Brain drain burning a $60b hole in Hong Kong's pocketmoney-glitz | Karen Ng and Winnie Lee 23 Aug 2021
An emigration wave out of Hong Kong could cost the city more than HK$60 billion or 2.3 percent of its gross domestic product every year, warn experts.
And these losses could deepen with hundreds of thousands of young and highly talented people expected to emigrate over the next two years, further affecting the city's economy.
Population movements are related to economic growth, says Law Ka-chung, an adjunct professor of economics and finance at the City University of Hong Kong. If the population swings up or down by a mere 1 percent, it is estimated that GDP will also change by a corresponding 2.3 percent, he points out.
Hong Kong's population as of end-June was estimated at 7.39 million and a total of 89,200 or over 1 percent of Hong Kong residents left the city in the first half of 2021, according to the Census and Statistics Department.
Their departure is estimated to cost the city at least HK$61.4 billion in annual GDP, based on 2020's GDP of HK$2.671 trillion.
And Hong Kong Police figures show there were 22,897 applications for certificates of no criminal conviction -- a document required for emigration -- for the seven months of this year, 78 percent of the total applications in 2020.
Departing residents pulled out a record HK$6.567 billion from the city's pension fund for workers for the 12 months ended March, up 27 percent year on year, according to the Mandatory Provident Fund Authority.
And the emigration wave has not yet peaked, the experts say.
Paul Yip Siu-fai, a professor of social work and social administration at the University of Hong Kong, expects that exodus to peak between the second half of this year and next year.
HKU head of sociology Eric Fong Wai-ching expects the exodus to continue over the next two years, and possibly get worse as he estimates 370,000 residents will emigrate over the next 12 months.
The recent wave - which grew after the adoption of the national security law last year and a crackdown on democracy protesters - has drawn comparisons to the exodus of the eighties and early nineties, when hundreds of thousands of middle-class Hongkongers packed their bags and left in the run-up to Hong Kong's handover to China in 1997. At least 700,900 residents or 12 percent of the city's population emigrated between 1981 and 2000 with the wave peaking in 1992 when 66,200 people leaving the city's shores, according to the local think-tank Youth IDEAS.
Although Fong believes there was a bigger exodus in the run-up to 1997 than now - as many countries have raised the bar to weed out the less affluent and unskilled - the recent wave has wider ramifications as brainy young graduates are leaving and are much less likely to return in the future, unlike many of the 1980s emigrants who made their way back to their hometown.
To add to these woes, Hong Kong is grappling with the problem of an aging populace.
The Census and Statistics Department projects that the number of residents aged 65 or above will nearly double to 2.52 million by 2039, accounting for a third of the city's population, and will stay at the level for at least 30 years.
Yip worries that the aging problem will worsen as most emigrants are leaving with their kids in tow and he fears that mainlanders may not be able to plug the gap in the market as most of the emigrants are senior professionals.
Law says the population outflow may hit Hong Kong hard as its economy is highly reliant on the services industry, which is labor intensive.
Terence Chong Tai-leung, an associate professor of economics at the Chinese University of Hong Kong, admits the labor market is squeezed but he believes mainlanders can take up the slack, as there are more than nine million students graduating every year in China.
The property market, though, appears to be unperturbed, at least for now. During the eighties, emigrants sold their homes but lived to regret it as prices skyrocketed over the next couple of decades, despite a few market corrections. But this time round, not all emigrants are selling and prices are currently hovering at record highs.
Property prices rose 3.8 percent in the first half of the year, according to the Rating and Valuation Department, though lagging behind markets in UK, US, Australia and Canada.
Ken Yeung Hoi-chuen, head of China and Hong Kong property research at Citi, says prices will fall 4 percent in the second half as the market starts to see an increase in real estate listings by departing residents.
However, analysts and real estate agents say there's solid demand from residents and new Hongkongers - mainlanders who migrated to Hong Kong and are now settled in the city.
In the first quarter, New Hongkongers snapped up 27 percent of all new homes that went on sale at Kai Tak, 17.9 percent at Lohas Park and nearly 10 percent at Tuen Mun, says Midland Realty.
Agents say prices will not slump even if more homes go up for sale, and they expect new records to be set once the border with the mainland - which has been shut amid travel curbs over the Covid pandemic since last year - reopens.
FEELING THE PINCH
Meanwhile, the city's medical, education and financial sectors are all feeling the pinch of the exodus. Hospital Authority chairman Henry Fan Hung-ling attributes the high turnover rate among nurses and doctors to the emigration wave and describes the situation as "worrying."
The Hong Kong Association of the Heads of Secondary Schools says schools are facing a serious brain drain of teachers, especially at the mid-level.
Primary schools suffered a net loss of students for the first time in three years, and it is estimated that 15,400 students had left primary and secondary schools by October, the Education Bureau's statistics for 2020/21 show.
The HKAHSS says the impact of the exodus on the city is hard to estimate.
Nearly 40 private kindergartens shut down in the past two years, mainly due to the pandemic and people leaving, says Randy Chiu Ki-kwan, professor emeritus of the department of management at Hong Kong Baptist University.
Financial Services Development Council executive director Au King-lun admits emigration is a concern for the financial industry in the short term.
But after analyzing the MPF data, Chong estimates that only around 10,000 Hongkongers have flown the coop, and their departure will barely affect the economy.
Meanwhile, the MPFA has sought to calm the waters by saying that the record payout is not linked to the emigration wave as the number of claims on the grounds of permanent departure actually fell 2.7 percent in 2020/21 while total MPF assets rose by 35 percent year on year.
Though the HK$6.567 billion is only 0.56 percent of the total MPF assets, numbers don't often tell the whole story. For instance, BNO passport holders who jumped on a plane to the UK in the past few months may have left without taking their pension savings as their passports are not recognized as legal travel documents and as such can't be used to withdraw funds.
But by all accounts, it appears that Hong Kong is in the midst of a brain drain that will have economic consequences, and the private and public sectors will have to work hard to stem the tide over the next couple of years.