January 16, 2025 · 《Ming Pao》
Hong Kong’s current economic crisis began in 2019 and has now lasted for 6 years. To date, the city’s real GDP has still not recovered to its 2018 level, making this the longest recession on record. However, after the central government and the HKSAR government made concerted efforts to implement countermeasures, several bright spots have emerged in the social economy, including an unprecedented response to the imported talent scheme, a halt and rebound in population decline, and a halt and rebound in the number of regional headquarters of overseas companies in Hong Kong.
This article is the second part of “Does Hong Kong’s Long Economic Night Have a Dawn?” The first part (published in 《Ming Pao》 on January 9, 2025) analysed why this recession is so severe; this part analyses whether the current economic bright spots and the government’s response measures can dispel the long night of economic crisis and bring a dawn.
1. Recent ‘Talent Grab’ Policy: Highlights and Blind Spots
As mentioned in Part 1, Hong Kong has experienced several very severe economic crises in the past, but at those times its population was still growing, which provided important support during the crises. After the social unrest in 2019, however, some 200,000 to 300,000 people emigrated, and Hong Kong’s population and labour force both declined significantly. Moreover, in the past Hong Kong’s population structure was relatively young, with stronger adaptability and resilience in the face of crises. Today, however, the population is rapidly ageing, while young and highly-skilled Hong Kong people are precisely the group most inclined to emigrate. Many young couples and their children have moved abroad, turning Hong Kong into a city of “left-behind elderly”. To reverse the trends of population decline and ageing, Hong Kong must import large numbers of young talent in order to overcome this economic crisis. The fact that the government’s imported talent scheme has received an overwhelming response is the biggest bright spot in the crisis.
The government’s “Talent Grab” scheme was launched in late 2022 as the post-pandemic recovery began. By the end of last year, as many as 170,000 talents had arrived in Hong Kong, together with 180,000 dependants, bringing the total number of arrivals to 350,000. In addition, there were another 20,000 to 30,000 imported workers, making the total quite substantial.
Hong Kong’s population peaked at 7.52 million at the end of 2019. An emigration wave followed, and combined with the large numbers who left during the COVID-19 pandemic, the population fell to a low of 7.35 million by mid-2022, a drop of 170,000. After the border reopened, large numbers of people who had left during the pandemic returned, and by mid-2023 the population had risen to 7.54 million — an increase of 190,000 in a single year — slightly surpassing the 2019 year-end peak of 7.52 million.
The “Talent Grab” scheme only began accepting applications in late 2022 as the post-pandemic recovery began, and the number of talents who had arrived by mid-2023 was still small. Therefore, the 190,000 increase between mid-2022 and mid-2023 was mainly due to the return of people who had left during the pandemic, together with One-way Permit holders, foreign domestic helpers, students, and others who rushed to come to Hong Kong when the border reopened. Many Hong Kong residents who had earlier emigrated overseas or to the mainland and had been unable to return for a long time due to the pandemic also took the opportunity to return to visit relatives. As a result, the population surged by 190,000 in a single year. This population increase had nothing to do with the “Talent Grab” scheme.
Thereafter, from mid-2023 to mid-2024, despite large numbers of imported talents and their dependants arriving in Hong Kong, the population unexpectedly fell by 4,300. The “Talent Grab” scheme failed to grow the population, indicating that many of the talents who came did not actually stay in Hong Kong. Furthermore, outward migration was particularly heavy during this period: apart from Hong Kong people continuing, as in the past, to relocate overseas and to the mainland, many who had earlier emigrated overseas or to the mainland took advantage of the reopened border to visit Hong Kong and then left again. In sum, the “Talent Grab” scheme did not deliver any population growth during this period — and this is one of the reasons for Hong Kong’s persistently weak consumer spending over the past year.
According to the most recently published figures, the “Talent Grab” scheme has also failed to reverse the downward trend in the labour force. In October last year, Hong Kong’s labour force stood at 3.83 million — down by 20,000 from the 3.85 million recorded at the end of 2022 as the post-pandemic recovery began, and down by 170,000 from the 2018 peak of 4 million.
The government claims that large numbers of outside talent have come to Hong Kong, yet the population has still fallen slightly and the labour force has shrunk by 20,000. This indicates that many of the imported talents have neither stayed in Hong Kong for the long term nor actively entered the local labour force. (Under the Census and Statistics Department’s methodology, imported talent are counted as part of the labour force as long as they make a serious effort to seek work, regardless of whether they actually find employment.)
The “water content” of the imported talent programme is believed to be very high. According to media reports, some Top Talent Pass Scheme applicants had no intention of seeking work in Hong Kong at all, and only applied in order to obtain the initial two-year visa for the convenience of travelling to and from Hong Kong. Some applied so that their children could be educated in Hong Kong while the parents continued to work on the mainland. Whether the imported talent will really put down roots in Hong Kong is, at this point, anyone’s guess. There are notable cultural differences between the mainland and Hong Kong, and the great majority of mainland talents coming to Hong Kong have not mastered fluent Cantonese. Hong Kong’s industrial structure is also relatively narrow, concentrated mainly in finance, insurance, and import/export, so mainland talent may not find it easy to secure suitable work in Hong Kong.
Hong Kong’s population statistics for the second half of 2024 are not expected to be released until February this year, but the author believes that the figures will then show an increase in population. Even if the imported talents are not truly staying in Hong Kong to work, once their children receive education in Hong Kong, the city’s population will rise, and this will become a factor supporting the economy and consumer spending. If the imported talents can genuinely stay and work in Hong Kong, the city’s gains will be considerably greater.
2. Attracting, Retaining Talent and Bringing Hong Kong Residents Back
There are now many suggestions in society on how to encourage Top Talent Pass holders to stay in Hong Kong, including providing job-matching information and school-admission information for their children. Space does not permit a detailed discussion of these proposals here. The author wishes to stress the following: a society that can retain its local talent can also retain outside talent; conversely, if a society cannot retain its local talent, it is unlikely to retain outside talent either. Retaining local talent and attracting outside talent are two sides of the same coin.
Beyond attracting mainland talent, the government is also striving to draw talent from other regions to work in Hong Kong. Today, many Hong Kong financial-sector talents have moved to Singapore, London, New York and other places; many foreign specialists working in these financial centres will know Hong Kong friends. How foreigners perceive Hong Kong is naturally influenced by Hong Kong people living abroad, especially those who have left. If Hong Kong talent continues to leave, it will be doubly difficult for the city to attract foreign talent to come. Seen from this angle, attracting Hong Kong residents to return is highly significant — not only for the obvious reasons that Hong Kong is short of people and that returnees can easily fit back into the Hong Kong environment, but more importantly because Hong Kong people returning after having left is the most persuasive and compelling “Hong Kong story” of all.
Any society that attracts large numbers of outsiders to immigrate over a short period is prone to tensions between locals and newcomers. If the public perceives government policy as favouring outsiders, anti-foreigner sentiment is even more easily triggered. The HKSAR government needs to champion a culture of openness, diversity, fairness, inclusion and integration, helping outsiders fit into society on the one hand and promoting social harmony on the other.
3. International Education Hub: From Tertiary to Primary and Secondary
Hong Kong’s tertiary institutions have successfully attracted large numbers of mainland students — a bright spot amid the city’s prolonged economic slump in recent years. The government is also keen to build Hong Kong into an international hub for post-secondary education, but it has not placed equal emphasis on attracting outside students to local primary and secondary schools. In fact, many mainland talent applying to come to Hong Kong are doing so because they want their children to receive a Hong Kong primary and secondary education. Many of Hong Kong’s private or self-financing primary and secondary schools adopt international curricula and are attractive to mainland students. By contrast, mainstream primary and secondary schools teach mainly in Cantonese and are government-subsidised, so they are not suited to attracting mainland students — partly to avoid using public funds to subsidise outsiders.
For mainland parents, local primary and secondary schools may actually be more attractive than Hong Kong’s tertiary institutions, mainly because their tertiary-age children are more mature — parents can feel comfortable letting them go far away to Europe or America — but they cannot feel easy sending their primary or secondary-age children off to distant lands. Given that Hong Kong is geographically and culturally closer to the mainland, for younger mainland students Hong Kong is a better choice than a foreign country.
The biggest difficulty for Hong Kong’s private and self-financing primary and secondary schools in attracting mainland students today is the lack of corresponding policies and facilities, in particular the lack of student hostels. If mainland parents have no plans to come to Hong Kong to work, and simply want to arrange for their younger children to be educated here, the HKSAR government needs to allow these young people to apply for student visas to enter local primary and secondary schools; and the schools that attract mainland students will also need to build sufficient student hostels.
Hong Kong is famously “short on land”, and finding sites to build hostels for non-local primary and secondary school students is no easy task. However, from the perspective of Greater Bay Area integration, this is a development direction worth considering. Moreover, from the angle of attracting talent to put down roots in Hong Kong, young people who come to study in Hong Kong find it easier to fit into local culture and life, and are also more likely to stay and develop their careers here. At present, although a sizable number of mainland undergraduates come to Hong Kong each year to study for a master’s degree, they are older, usually have difficulty integrating into local life, and find it hard to pick up Cantonese in just one year of study. After “gilding” themselves at a Hong Kong tertiary institution, the great majority return to work on the mainland, and the proportion who stay in Hong Kong is not high.
4. Overseas Companies’ Regional Offices Returning to Growth?
InvestHK and the Census and Statistics Department conduct an annual survey of overseas companies with a presence in Hong Kong. The number of overseas companies with operations in Hong Kong is an important indicator of Hong Kong’s role as a “super-connector”. Among overseas companies in Hong Kong, the most indicative category and the one with the greatest economic value is regional headquarters.
Historically, roughly half of the regional headquarters in Hong Kong have come from three major regions: mainland China, the United States, and Japan. The number of overseas regional headquarters in Hong Kong reached a historic peak of 1,541 in 2019, and then declined in fits and starts to 1,336 in 2023 — a fall of 205 (13.3%). Of these, companies from the mainland actually rose by 31 (14.4%); companies from the United States and Japan fell by 64 (23%) and 26 (11.2%) respectively; and those from other regions fell by 146 (17.9%) — a very significant decline.
The most recently published survey, however, shows that from 2023 to 2024, the number of regional headquarters of overseas companies in Hong Kong rebounded by 74 (5.5%) to 1,410. Among these, companies from the mainland surged by 63 (25.5%); companies from Japan continued a slight decline, falling by 6 (2.9%); and those from other regions rose slightly by 11 (1.6%). Although the number of regional headquarters of outside companies in Hong Kong has rebounded, it remains far below the 2019 peak.
Given the prolonged weakness of the Japanese economy, the continued decline in the number of Japanese regional headquarters in Hong Kong is hardly surprising. The really telling figure is the change in the number of regional headquarters from other regions. The slight rebound in this figure is a rather positive signal. “Other regions” mainly covers Europe and Southeast Asia, and suggests that amid US–China tensions, companies in these regions are still willing to set up regional headquarters in Hong Kong. However, with Trump’s return to the White House, more turbulence and challenges lie ahead, and we will need to watch closely whether the recent rebound in the number of overseas regional headquarters in Hong Kong can be sustained.
5. Officials Must Confront the Unprecedented Crisis in Hong Kong’s Economy
Hong Kong’s economy is undergoing a structural transformation, and the process will be long and painful. Innovation and technology (I&T) investments have a long payback period, and international competition is also extremely intense. Moreover, as noted in Part 1 of this article, although government investment in I&T has grown rapidly over the past decade or so, it has not significantly catalysed private-sector investment.
At root, “the human factor comes first”. Hong Kong is a city without abundant natural resources, and talent is its most important resource. The fact that large numbers of mainland talents are applying to come to Hong Kong is a very positive development; but whether the imported talent will stay and develop in Hong Kong depends on whether the city can provide a favourable environment and incentives. Whether the bright spot of the Top Talent Pass Scheme will truly bring a dawn to Hong Kong’s economy still depends on whether the government can implement in-depth and detailed policies to retain imported talent.
Hong Kong’s economic development is mainly determined by fundamental political and economic factors — it will not really improve just because officials “sing its praises”, nor will it really decline simply because the opposition “talks it down”. Government officials need to be pragmatic, and must refrain from glossing things over and reporting only good news while hiding the bad. Only when Hong Kong’s officials can squarely face the unprecedented crisis in the city’s economy and seriously identify the gaps will a glimmer of light at last appear in this long economic night.
(Translation supported by AI)
Related articles:
- Does Hong Kong’s Long Economic Night Have a Dawn? (Part 1) by Yun-wing Sung
