial Times show that Hong Kong will be less international and closer to China, both economically and culturally.
For many living in the city, this is a turning point for Hong Kong. “At this point, we can only understand our destiny by rolling the dice,” says Lai.
The world city of Asia
After the British handed over Hong Kong to the Chinese, the authorities tried to drink its international powers. In 2001, Hong Kong was renamed the “World City of Asia” to try to combat fears after the broadcast that the city would be perceived by global business as another part of China under communist rule.
But branding didn’t matter, as Hong Kong’s wealth rose along with China’s economic boom. The city rose sharply in the rankings of the freest international economies and global investment banks rushed to expand into the city.
Until 2012, American banks were the largest employers of financiers. At that time, China’s economic output was about half the size of the United States.
“There has always been noise in Hong Kong,” said a senior Singaporean businessman in the city. “Foreign companies saw Hong Kong as a gateway to mainland China, so there is a lot of history and investment here, they have set up significant offices.
With the guarantees offered by its British legal system and the international stock market, Hong Kong has consolidated its importance as a window for investment in Chinese companies, which have rapidly expanded their presence with the growth of the economy.
In the last few years, however, Chinese companies have outperformed Western competitors as the dominant force in Hong Kong’s corporate world. The city’s largest employer of employers among financial groups is now Citic Securities, based in Shenzhen.
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In banking and law, both Chinese and international companies are becoming increasingly inclined to be dominated by employees from the continent to match the composition of their clients. “When I hired, I would always prefer someone with a Western education who speaks fluently, if not a native Mandarin,” the American lawyer added, referring to China’s national language.
Now that you are a native Mandarin, you are more likely to go beyond those who speak Cantonese, the South Chinese language spoken in Hong Kong, according to Liu Pakwa, a professor of economics at the Chinese University of Hong Kong.
“In 1991 [Mandarin]”Male-speaking migrants earn on average 16.8% less than Cantonese-speaking migrants, but by 2016 they are earning an average of 34.6% more,” Liu said.
The city was a major beneficiary of the so-called “Chinese miracle” as the country built its service, trade and tourism sectors. At the top of Hong Kong’s tourism industry in 2018, 65 million visitors came in one year, four-fifths of whom came from the continent.
Local restaurant baron Simon Wong, who manages a portfolio of more than 45 franchises as head of the Hong Kong-based LH Group, says the influx has boosted the end result, especially in downtown neighborhoods. “Tourists from mainland China before the pandemic accounted for about 30% of our customers at our restaurants in Tsim Sha Tsui and Causeway Bay,” he said.
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Three years of change
The party stopped for tour operators, hoteliers and retailers in the city in 2019, when anti-government protests erupted in opposition to the proposed law, which allows crimes to be transferred to the continent for the first time.
The demonstrations escalated into an unprecedented public revolt against not only the city authorities but the Chinese Communist Party as a whole. Protesters and pro-democracy activists have accused the Hong Kong government of eroding the guarantee of “one country, two systems” autonomy that the Chinese have agreed to hand over after the surrender.
The number of tourism from the mainland has declined after Chinese state media gave strong publicity to a number of incidents with demonstrators targeting the continent’s residents.
In response to the protests, Beijing imposed a draconian law on Hong Kong’s security, which was criticized by foreign governments and human rights groups. In addition to eliminating political opposition, the law paved the way for a broad reshuffle of civilian life to bring citizens closer to mainland China. Organizations deemed unfriendly to the government have been destroyed, and six-year-olds are now subject to nationalist education.
Dozens of Hong Kong residents chose to be expelled from the city after the law was passed, but for many in the business community, China’s reaction to Covid-19 had a greater impact.
Since the beginning of the pandemic, Hong Kong has introduced a weekly quarantine that expelled newcomers and requested contacts with Covid-19 cases under quarantine in government camps.
Even now, arriving passengers have to be quarantined for a week, although the city records hundreds of cases a day, angering executives who had previously chosen Hong Kong as a regional base in part because of its role as a transportation hub.
“Hong Kong was an aircraft carrier that you could get in and out of so easily,” said a former managing partner at a Hong Kong-based US law firm. With easy travel routes to Southeast Asia for customer meetings, “You can have a head office in Hong Kong and a smaller one in Beijing or Shanghai.”
Strong pandemic measures, in addition to the Hong Kong government’s inability to deviate from Beijing’s dogma, are seen by many locals, migrants and immigrants as an expression of where the city is headed.
Many decided that was enough. More than 130,000 people have left Hong Kong since the beginning of the year. At least 123,400 more have applied for the UK’s national (overseas) migration scheme, set up following pro-democracy protests in 2019.
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Even some mainlanders, initially attracted by the culture and spirit of Hong Kong, no longer see the attraction. “Even as an outsider, I still wonder why Hong Kong ends up like this,” said Lee, a 27-year-old continental migrant to Hong Kong who plans to move to Canada with her partner later this year. “When I was in college, Hong Kong was a very inclusive and free place.”
The companies are temporarily deploying part of their staff elsewhere in Asia, a situation that over time threatens to become permanent, with global business questioning Hong Kong’s suitability as their base in the region.
“They will kill this city, they will castrate it to the extent that …. . it’s just going to be a small Chinese city, “said a former senior Hong Kong lawyer from the company’s new overseas base.
While Beijing wiped out the city from public opposition, it failed to promote a new sense of Chinese identity. More than ever, young people in the city identify themselves as Hong Kong residents, with the latest figures showing that only 2 percent are identified as Chinese.
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“It will be time for a boom”
However, Hong Kong has been declared “dead” many times and still managed to maintain its global character.
Despite all the problems of the last three years, the city still boasts a convertible currency, a bustling port and mechanisms that allow international investors to gain exposure to the Chinese market through Hong Kong. Despite pandemic restrictions and a gloomy atmosphere, no large bank has closed offices in the city.
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