Hong Kong's popularity as the regional hub of choice for foreign firms is waning, according to government data, especially to businesses from the U.S. which saw their count drop to the lowest in nearly two decades.

The number of U.S. firms with a regional hub in Hong Kong fell to 254 as of June 1, according to new data from the city's Census and Statistics Department, compared to 282 last year.

This also marks an 18-year low since 2003 when there were 242 U.S. firms with a regional hub in Hong Kong. 

The total number of firms based in a country or territory outside of Hong Kong (including mainland China) with a hub in the city fell to 1,457 compared to 1,504 last year and a record-high 1,541 in 2019. 

International Exit

Although U.S. firms accounted for the largest portion of departures from Hong Kong as a regional hub, numerous other countries also saw lower numbers. 

Most notable was Japan which totaled 210 firms (-16) – the lowest since 2005. 

Cuts also came from France (-5), Taiwan (-4), Germany (-7), Italy (-1), Singapore (-1), Australia (-1), Netherlands (-1) and Sweden (-1).

Increased Exposure

It was not all bad news for Hong Kong’s hub status with mainland China posting a record-high 252 firms compared to 238 last year.

Firms from the U.K. (+7), Switzerland (+2) and Korea (+2) also added regional headquarters in Hong Kong while Canada stayed flat.

Multiple Headwinds

Various policy decisions in Hong Kong in recent months and years have led to growing wariness abroad from the business community.  

U.S. President Joe Biden issued a business advisory in July warning American companies of a «new legal landscape» under the security law that could «advisedly affect their operations» in Hong Kong. In September, more than 40 percent of members surveyed by the American Chamber of Commerce in Hong Kong said they might leave the city, citing the security law as their top concern. 

The city’s coronavirus containment policies have also affected sentiments with the European Chamber of Commerce voicing its members’ frustration over doing business in the highly restrictive city in an open letter in August and financial industry group ASIFMA recently urging the government to loosen rules and provide a timeline for reopening.

Several days later, chief executive Carrie Lam announced even tighter rules, including the removal of most exemptions for its strict 21-day quarantine, as part of the administration’s «zero-Covid» policy.