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Hong Kong’s continued decision to hold the line with its strict «dynamic zero-Covid» strategy is once again putting the city’s hub status to the test. Could this be the final straw?

Hong Kong chief executive Carrie Lam is insisting on maintaining the so-called «dynamic-Zero Covid» strategy, in stark contrast with many other countries elsewhere that are opting to live with the virus.

The decision is backed by Chinese President Xi Jinping who earlier this week expressed his «concern about the pandemic situation» and said to «use all necessary measures» to control the outbreak. Interestingly, Xi's comments were only published in Hong Kong-based pro-Beijing newspapers and not media outlets in the mainland.

While it remains to be seen if the approach is effective, the business community is already making plans to avoid related disruptions.

Major Relocation

Numerous financial firms have been making arrangements to relocate key executives to cope with the situation.

Citi, for example, will reportedly move a handful of senior equities staff from Hong Kong to Singapore while Bank of America started a «contingency planning» process last month to identify Hong Kong workers who can relocate to the city-state.

Fellow American lender Wells Fargo reportedly began planning to move its Asian hub from Hong Kong to Singapore in April last year. 

And relocation plans are not limited to financial institutions or Singapore with luxury companies like French spirits maker Pernod Ricard and hotel group Mandarin Oriental also making similar plans to temporarily move executives to other hubs such as Dubai. 

Mass Turnover

Still, the pain is already being felt with staff turnover rapidly increasing in Hong Kong’s financial sector.

J.P. Morgan, for example, has reportedly lost around 20 Hong Kong-based executives at the managing director level. 

Even the Securities and Futures Commission has lamented about the difficulties of higher turnover – the market regulator has lost 12 percent of its staff which has forced those remaining to work 12-hour days – adding that the lack number and mix of staff could affect its ability to «deliver on the various initiatives underpinning Hong Kong’s development as an international financial center».

Brain Drain

And the risk to Hong Kong’s hub status extends beyond short-term disruptions and turnover.