HONG KONG MONITOR 19 March 2021

19 march 2021

Coronavirus (COVID-19) and threats to Hong Kong’s electoral system dominated the reporting period (12-18 March). An outbreak connected to a fitness centre widely used by the expatriate community in Sai Ying Pun district has garnered a significant amount of attention, with the government issuing compulsory testing and quarantining affecting around 80 residential premises and workplaces. Employees of foreign legal firms and financial institutions have also been forced to undergo testing. This development breaks the supremacy of months of incident reporting of local cases, and highlights the vulnerabilities of exposure of the pathogen across indigenous and foreign lines indiscriminately.

Relatedly, the Chinese government has simplified visa applications for foreigners if they show proof that they had been inoculated with Chinese-made vaccines. There was no explanation given indicating the rationale behind favouring Chinese vaccines, but the implications are clear in that uptake in foreign vaccines are and will be subject to political coercion very likely driven by geopolitical and economic competitions.

Meanwhile, Hong Kong’s political environment is set to alter dramatically when the government implements reforms that will fundamentally change the electoral system. Recent announcements by Chief Executive Carrie Lam about these wholesale changes as well as delaying the September 2021 Legislative Council (LegCo) elections has had very limited overall impact in the operational context for foreign companies. However, it reinforces one of the most concerning trends: the erosion of a political and legal system that effectively will pose more risks to these businesses and respective domestic and expatriate workforce. Such changes are also very unpopular with Hong Kong’s well-educated and talented youths, who have indicated their intentions to leave the territory due to the changing political dynamics in a recent survey conducted by a local research group.

In terms of on-the-ground protests, incident volumes remained low with only three significant events. See details below.


GEOPOLITICS AND LOCAL IMPLICATIONS

On Wednesday (17 March), the US government imposed new financial sanctions on at least 24 Hong Kong and mainland Chinese officials in response to Washington’s concerns over what it views as their role in eroding political and social autonomy in the territory. The measures were announced by US Secretary of State Antony Blinken, who also noted ‘foreign financial institutions that knowingly conduct significant transactions with the individuals listed in today’s report are now subject to sanctions.’ Blinken’s announcement came one day before a meeting in Alaska between senior US and Chinese government officials and followed similar measures in October 2020 that imposed sanctions on Hong Kong’s Chief Executive Carrie Lam and other senior mainland officials for their role in eroding the territory’s autonomy.

The US move is a stark sign that it will continue to press for a return to the status quo ante in Hong Kong as reflected in the Sino-British Joint Declaration that guaranteed the territory a 50-year-period of high-level autonomy from Beijing which Washington, the UK and other liberal democracies consider have been breached by China’s decision in June 2020 to impose its national security law (NSL).

In another move certain to exacerbate tensions between the US, China and Hong Kong, the US Department of Transportation on 16 March said it was considering taking action against Cathay Pacific Airways, the territory’s premier long-haul carrier, in response to what it views as arduous quarantine restrictions placed on US aircrew by the territory’s government. These moves are certain to evoke a response from Hong Kong and Beijing that can be expected to impact foreign, but mainly US, commercial interests and individuals in the six-month outlook.


Cathay Pacific Airways plane in front of air traffic control tower at Hong Kong International Airport, 17 March 2021 / Reuters


PUBLIC HEALTH AND SAFETY: COVID-19

On Friday (12 March), China’s foreign ministry office in Hong Kong introduced measures simplifying mainland China visa applications for vaccinated foreigners and their family members, effective as of Monday (15 March). The move, which notably only applies to those that have been immunised with Chinese-made COVID-19 vaccines, reinstates pre-pandemic application requirements.

China’s foreign ministry did not specify why only those immunised with Chinese-made vaccines are eligible for simplified visa applications. However, the move is likely aimed at bolstering China’s embattled vaccine diplomacy efforts. Roll-out of vaccines by Chinese firms such as Sinovac Biotech, Sinopharm, and CanSino Biologics have been impeded due to reduced willingness to receive Chinese-made vaccines over efficacy and safety concerns. Such concerns come despite recent calls by China’s former head of the country’s food and drug regulator, Bi Jingquan, to release more data to ease concerns and build confidence. The foreign ministry’s move also underscores political risks to foreign vaccine-producing competitors such as Pfizer-BioNTech, which may be under increased scrutiny as a consequence. Foreign expatriates requiring regular travel to the mainland may be under increased pressure to receive Chinese-made vaccines, potentially against their wishes.

Authorities on 12 March issued a compulsory COVID-19 testing notice affecting 80 residential premises and workplaces, largely concentrated in the central business district, following an outbreak of 60 recorded infections. On Saturday (13 March), 35 of 47 new cases reported were related to an outbreak at the Ursus Fitness gym in the territory’s Sai Ying Pun district. The gym is frequently used among members of the expatriate community, including those working in the financial and legal services sectors. As a result, employees at law firms and banks in the affected district are required to undertake the virus tests. Some organisations cited as affected include Shearman & Sterling, Allen & Overy, Herbert Smith Freehills, HSBC, Credit Suisse, BNP Paribas, and BNY Mellon.

Prior to the renewed COVID-19 outbreaks recorded over the weekend of 13-14 March, cases in Hong Kong were in single to low double-digit figures. In the immediate term, the outbreaks and mandatory testing are likely to disrupt operations of foreign businesses with staff, assets, and operations in the affected areas. In the longer-term, the incident highlights the need for continued vigilance in abiding by COVID-19 health protocols and containment measures despite progress in the territory’s vaccination programme.  

Then on 15 March, it was reported that two US Consulate-General staffers tested positive for COVID-19 during an ambush lockdown in the Mid-Levels area of Hong Kong Island. The two cases have prompted concerns that diplomatic immunity of foreign diplomats may provide a loophole against compliance with local pandemic control rules. On 16 March, the US Consulate-General said that the accusation of invoking diplomatic immunity to avoid quarantine rules was a ‘disinformation campaign from Chinese controlled media’. The US mission insisted that it has acted in full compliance with local regulations. Chief Executive Lam confirmed that the two staffers were isolated in a local hospital. These two cases come amid a fifth wave of COVID-19 infections triggered by a super-spreading event at a gym frequented by expatriates in the Sai Ying Pun area of Western district, Hong Kong Island. In the immediate term, concerns around diplomatic immunity and links between the cluster and expatriates may foment tensions with locals. Such tensions could potentially translate into harassment targeting perceived to be members of this community.

Relatedly, almost six in 10 respondents to an American Chamber of Commerce survey of the American community, conducted 15-16 March, are concerned about the Hong Kong government’s moving of entire school classes into quarantine facilities to mitigate a fifth wave of COVID-19. Parents are particularly worried about the government sending toddlers from playgroups to official quarantine centres after being in close contact of any confirmed cases from the Ursus Fitness gym cluster. Many parts of Central and Western districts, including Sai Ying Pun and Mid-Levels, have been subject to so-called ‘ambush lockdowns’ as a result of the outbreak linked to Ursus Fitness. However, no additional cases were identified after over 700 people were tested over 15-16 March. The survey also revealed that 54 per cent of respondents would factor the severe quarantining measures into decisions over whether they would remain in Hong Kong or not.

An entire class of young children from a private school used by Hong Kong’s expatriate community were on Thursday (18 March) ordered to spend 14 days in a government quarantine centre. The children, aged between three and four years, who attend the Woodland Montessori Academy in Hong Kong island’s upmarket Mid-Levels district, will be accompanied by at least one parent. The case, and the earlier enforced quarantine of often senior expatriate executives in basic and highly constricted accommodation, has drawn widespread international media coverage. In comparison, the government has maintained a quarantine policy that has separated families and children, and this has started to generate a considerable amount of public anger.


Residents in Sai Ying Pun are screened for COVID-19, 17 March 2021 / Xiaomei Chen


LOCAL POLITICAL AND SECURITY DEVELOPMENTS

A survey released on Sunday (14 March) revealed that around 25 per cent of Hong Kong residents below the age of 34 with graduate or post-graduate qualifications intended to leave the territory within the coming five years. The online survey was conducted by the Youth IDEAS research group, which polled 1,135 of its affiliated Hong Kong Federation of Youth Groups 300,000 members. The survey indicated around 16 per cent of those who wanted to leave the territory for employment said they did not intend returning to Hong Kong, while 12.6 per cent said they would only consider returning after securing a foreign nationality. The favoured destinations were the UK, North America, Australia, New Zealand and Europe. A 2019 Labour and Welfare Bureau report, using data mainly gathered prior to political unrest in the territory, forecast a shortage of 34,600 skilled workers with university education by 2027.

Respondents to the survey cited their intention to leave Hong Kong was due to ‘work-life balance’ (41.5 per cent), ‘emigration’ (36.7 per cent) and ‘social and political stability’ (34.9 per cent). The poll should be viewed as a ‘snapshot’ in terms of measuring the sentiments of well-educated local residents, as further moves by Beijing to impose its laws and other control mechanisms on the territory can be expected to accelerate this trend while encouraging individuals to conceal their intentions. The implications of the departure of this cohort, or local or central government efforts to impose measures to deter or prevent such a large number of well-educated residents leaving the territory, will have a major impact on the operations of foreign companies reliant on this workforce almost certainly within the 12-month outlook.

On 15 March, Hong Kong’s high court granted bail to three more detainees from the 47 politicians and activists remanded in custody on charges of subversion in connection to the holding of an informal 2020 Legislative Council candidate election. To date, 11 have been released on bail. The case has attracted widespread attention by the international community, deepening concerns over the impact of the NSL on the local legal and political environments.

In other local political developments, District Court Judge Amanda Jane Woodcock said that a ruling in the prosecution for unauthorised assembly against Jimmy Lai, Martin Lee, and other well-known pro-democracy figures is anticipated on 1 April.    The court ruling is likely to be closely monitored by observers in the international community, with an unfavourable outcome likely garnering sharp criticism from foreign governments. On the ground, activists may engage in street-level protest activity in the vicinity of the court in solidarity with the prominent figures.

In legislative affairs, Chief Executive Lam admitted on 16 March that it would be ‘very difficult’ to hold Legislative Council (LegCo) elections as scheduled on 5 September. She told pro-Beijing newspapers Wen Wei Po, Ta Kung Pao, and the Hong Kong Commercial Daily that she will accelerate electoral reforms. She said that the government needs to implement more than 20 laws to overhaul the electoral system before holding three local elections within 12 months.

The postponement of LegCo elections and implementation of these reforms will garner more criticism and condemnation by local pro-democracy activists and foreign governments. The European Union (EU), for one, have threatened to impose some form of sanctions in response to any radical changes. Other foreign governments are likely to follow, placing a higher level of political risks against international companies in the territory.


THE WEEK AHEAD

A proposed ‘negative list’ in the oath-taking bill to ensure only ‘patriots’ govern Hong Kong is to be debated in the territory’s legislature the week commencing 22 March. The list, which defines unpatriotic acts, is too vague and could place judges under high pressure if their rulings and judgments are seen as challenging the government, according to legal scholars, lawyers, and diplomats. Further threats to Hong Kong’s judicial independence are being closely followed by the foreign business community, with significant implications for their respective interests. A number of foreign organisations conducting business in the Asia-Pacific region have considered excluding Hong Kong from legal contracts, including governing law and arbitration clauses, over such threats. Foreign organisations should monitor the passage of the oath-taking bill and the negative list in particular, assess its legal ramifications, and plan accordingly.

In public health and safety matters, there is mounting anger and condemnation of the government’s quarantine policy that separates families and children. Much of the frustration is already borne out of the effects from a drawn-out pandemic, but these quarantines have sharpened the criticism against the Lam government. Politically, they have been propagandised to highlight the strong arm of Beijing and its efforts to quell any public dissent, especially in light of the NSL. Now that a proportion of the expatriate community has been drawn into the orbit of shared quarantine experiences, international scrutiny on Hong Kong and Beijing will likely add to growing geopolitical tensions.

Complaints by often affluent nationals from Western nations may be dismissed both locally and overseas as an example of ‘exceptionalism’ given that lower profile Hong Kong residents have routinely been confined in quarantine ‘camps’. Nevertheless, this policy is certain to have an impact on how the territory is perceived by senior and skilled foreign executives and specialists. While many foreign nationals may have largely ignored the political dimension of Hong Kong’s rapidly changing status following China’s decision to directly intervene in the territory’s legal and administrative systems, the mass quarantining of very small children who have not to date been tested for COVID-19 has caused widespread concern.

The consequences of this policy are likely to affect foreign companies as the pandemic subsides, with many expatriate families reassessing whether they wish to remain in the territory and the anticipated reluctance of others to accept a posting or role in Hong Kong. Companies can be expected to consider how they may address these often emotional issues in order to ensure they are able to maintain corporate and operational standards.  

In keeping with prevailing trends, there have been no announcements or posts of public protests next week. However, the pattern of behaviour among activists is to announce events at least 24-48 hours in advance, or to spontaneously execute them with at least 1-2 hours advance notice on various encrypted social media messaging platforms.

 

UPCOMING PROTESTS 19-25 March

No protests have been announced.

 

PROTEST CHRONOLOGY 12-18 March

Monday 15 March

2100: Pro-democracy activists held a memorial event at Pacific Place shopping centre, Admiralty, Hong Kong Island, where they commemorated the death of Marco Leung Ling-kit, who died during anti-government unrest in 2019. There were no reports of any arrests or significant disruption to local area travel and business.

Wednesday 17 March

1315: An individual pro-democracy activist held a protest dubbed ‘Hong Kongers have Lunch and read Apple Daily with you’ at Edinburgh Place, Central district, Hong Kong Island. The lone activist chose the venue out of convenience, as he was due to undergo a mandatory COVID-19 PCR test at testing station in the vicinity. The test was almost certainly linked to measures aimed at containing a recent wave of outbreaks. There was no significant disruption to local area travel and businesses.

Thursday 18 March

1800: A lone individual held a demonstration at the Metro Plaza shopping mall, Kwai Fong, Kwai Chung Town, Kwai Tsing district, Hong Kong Island. Appearance the Metro Plaza fits within routine patterns of activities for pro-democracy activists. These venues provide ample opportunity to propagandise their issues to a wider audience. They may attract a significant amount of negative publicity for these venues but pose limited operational risk when protest participant numbers are low.