Hong Kong has lost ground to regional rival Singapore, according to a Financial Times analysis of real estate prices, air traffic and other indicators, underlining the challenge the Chinese territory faces as it reopens to the world after years of pandemic controls.
In recent weeks, John Lee, Hong Kong’s chief executive, has launched a campaign to convince the world that despite Covid-19 and a brutal security crackdown, the Chinese territory is not only open for business but remains Asia’s premier financial centre.
Yet the data demonstrates Hong Kong paid a price for its tough pandemic restrictions and quarantines, while Singapore made gains.
“The trajectory for Singapore to become Asia’s finance hub . . . that takes time. It won’t happen in a year. But if I was the Singapore government, I would be very happy with where things are headed,” said Michael Marquardt, Asia chief executive of IQ-EQ, an investor services firm.
Hong Kong’s regional importance has been entrenched by its location on mainland China’s doorstep. The city has only just reopened to tourists after three years in which many international airlines stopped their services.
In contrast, Singapore was one of the first countries in Asia to reopen its borders during the pandemic. Last year, Hong Kong lost its position as the region’s busiest airport to Singapore, according to Sobie Aviation.
More aircraft have arrived in Singapore than in Hong Kong every month since January 2022, flight statistics show. Arrivals in Singapore have now reached 70 per cent of pre-pandemic levels, while those in Hong Kong are just over half of what they were before the pandemic.
Despite the reopening, severe labour shortages in Hong Kong are preventing the full return of routes. Qantas has delayed the start of their Hong Kong to Melbourne service to the middle of the year.
“The airport is much busier but it’s still at a fraction [of before Covid-19],” said Kristian Odebjer, chair of the Swedish Chamber of Commerce in Hong Kong. “There are serious bottlenecks in terms of ground staff. I think that is holding back Hong Kong.”
Chinese leader Xi Jinping’s clampdown on technology entrepreneurs has heightened Singapore’s attraction as a destination for wealthy elites — and their funds.
Since mid-2021, Singapore’s foreign currency deposits have increased by more than $100bn, an FT analysis of bank data shows, while Singaporean dollar deposits remain steady. Deposits in Hong Kong banks have dwindled since early 2022, only halting in November as the Chinese city lifted quarantine restrictions.
The number of family offices in Singapore — privately run companies that offer wealth management services — has grown from a handful in 2018 to an estimated 1,500 by the end of last year, according to Singaporean data analysis firm Handshakes. Hong Kong, eager to regain ground, will host an “invitation only” meeting for some of the world’s richest family offices next month.
Perceptions that Beijing was increasingly anti-business and anti-private wealth was “the main reason for the migration of Chinese billionaires from mainland or Hong Kong to Singapore and other places”, said Zhiwu Chen, chair professor of finance at the University of Hong Kong.
“In the past, they might have parked it in Hong Kong but now move to Singapore,” said Kevin Au, director of the Centre for Family Business at the Chinese University of Hong Kong.
It is difficult to quantify how many people have moved from Hong Kong to Singapore and banks — hesitant to annoy Beijing — remain reluctant to say how many staff they moved there during the height of the pandemic.
Some had been expanding in Singapore even before the pandemic, especially after the introduction of a tough new security law in Hong Kong in 2020 following protests and unrest. BlackRock doubled the size of its Singapore office in 2022, while Wells Fargo shifted its Asian hub from Hong Kong to Singapore the year before.
All of this has contributed to rental prices in Singapore surging 40 per cent in the fourth quarter of last year from the same period two years earlier. With 140,000 Hongkongers entering immigration programmes such as the one offered by the UK, rents in Hong Kong dropped 10 per cent in the fourth quarter from an all-time high in the third quarter of 2019.
This has also affected demand for office space. Grade A office vacancy levels in downtown Singapore stood at 2.3 per cent at the end of last year compared with 11.1 per cent in Hong Kong.
Hong Kong’s proximity to China remains a huge draw for investors. In terms of capital market activity, Hong Kong is still far ahead of Singapore, with stock market turnover and market capitalisation more than seven times larger than its rival.
In the asset management and advisory service industry, Singapore is fast closing its gap with Hong Kong. In 2021, Singapore’s assets under management grew 16 per cent to $4tn, while Hong Kong’s grew by only 2 per cent to $4.6tn.
More broadly, with Hong Kong open and China’s abandonment of its zero-Covid policy, the IMF has forecast Hong Kong to grow 3.9 per cent in 2023, faster than Singapore’s 2.3 per cent.
Some Hongkongers could yet return. “There will be some that the political situation in Hong Kong has become intolerable [for], they want to move away and stay away, but there will be some who maybe they could change their mind and economic conditions in the UK or US might not be as good as expected,” said Stuart Gietel-Basten, a demographer at the Hong Kong University of Science and Technology.
