Economist Stephen Roach Reiterates ‘Hong Kong Is Over’

A view of the empty Murray House at Stanley Village, Hong Kong, on June 6, 2024. Bill Cox/The Epoch Times

Stephen Roach, the former chairman of Morgan Stanley Asia, reiterated his “Hong Kong is over“ stance during a Foreign Correspondents’ Club lunch in Hong Kong on June 5.

Mr. Roach cited three main reasons: the fundamental weakening of Hong Kong’s basic economic foundation, the unresolved U.S.–China conflict, and the reduced political autonomy of Hong Kong since 2019. He believes that Hong Kong’s economy is tightly linked to mainland China’s and that without a rebound in the Chinese economy, Hong Kong cannot recover on its own.

Mr. Roach, a former “good friend“ of Beijing, reminisced about how he was captivated by Hong Kong after landing at the old Kai Tak Airport in the 1980s and believed that Hong Kong’s prosperity would last longer than anyone expected.

But now it’s all over, he concluded.

The Hong Kong of yesterday is not the Hong Kong of today, and certainly not the Hong Kong of tomorrow, he said.

Hong Kong’s retail and tourism slump continues. Despite the Hong Kong authorities’ efforts to attract tourists with events like Night Vibes, monthly fireworks, and drone shows, a nearly 15 percent drop in retail sales was reported for April. The iconic Hong Kong tourist spot Murray House has become a “ghost site” after tenants left and businesses closed.

Murray House, located in Stanley, was built in 1844 as a British military barracks and developed into a tourist attraction over a century. In 2005, real estate investor Link REIT (formerly The Link) acquired Murray House along with the adjacent Stanley Plaza.

Before the pandemic, Stanley was a popular spot for Western tourists and the middle class. However, major tenant H&M closed in April, followed by the closure of two restaurants, leaving Murray House vacant. Stanley Plaza, including Murray House, generated an income of HKD 68.8 million ($8.81 million) for the 2022–23 fiscal year. Yet the current lack of tenants indicates a complete loss of rental income for the House.

Link REIT, the owner of the Plaza, announced in February 2022 that it had received an unsolicited purchase offer for the properties and decided to put them up for tender. Market sources indicate that Link REIT received five bids, with the highest at HKD 2.5 billion ($0.32 billion), but the sale fell through due to indefinite delays in reopening the border with mainland China. According to the company’s annual report, as of March 2023, Stanley Plaza was valued at HKD 1.518 billion ($0.19 billion), a 39.3 percent drop from the reported acquisition offer.

A view of the empty Murray House at Stanley Village, Hong Kong, on June 6, 2024. Bill Cox/The Epoch Times

The Hong Kong Tourism Board’s “2024-25 Work Plan“ submitted to the Legislative Council predicts that per capita spending by overnight tourists in 2024 will be HKD 5,800 ($742.59), down 15.95 percent from 2023. For non-overnight visitors, who made up half of all tourists in 2023, per capita spending is expected to be HKD 1,300 ($166.44), a 35 percent drop from 2019.

Tourism Slump Continues

In May, Clement Kwok, CEO of The Hongkong and Shanghai Hotels, Limited, stated that the business outlook for the Peninsula Hong Kong Hotel remains uncertain. The deterioration of Sino-American relations has led to a shortage of long-haul tourists from Europe and America, who still have a poor impression of Hong Kong.

The company owns the Peninsula Hotel in Tsim Sha Tsui, The Peak Tower, and The Peak Tram. The Peak Tower, similar to Murray House, saw a 57.9 percent increase in revenue to HKD 221 million ($28.3 million) in the 2023 fiscal year, compared to HKD 140 million ($17.92 million) before the 2019–22 renovation and the pandemic.

However, strong passenger numbers did not translate to higher rental income for The Peak Tower, which earned HKD 137 million ($17.54 million) in 2023, a decrease of 34 and 11 percent compared to 2018 and 2019, respectively. This indicates that tourists mainly check in without spending much. Even the Peninsula Hotel saw a 23.2 percent decline in revenue to HKD 1.039 billion ($13.3 million) in 2023 compared to 2019.

According to the Census and Statistics Department, the total number of visitors to Hong Kong in the first quarter of 2024 was 11.23 million ($1.44 million), a 38 percent drop from the same period in 2019. Hong Kong’s two major theme parks, Disneyland and Ocean Park, have not returned to their 2019 performance levels.

Ocean Park had 2.4 million visitors in the 2022–23 fiscal year, significantly lower than 5.7 million in 2019, with revenue of HKD 839 million ($107.42), down 51.64 percent from 2019. Hong Kong Disneyland had 3.4 million visitors and HKD 2.243 billion ($0.29 billion) in revenue in 2022, down 47.7 and 62.9 percent from 2019, respectively. These figures show that both tourist numbers and spending are down.

The escalator on the ground floor of the Murray House closed due to the decrease in tourists. Bill Cox/The Epoch Times

In late May, the Census and Statistics Department announced that provisional retail sales in April fell 14.7 percent year-on-year. Luxury goods, which tourists often buy, saw the biggest declines: jewelry and watches fell 28.7 percent, electronics and other durable goods fell 26.5 percent, and footwear fell 26.3 percent.

Harbour City in Canton Road, known for its luxury brands, had a mall revenue of HKD 5.474 billion ($0.7 billion) in the 2023 fiscal year, a 26.5 percent drop from 2019, according to its parent company, Wharf Real Estate Investment Company. During Easter, the company even offered five hours of free parking for shoppers, indicating a crisis in both tourist and local spending.

While in May, the authorities announced 210 tourism events, including fireworks, for the year, the business community has not been inspired to invest more. The S&P Global Hong Kong Purchasing Managers’ Index (PMI) fell from 50.6 in April to 49.2 in May, dropping below the contraction threshold of 50 for the first time since October 2023. S&P Global also noted that overall sentiment among private companies in Hong Kong remains pessimistic, with the wholesale and retail sectors being the most pessimistic about the future.