(Bloomberg Businessweek) -- Ho Siu-ying, 76, who has been piloting her tire-ringed, wooden sampan to the iconic Jumbo Floating Restaurant in Hong Kong’s Aberdeen harbor for 35 years, has never seen such hard times. Normally, ferrying diners back and forth nets her $13 to $26 for a day’s work—enough to live modestly in public housing with her daughter and even take an occasional leisure trip to the Chinese mainland. But with a catastrophic drop in tourism caused by seven months of civil unrest, she frequently goes home empty-handed. “A lot of days I’m working for no pay,” she says, leaning back to let out an unusually cheerful laugh that causes the wrinkles around her eyes to crease and conceals her concern, which she shares in a quieter voice. “I’m honestly very worried right now because I’m using up my savings.”
Jumbo—whose red and gold, Ming Dynasty-styled exterior has appeared in many movies and has been visited by notables including Tom Cruise and Queen Elizabeth II—dismissed about 60 employees, or almost half its staff, in early January. The restaurant has cut back its hours and is now closed on Mondays.
All over Hong Kong, restaurants, retail stores, and hotels are shuttering, shortening their hours, and letting employees go. Everyone—from senior government officials to labor unions to business owners struggling to make rent and payroll—expects the situation to get worse, especially after three days of public holidays to mark the Lunar New Year, which begins on Jan. 25.
Visitors from mainland China usually throng the city at this time of year. Their numbers reached an all-time high of more than 5.5 million in January 2019, but there’s little chance that record will be surpassed in 2020. The number of tour groups arriving from China plummeted 90% in the four months through December compared with a year earlier, according to the Travel Industry Council. It’s not just the pro-democracy demonstrations, which have at times closed the Hong Kong airport and subway system and forced businesses to shut their doors, that are deterring visitors. Depreciation of the yuan made Hong Kong 10% more expensive for Chinese tourists last year.
The local economy was already suffering from the effects of the China-U.S. trade war before the protests began in June. The recession that began in the second quarter of 2019 looks set to deepen as more businesses succumb to the decline in tourism. Hong Kong’s Financial Secretary Paul Chan has described the situation as an “economic typhoon.”
Retail sales have declined for 10 straight months, falling 25% in November alone—the latest available data. Both Prada SpA and LVMH’s Louis Vuitton have plans to close their locations in the Causeway Bay shopping district, home to the most expensive commercial real estate in the world, after the Lunar New Year holidays. Employees at both stores say they have no idea whether their employers will move them to other locations or just fire them—and they may not be told until their final day at work, a common practice in Hong Kong.
Chow Tai Fook Jewellery Group Ltd. and cosmetics chain Sa Sa International Holdings Ltd. have announced closures of about 15 and 30 stores, respectively. Some tenants at Horizon Plaza, a luxury mall in southern Hong Kong, report a 60% decline in foot traffic and revenue, and several shops there have closed, according to local district councilor Kelvin Lam.
For employers, there’s a strong temptation to postpone layoffs until after the Lunar New Year, as the bonuses that companies traditionally pay out at the time can be counted toward severance, which is required by law. The Hong Kong Retail Management Association is forecasting 5,600 jobs will be lost over the next six months, a situation Chairwoman Annie Tse called the “worst ever in history.” Already, official unemployment statistics show joblessness in the retail industry and food and beverage sector at 5.2% and 6.2%, respectively—almost double the 3.2% figure overall.
Official figures don’t capture the full extent of the job destruction as they don’t count part-time workers. In the restaurant sector, tens of thousands of them have been let go or told to take unpaid leave until the economy recovers, according to Kwok Wang-hing, chairman of the 10,000-strong Eating Establishment Employees General Union. Thousands more have lost jobs permanently at some 400 restaurants that have closed in the past several months, most of them cha chaan teng, cafes serving affordable fare like fried noodles and fried rice. About 1,200 union members are owed a combined HK$10 million ($1.29 million) from employers who simply closed up and disappeared without paying severance. “Everyone feels lost. With thousands of shops to close after the Chinese New Year, many are worried about their future job prospects,” says Kwok, who himself works mornings in a dim sum restaurant. “We can’t really fight for any rights right now, so there’s nothing we can do until the situation improves, when we can negotiate with the employers.”
Several restaurants that cater to foreigners and the well-heeled of Hong Kong have also shut their doors, among them the vegan refuge Grassroots Pantry; BlackSalt Tavern, an Indian fusion spot; and Happy Paradise, a high-end take on the traditional Hong Kong eatery that hosted the onetime chef turned TV celebrity Anthony Bourdain on his last trip to Hong Kong. The restaurant, which is now operating solely as an event space, sits on a block in the Central District where at least half a dozen empty storefronts are plastered with for-rent stickers, while dress shops have large signs advertising deep discounts.
A 22-year-old unemployed supporter of the protests, who gives his name as Chau, says he lost his HK$10,500-a-month job at a bakery a few months ago due to the slowing economy. The manager fired him at the end of his 6 a.m.-to-3 p.m. shift and told him not to return the next day. “I didn’t expect it coming at all,” he says. A steady job had allowed Chau to procure his first credit card. Now he wouldn’t be able to pay for the purchases he’d charged. “It really screwed me up,” says Chau, who was forced to turn to his parents for help.
Mrs. Chan, who declined to give her full name, shares a 300-square-foot apartment in a public housing development in eastern Hong Kong, with her son, who stocks shelves in the kitchen of a fast-food restaurant. He gets paid by the day, but since July his hours have been cut and his pay has been reduced 25%-40%. “My son works less, so there’s less income to spend, too,” she says, surveying their tiny living room with bunk beds on the side and worn-through linoleum flooring.
She’s given up buying pork, the meat staple of almost every Hong Kong household that has become expensive due to shortages caused by African swine fever in China, and has taken to eating vegetables and discounted bread. Four sausage rolls from the local bakery are HK$15 after 4 p.m., and four plain buns are HK$12. Mrs. Chan also stands in line at the Ho Wan Roast Meat Restaurant four times a month to redeem the free rice box coupons she gets from a charity. She makes each box of rice and roast pork last two meals.
Ho Wan restaurant used to distribute 100 boxes to the elderly three evenings a week, but cut back to two nights starting in January. Owner Yu Zai says it’s because donations for the program have dropped. “I’ve had sponsors tell me that they can’t donate anymore because of the bad economy,” he says. “I understand.”
Hong Kong already has the biggest inequality gap in the developed world as measured by the Gini coefficient, and one of the lowest average hourly wages compared with developed countries in the Organization for Economic Cooperation and Development—the equivalent of just $4.82. Government figures released in December show poverty at the highest level since records started being kept a decade ago. One in five people now live below the poverty line, which is set at $6,700 a year, an almost absurdly low level in one of the most expensive cities in the world.
“The working classes all feel the pain now,” says Paul Yip Siu-fai, a professor and associate dean of social sciences at the University of Hong Kong. While many, particularly the young, have been strong supporters of the push for democratic freedoms, months of violent protests and the now direct impact on their livelihoods have led to feelings of ambivalence, hopelessness, and helplessness, he says. “The unfavorable economic situation and social disharmony have caused much strain and anxiety in the whole community.” One in three adults report symptoms of post-traumatic stress disorder (PTSD), according to a study by HKU researchers published in the Lancet medical journal on Jan. 9.
Hong Kong’s wealthy have been largely insulated from the economic downturn. Property prices in the world’s most expensive residential housing market have remained resilient. And the stock market’s Hang Seng Index, after tanking in the months after the protests began, is now about 4% higher than when they started. On Jan. 16, seven companies alone had their initial public offerings on the Hong Kong stock exchange. Yet more and more, foreigners employed in finance and related industries either are choosing to leave Hong Kong or have been forced to by a drop-off in business or global companies rethinking how much presence to maintain in the city. The latest immigration numbers show only about a 5,000-person decrease; yet anecdotally, many expatriates are moving to Singapore, Shanghai, or back to their home countries.
A store called Second Chance is jammed with treasures from emptying homes: hundreds of Chinese porcelain vases, Buddha heads, lacquered tables, a Napoleonic-era beveled mirror, a Ralph Lauren sleigh upholstered in red velvet and pulled by life-size metal reindeer, and an 8-foot-high Balinese ceremonial drum. Store owner Richard Bowsie, originally from Northern Ireland, says he’s fielding 140 to 150 calls or messages a day from people leaving Hong Kong and wanting to unload their furniture, up from 30 to 40 a day before the protests began. And he’s been taking in items from other distressed and shuttering antique shops as well. “People are asking can we take it from them for free. That’s how desperate people are getting,” he says.
Yet business is “bloody awful,” says Bowsie, down about 80% from before the protests. He can barely sell anything, even at 50%-70% discounts, which is why he and his wife have been talking about whether it’s time to throw in the towel. Instead, for the moment, they plan to expand to an area closer to customers. “We’ve been going for quite a while,” he says, “which is why we don’t want to give up.”
A 20-something front-line protester who gives her name as Elena believes Hong Kongers must be willing to make economic sacrifices to secure more political freedoms. She herself gave up a post as a research assistant after fleeing the city because she feared she was wanted by the police for her participation in demonstrations. “I know it’s hard to give up things we used to have, including jobs,” she says, speaking by phone from a remote location she doesn’t want to reveal. “But this is the last chance for Hong Kong people to fight.”
Ho, the sampan captain, says she doesn’t care one whit about politics. She just hopes to hang in for another four years, until her license is up for renewal, and retire at age 80—as long as her savings can ride her through the current downturn. “I don’t know anything about the political situation, and I don’t have the knowledge to learn about it,” she says. “I just hope it will end soon so the tourists will come back and business will return.” —With Natalie Lung
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