Hong Kong and China are losing their attractiveness as places for expatriates to work, and are at risk of a brain drain sapping away their most-talented homegrown personnel, with the local economies looking shaky and a zero-Covid strategy still in place.
Meanwhile, Taiwan and Indonesia, which plans to offer visas to "digital nomads," are rising in popularity.
Taiwan ranks third globally among the "Best Places for Expats" in a new ranking by the expatriate-network support site InterNations. The island scores particularly well in "Health and Wellbeing" component, where it is tops in the world, and in "Quality of life," where it ranks behind only Spain.
Those factors push Taiwan to third overall, behind Mexico and Indonesia. Indonesia is readying new rules to attract "digital nomads." The archipelago nation intends to offer a tax-free five-year visa for people who generate their income outside Indonesia but want to use somewhere like Bali as a base. The visas are in the final stages of preparation and should soon open for applications, Sandiaga Uno, the Indonesian minister for tourism and creative economy, said at the end of June.
Hong Kong, on the other hand, ranks third-worst in the InterNations survey. High costs push the city near to the bottom, outdone only by Kuwait and New Zealand.
The evisceration of civil liberties in Hong Kong weighs on the minds of job candidates in the city, while the two-month hard lockdown in Shanghai revealed how fully the Chinese Communist Party can control people's lives. On top of that, the imposition of long quarantine periods - still set at seven nights in an expensive hotel from anyone returning to Hong Kong - and the random nature of zero-Covid lockdowns make both Hong Kong and mainland China unattractive.
Taiwan benefitted from a decent score in the "Travel and Transit" category of the InterNations survey. Although Taiwan is still restricting entry for most foreign nationals, it has recently waived the need to get a PCR test for citizens and permanent residents. People can serve a three-day quarantine at home.
Taiwan's Ministry of Foreign Affairs implicitly contrasted the freedoms in its democratic system with the dictatorship in China and autocratic rule in Hong Kong.
"Quality of life reflects individuals' happiness with the society & value systems in which they live," the ministry said in a tweet. "No. 2 worldwide for QL is a splendid showing & among many highlights for the country."
Such issues aren't factored into a stock index overnight. But they will ultimately be reflected by share prices in the various jurisdictions. Woes in China's stop-start emergence from Covid as well as political interference in a wide variety of industries have driven the CSI 300 index of the largest mainland companies down 15.8% in the last year. Even worse, Hong Kong's Hang Seng Index is off 25.6% in the last 12 months.
A concentration in chipmaking has helped support the Taiex index in Taiwan. But such tech stocks have suffered this summer, with the Taiex down 17.8% in the last 12 months, thanks mainly to a 10.8% drop since June 10. It looks like a correction in the share price of Asian chipmakers may now be over, as I explained last week.
The Jakarta Composite Index in Indonesia is one of Asia's current star performers. It's up 9.7% in the last 12 months, in contrast to the woes in developed markets.
The recruitment company Ambition says there has been a 40% drop in candidates for entry-level positions at investment banks and law firms in Hong Kong.
For mainland China, the zero-Covid strategy has "profoundly affected the country's economy," Huiyao Wang, the founder of the Center for China and Globalization, said over the weekend in a column for the Financial Times. "In particular, the impact on China's stock of global talent has been severe."
Cross-border trips to China by foreigners all but stopped. The number of trips in and out of China by non-Chinese nationals plummeted 95.4% last year, compared with pre-Covid 2019. Cross-border travel in and out of China by mainland Chinese citizens was also down significantly, by 79%, with my contacts telling me it is virtually impossible to renew a passport.
Those are the raw numbers. What it means in practical terms is that China-based foreign staff have been unable to meet friends and relatives overseas, to attend weddings, funerals, work and family gatherings, for the better part of three years.
Likewise, Chinese nationals working inside China are unable to travel internationally to train and network with colleagues. The personal connections they might make by working for a multinational just aren't happening.
Not surprisingly, this has led to an exodus of expatriates. Half of China-based expatriates may have left China since the pandemic began, according to the European Chamber of Commerce in China. A survey by the American Chamber of Commerce in China in May showed that 74% of respondents say the zero-Covid stance is hampering efforts to recruit and retain skilled foreign employees. Some 33% of respondents said senior management or essential staff had declined jobs in China due to the Covid response.
No industry is spared. The British Chambers of Commerce in China estimate that 40% to 60% of foreign schoolteachers will leave China this year. That means international schools will be sorely understaffed, exacerbating new rules on the education sector in China barring after-school for-profit tuition and banning international schools from any naming convention showing a link to an overseas school. For instance, Harrow Beijing, an affiliate of the prestigious Harrow School near London that dates to 1572, is now calling itself Lide School as a result. International schools in China can't even call themselves that - they are also barred from using the word "international" or any overseas country or place in their name.
Pre-pandemic, around half a million foreign students were studying in China at any given time. The majority (more than 60%) said they intended to stay on in China to work. Those ranks are now decimated. The number of foreign enrollees at Hong Kong universities is also falling, for the first time in a decade. The number of Chinese students going abroad plunged during the pandemic but is now recovering, with a strong flow to study in the United States, United Kingdom, Singapore, Japan and Hong Kong.
There may be some benefit to Chinese employees for multinationals, who will fill the roles in China once taken by expatriates. Some 60% of members of the European Chamber of Commerce in China say they plan to "localize" jobs once filled by foreign staff. Wang notes in the FT that Apple (AAPL) in pre-pandemic times booked 50 business-class seats every day to fly staff between Shanghai and San Francisco. It is now relying on locally based engineers.
One of the issues facing China is that the National Immigration Administration has been obsessed with controlling Covid-19 during the outbreak, rather than enabling travel. It will take a mindset shift for it to change gears back to stimulating outgoing and inbound travel once again.
In Hong Kong, the stock watchdog, the Securities and Futures Commission, has warned that Hong Kong's status as a global financial hub from which to serve Asia is at risk. The city has lost 25% of its junior professional staff, the regulator said.
That's reflected in the experience of recruitment agency Morgan McKinley. The company tells Bloomberg that it has seen a 60% dropoff in interest for all levels of job in Hong Kong, from entry-level posts to experienced hires, for the six-month period through June.
Rob Sheffield, Morgan McKinley's managing director for greater China, told the news agency that job candidates say they are leaving Hong Kong or looking to leave. Talented Hong Kongers are often using study overseas as a springboard to seek jobs outside the city.