Hong Kong previously maintained one of the strictest quarantine regimes in the world. Photo: AFP via Getty Images / Bertha Wang

China is boosting efforts to persuade foreign companies to stay put in Hong Kong and the mainland as foreign direct investment (FDI) growth rates fell in April and May amid some of the world’s strictest Covid-19 rules and regulations.

Media reports said Beijing’s Liaison Office met representatives of various chambers of commerce in a closed-door meeting in Hong Kong in early June to seek their views on how to revive the financial hub’s local business environment and what they need to do more business in the mainland.

Hong Kong officials said the government was actively considering cutting the quarantine period for international travelers from seven to five days. Those restrictions are increasingly out of step with Europe, where foreign travelers can enter without a quarantine period or in many countries even proof of vaccination.

Wu Hongbo, a special representative of the Chinese government, paid a low-profile trip to seven European countries between late May and early June to promote China’s relaxation of quarantine rules and improve China-Europe relations.

These moves came after the year-on-year growth rate of China’s FDI slowed to about 6% in both April and May from 31.7% in the first quarter of this year due to virus outbreaks and large-scale lockdowns in key Chinese cities including trade hub Shanghai.

In the first quarter of this year, more than one million people in Hong Kong were infected by the highly infectious Omicron variant, causing an estimated 9,000 deaths.

In mid-February, Beijing ordered the Hong Kong government to launch a citywide Covid testing scheme, which would have led to a seven to 10-day lockdown, but the government failed to implement it as foreign companies threatened to leave.

Many shops in Causeway Bay are closed down due to Hong Kong’s strict anti-epidemic rules in early 2022. Photo: Jeff Pao

In early April, Hong Kong lifted its flight ban on nine countries including the United States and the United Kingdom, halved the quarantine period for incoming travelers from 14 to seven days and started easing its social-distancing rules in three phases.

Currently, the city still requires international travelers to be isolated for seven days at designated hotels upon arrival.

Between late March and mid-May, many key Chinese cities including Shanghai, Beijing and Guangzhou were locked down due to virus outbreaks. At the time, US and European chambers of commerce raised concerns about China’s “zero-Covid” policy and said many foreign firms would move out if the lockdowns continued.

According to the Ministry of Commerce, the year-on-year growth rate of China’s FDI was 12.9% in March and 6% in both April and May, compared with a 45.2% increase in the first two months of this year.

The commerce ministry said it was a great achievement that China’s FDI could maintain a 22.6% year-on-year growth in the first five months of this year amid virus outbreaks. Last year, China’s FDI rose 20.2% year on year to US$173.48 billion.

In early June, Wang Danfeng, an economic official at Beijing’s Liaison Office in Hong Kong, reportedly held a 90-minute meeting with a group of representatives of foreign chambers of commerce.

In the meeting, Chinese officials were interested in understanding the problems that foreign companies faced in Hong Kong, media reports said last Friday. However, they did not respond to the foreign chambers’ calls for a complete cancellation of the quarantine rules.

The direct communication between the Liaison Office with foreign investors in Hong Kong was unprecedented as previously it was the Hong Kong government’s responsibility to deal with business issues.

The change took place on May 30 after Beijing officially approved former Chief Secretary John Lee to become Hong Kong’s next Chief Executive.

Hong Kong’s then-Secretary for Security John Lee Ka-chiu during a press conference inside the Central Government Offices in Hong Kong on May 17, 2021. Photo: AFP / Vernon Yuen / NurPhoto

Lee and his cabinet will take office this Friday, which marks the 25th anniversary of the establishment of the Hong Kong Special Administrative Region. 

Lo Chung-mau, the incoming Secretary for Health, said on June 23 that the new Hong Kong government might shorten the quarantine period for travelers from seven to five days, or even less, as only 1% of newly-arrived travelers carried the coronavirus.

Meanwhile, Frederick Kempe, chief executive of the Atlantic Council, a Washington-based foreign policy think tank, wrote an article published by CNBC on June 19 about Beijing’s attempts at damage control for its strict Covid policies.

In a recent trip to seven European countries including Belgium, Cyprus, the Czech Republic, France, Hungary, Germany, and Italy, Chinese diplomat Wu Hongbo told European business leaders that China had made mistakes regarding its Covid policies to “wolf warrior” diplomacy, according to the article.

Citing one of the European business leaders, Kempe said Beijing wanted to change the tone of the story and control the damage of its previous Covid, diplomatic and economic policies.

He said China was also growingly concerned about “losing Europe” after its ally Russia launched its invasion of Ukraine on February 24.

Read: Beijing signals support to internet giants as curbs ease

Follow Jeff Pao on Twitter at @jeffpao3