Recently, the South China Morning Post released a video showing the precarious position of the restaurant business in Hong Kong. This is part of a larger trend of stagnation that has hit the Hong Kong economy. Coronavirus definitely played a role in this, but it is only part of the story. The larger story is that COVID, the National Security Law, and a changing political culture are all contributing factors to the decline of Hong Kong. If the government of HK wants to reverse HK’s fortunes, it needs to reverse course on the totalitarian path.
The economic situation in Hong Kong has stagnated. Even several years after the pandemic, many metrics are behind where they were in 2019. Despite an increase from 2023 to 2024, the total number of tourists visiting the city is 20% below what it was pre-pandemic. COVID restrictions completely shut off the flow of tourists, but the slow reopening of Hong Kong and China more broadly forced tourists to make alternative arrangements.
COVID certainly played a role in HK’s economic woes, but it is not enough of an explanation. Other countries have managed to recover and are thriving in the post-COVID world. Four years after the pandemic, GDP growth in the city is just over 2%. So what other factors are affecting Hong Kong?
The answer is that there is a very different political environment in Hong Kong. 2020 saw the implementation of a sweeping National Security Law that criminalizes dissent against the central government in Mainland China. The fact that this violates the Basic Law, Hong Kong’s quasi-constitution, is of no concern to Hong Kong Chief Executive John Lee. Hundreds of Hong Kongers have been arrested for infractions deemed to be subversive of the Chinese Communist Party (CCP).
Indicative of the NSL is the case of businessman Jimmy Lai, a billionaire and founder of businesses such as fashion brand Giordano and newspaper Apple Daily. Lai found himself in the crosshairs of the CCP due to his outspoken criticism and pro-democracy activity. The reason this matters to the economic situation of Hong Kong is the manner in which Lai is being persecuted. Upon his arrest, the government froze the assets of both Lai and his companies, meaning Apple Daily had to shut its doors. This all happened before Lai was convicted of anything. A clear violation not only of his property rights but also of due process.
What previously made Hong Kong an attractive destination for financiers was its dependable legal system that provided due process. However, the NSL and its implementation demonstrate to business leaders that their assets are no longer safe in the city. Even if they are unjustly accused, what happened to Jimmy Lai demonstrates that businesses should not be confident of receiving a fair trial.
The National Security Law is a gross injustice that violates the liberty of the people of Hong Kong. Such appeals to justice are unlikely to sway the decision makers in China, however. It is not just out of principle that the CCP should reverse course, but there is a utilitarian reason as well. If Hong Kong cannot be trusted to provide liberty and the rule of law, there is no reason why financiers should do business there. Businesses are already leaving Hong Kong for places like Singapore, in part due to the unpredictable legal situation in Hong Kong. To reverse its economic fortunes, the CCP should repeal the NSL to the benefit of Hong Kong and China as a whole.
Hong Kong was once an international hub due rule of law and free markets. The case of Jimmy Lai demonstrates that HK no longer adheres to the rule of law. There is reason to believe it is no longer committed to free markets, either. Businessman Li Ka-Shing made a deal a few months ago to sell the ports he owned in Panama to a U.S.-owned consortium, but the deal came into question when the CCP objected. Businesses cannot thrive if there is a fear that the government will blow up deals it doesn’t like. If Hong Kong is to remain a thriving economic hub, it must reverse course and commit itself to the free market principles that made it great.
The Hong Kong economy is struggling due to the pandemic, the National Security Law, and a shift in the political culture. To recover, the city must back away from authoritarianism and embrace the values that made it great. Doing so is not only the right thing to do, but it is also the smart thing to do.
