European business interest groups expect Hong Kong’s zero-tolerance approach to Covid-19 will last until 2024, worrying it may make Hong Kong “less diverse” and “less appealing” to international business.
As one of Asia’s most important wine hubs, Hong Kong’s wine market will likely suffer from the city’s stringent social distancing measures and border closures.
The European Chamber of Commerce in Hong Kong (EuroCham) has published a draft report listing the scenarios for Hong Kong’s pandemic measures, as reported by Bloomberg.
Established in 1997, EuroCham is a non-governmental group representing 13 European Chambers based in Hong Kong and 1 in Macau. The group provides a platform for its members to discuss common challenges and promotes economic interactions between Europe and the Greater Bay Area.
According to the report, the most likely scenario for Hong Kong to abandon its strict zero-tolerance approach is to wait until China rolls out its mRNA vaccine to its 1.4 billion population. In this case, a reopening can only happen in late 2023 or early 2024.
It warned the prolonged lockdown measures may result in an unprecedentedly large exodus of foreign talents, which would make Hong Kong “less diverse and less appealing to international firms”, and limit its potential to contribute to China’s economy.
“We anticipate an exodus of foreigners, probably the largest that Hong Kong has ever seen, and one of the largest in absolute terms from any city in the region”, the report said.
The report also suggested other scenarios including possible unpredictable outbreak in mainland China or Hong Kong.
If China was faced with an uncontrolled outbreak, Hong Kong may wait for China to gain control of the pandemic situation, or abandon the zero tolerance approach on its own and reopen its borders, the report said. For this scenario, the timeline for Hong Kong reopening would be in 2023 or 2024.
If Hong Kong experiences another outbreak, the government may intensify its already-severe restrictions, resulting in widespread lockdowns, tighter border closures and even food shortages.
The least likely scenario suggests Hong Kong and China would both stick to their Covid zero policies and distance themselves from the international community in the long run. China would focus on its internal development plans, making Hong Kong a “collateral casualty” stuck between its reliance on the mainland and its role as an international city, the report said.
The chamber recommended the government to accelerate vaccinations and shorten quarantine from 21 days to 7 to 14 days. Hong Kong’s Health Chief later revealed that the government is considering a shorter quarantine period and home quarantine.
A gloomy prospect for Hong Kong wine market
Unlike the mainland, Hong Kong’s wine market depends on mainland China’s travellers and re-exports. Continual Covid isolation may shake Hong Kong’s position as Asia’s fine wine trading hub and cork international wine fairs.
According to the Census and Statistics Department, Mainland China and Macau are currently the major wine exporting destinations for Hong Kong, accounting for nearly 70% of re-exports in 2020.
But the prolonged border restrictions may affect cross-border fine wine trades. In 2019, total wine re-exports dropped by almost 56% compared to previous year due to heightened China‑US trade dispute. The figure further declined by around 40% in 2020 amid the outbreak of pandemic, data from Hong Kong Trade Development Council shows.
Until now, the latest re-export value from January to November 2021 has not yet reached the 2018 level.
Border closure also lowers in-bound tourists’ incentives to visit Hong Kong. For the period from January to November 2021, visitor arrival counts from mainland China have recorded a devastating drop of 97.8% compared to the same period in 2020, according to Hong Kong Tourism Board’s data.
Domestically, unpredictable patterns of social distancing measures means on-trade wine sales in Hong Kong may not return to pre-pandemic level in the near future due to fewer wine consumption from local consumers.
Restaurants face HKD 8 billion loss
The 6pm dine-in ban, four-person limit on public gatherings and cancellations on public festive events will also reduce on-trade wine consumption in restaurants, bars and clubs. The latest ban that came in effect on Jan 7 will cause HKD 8 billion loss for restaurants and bars for missing out Lunar New Year business. The ban will stay in place until at least February 17, as the city’s chief executive Carrie Lam announced this week.
Last November, a government spokesman pointed out that the pace of improvement in business would remain restrained by the “virtually frozen” inbound tourism, after releasing restaurant receipts and purchases statistics for the third quarter of 2021.
Apart from wine trades, promotional business events have faced delays or cancellations, disrupted the chances for industrial players to promote their products and explore further business opportunities.
For instance, Vinexposium has announced the cancellation of Vinexpo Hong Kong this year to focus on its Shenzhen fair, worrying that the travel interruptions in Hong Kong will affect overseas visitors and exhibitors. Its previous edition in 2018 reportedly drew over 1,400 exhibitors from 30 different countries.
In 2020, the city’s own annual wine trade event Hong Kong International Wine and Spirits Fair was also postponed several times until November 2021 due to travel restrictions. Compared to its 2019 edition attracting 1,075 exhibitors alone, the 2021 edition was held in a smaller scale featuring 900 exhibitors with other four fairs collectively.
I can see here that restaurants face a HKD 8 billion loss. What about the importers that supply these restaurants? Nobody mentions that, but your are talking about 3,000 importers, managing everything coming and being sold to the local market. Restaurants close and get subsidies for their staff. I have yet to hear of a subsidy to the importers.