Hong Kong is back in business.
Hong Kong authorities on Friday announced that they will drop hotel quarantine for arrivals to the city on Monday, Sept. 26. The change ends two and a half years of near complete isolation from the rest of the world and paves the way for Hong Kong to host a November banking summit whose invitees had balked at any quarantine requirements.
"We need to maximize our connectivity to the rest of the world... [So] I want to reduce inconvenience as much as possible for people [coming to Hong Kong,]" John Lee, Hong Kong's chief executive said at a press conference on Friday. "I'm optimistic that the new measures will be well-received by people coming to Hong Kong.
Hong Kong’s re-opening has lagged months—if not years—behind virtually every other economy on earth outside of mainland China and Taiwan. Hong Kong’s re-opening is also not complete. After entering the city, local residents and foreign visitors will need to take four government-administered COVID-19 PCR tests in the first week after arriving and need to self-isolate if they test positive. Each person arriving in Hong Kong will also be given a QR code via a COVID health tracker app. For the first three days, the code will be amber in color and will bar travelers from eating at restaurants. After three days, the QR code will change to blue and travelers can freely move in the city.
Hong Kong has maintained some of the world’s strictest COVID border requirements. Earlier this year, the city mandated 21-day hotel stays and sent any positive cases along with their close contacts to centralized quarantine centers for 14-day quarantine stays. The city has gradually relaxed mandated quarantine periods from 21 to 14 to seven and then three days in recent months, but a dizzying bureaucratic maze of PCR tests, hotel bookings, circuit-breaker flight bans, and potential confinement in the case of a positive test has closed the city off to only residents and a small cohort of determined visitors.
In the first eight months of this year, Hong Kong's airport handled 1.7 million passengers, down 97% from the 50.6 million it saw in the same period of 2019. Hong Kong's isolation has devastated the city's economy. Hong Kong's government recently said that it expects the economy to contract for the third year in a row due to its COVID measures, and the city is on track to report a record $100 billion budget deficit this year.
The scrapped quarantine represents a victory for Hong Kong's business community that has long advocated for the city to join most of the rest of the world in re-opening, but business groups argue the new rules still don't go far enough. In their view, Hong Kong must drop all restrictions to regain its former glory as Asia's World City.
What was Hong Kong's quarantine policy?
Hong Kong may have been one of the best places in the world to experience the pandemic in 2020 and early 2021, with residents able to live mostly free of COVID even as waves of infections and lockdowns ravaged the U.S., Europe, and much of the rest of the world.
Hong Kong’s initial COVID success was largely thanks to strict travel measures and the city's ability to track down cases when they arose. But once vaccines helped much of the rest of the world re-open in the middle of last year, Hong Kong's business community began to grow frustrated that the city remained shut. Companies and executives began to decamp for places like Singapore, but still the pleas from Hong Kong's business community fell on deaf ears within the government, which prioritized re-opening travel with mainland China over the rest of the world.
"We’re at the point where it just feels like we’re talking to a wall," Tara Joseph, former president of the American Chamber of Commerce in Hong Kong, said last October.
Hong Kong's COVID wave
In early 2022, an Omicron outbreak overwhelmed the city’s defenses. Combined with the city's relatively low vaccination rate, the variant caused one of the most deadly COVID waves anywhere in the world. The outbreak was a turning point for public health officials who shifted their support away from closed borders, says Ben Cowling, epidemiologist at Hong Kong University and one of the city’s leading experts on the pandemic.
“[Omicron] was just spreading too fast and too quickly and too aggressively to be able to stop it... The travel measures were not helping anymore” he says.
Hong Kong's COVID cases and death rate have dropped since a spring peak. The city has re-opened bars, restaurants, and most venues in the city despite officially adhering to a COVID-zero policy that tolerates no infections.
The government, though, still insisted on mandating some period of hotel quarantine to the mounting frustrations of the city's business community.
“COVID measures are by far the most important thing, if not the only thing [our members care about],” says Frederik Gollub, chairman of Hong Kong’s European Chamber of Commerce.
Hong Kong banking summit
But Hong Kong's stance appeared to shift in recent weeks due to the approach of an important financial meeting.
In early November, Hong Kong is set to host a two-day international banking summit that is expected to feature some of the world's most powerful financial executives. Morgan Stanley CEO James Gorman and Citigroup CEO Jane Fraser were invited; Standard Chartered CEO Bill Winters and HSBC CEO Noel Quinn had confirmed they would attend. The summit will coincide with the popular Hong Kong Sevens international rugby tournament. But bankers told Hong Kong's government in early September that they would be reluctant to travel to the summit if hotel quarantine was required, according to the Wall Street Journal. Hong Kong's government offered to issue exemptions to select executives, but invitees reportedly declined due to concerns that they might be criticized in public for receiving special treatment.
The Hong Kong government's deliberations over the banking summit may have been a breaking point for the hotel quarantine policy, says Vera Yuen, an economics professor at Hong Kong University's Business School. "With the banker summit they want to signal to the world that Hong Kong is coming back," she says. "They want to provide confidence to investors that we are not going backwards anymore.”
Calls to end burdensome COVID requirements also rang out from unexpected places. In August, the Chinese Manufacturers Association and The Hong Kong General Chamber of Commerce, two groups closely aligned with the government, joined the chorus of foreign chambers advocating for the relaxation of COVID measures.
"We have been seeing more and more local associations and important voices in the community reaching out to John Lee [over the COVID restrictions]," says Gollub.
Gollub says Hong Kong's government has been more receptive to the business community's pleas since Lee took over for former chief executive Carrie Lam in early July. "He realized early on [in his tenure] that the government has to act."
COVID restrictions hit economy
Lee said on Friday that Hong Kong is able to re-open because he is now "confident" that the city can handle a potential uptick in cases. He also assured the public that Hong Kong's government will not backtrack on relaxing quarantine periods, as it has done in the past.
Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, says it's not necessarily a single event or even the chorus of community and business voices that motivated Hong Kong's government to finally drop the quarantine requirements. In her view, the reason is simple: The economic costs of the rules became too great. In the first half of this year, firms raised $2.7 billion in Hong Kong IPOs, down 92.5% from one year ago and the bourse's worst first half year performance since 2003.
"[Opening the border] is not about cases, pandemic control, or vaccination rates. It's about the need for Hong Kong's offshore market at a time where Chinese companies will surely need to issue bonds and debt," says Garcia-Herrero. "Liquidity is shrinking in the banking sector and Hong Kong needs inflows. Of course, a very easy way to do that is to open the border."
Hong Kong loses ground to Singapore
It's also become clear that Hong Kong's loss has been Singapore's gain. "Private banking is preferring to book in Singapore because Singapore is open," Garcia-Herrero says. On Friday, Singapore overtook Hong Kong on a ranking of global financial centers based on a new survey of thousands of financial professionals from around the world. "Any bank in the world, their senior managers elsewhere have not visited Hong Kong in nearly three years, you know, it makes a difference," she says.
No matter Hong Kong's motivation for dropping the hotel quarantine, Hong Kong's business community isn't satisfied. It's unclear how many travelers will want to visit a city where they must undergo near-constant testing and be at the mercy of an amber health code that bars them from restaurants.
“I don’t think the amber code has any public health rationale," Cowling says. "It certainly will not have a public health impact. It is past time that Hong Kong relaxes all of the travel-related measures.”
“This is a step in the right direction...[but for] Hong Kong to truly regain competitiveness vis-a-vis other cities around the world, the announcement is far from enough; Hong Kong should be totally connected to the world without hinderance,” says Dr. Eden Woon, president of the American Chamber of Commerce in Hong Kong.
Gollub is pleased with Friday's announced but is holding off on a victory lap. "In order for Hong Kong to fully rebound and recover, we need zero restrictions. We need to go back to normal."
This story was originally featured on Fortune.com