Weak greenback dulls HK's appeal as workplace of choice for foreigners
From top expatriate executives to Philippine maids, Hong Kong is no longer necessarily the first place foreigners choose to work as the weakness of the local dollar reduces their pay relative to their home currencies.
Under the exchange rate system, the Hong Kong dollar is pegged to the US dollar and thus drops with it, hitting expatriates hard if they are paid in local currency and need to send money home.
Jerry Chang, director of the international headhunting firm Baron & Co, said the weak Hong Kong dollar had made it harder for the city to recruit expatriates.
'It is a double blow,' he said. 'Under the linked system, Hong Kong cannot raise interest rates to control high inflation, while the local currency is falling with the US dollar against the euro, yen, pound, yuan and Australian and Canadian dollars,' Mr Chang said.
For expatriates paid in Hong Kong dollars, this means 'they are earning less when converting their money into their currencies at home, and at the same time they have to pay higher prices for food, accommodation and transport'.
As the local dollar is linked to the US dollar, Hong Kong's financial markets tend to keep local interest rates in line with US rates to avoid too much money flowing from one currency to the other, thereby upsetting the currency peg.
Bob Charles, Asia-Pacific head for Watson Wyatt, an international human resources consultancy, said the weak dollar was becoming a big issue. 'This is more for employers of expatriates than for expatriates themselves,' he said.
'The traditional expatriate package is dying. Gone are some of the fancy perks such as club memberships and business-class flights - but the benefits are still there,' Mr Charles said. 'Employers who want to bring expatriates to Asia normally do so for two- or three-year periods and set remuneration based on the home country package. So British and Australian expatriates benefit from the fact their home salaries have risen in Hong Kong dollar terms.'
'A few years ago, some employers favoured Europeans over Americans,' he said. 'But this has now switched round' because of the weak dollar. 'Americans are taxed on worldwide income and so don't get the benefit of moving to lower-tax locations like Hong Kong and Singapore.'
The weak currency not only means Hong Kong has lost out to other countries in luring top executives; the city is also finding it more difficult to compete for domestic helpers.
'My Philippine domestic helper told me that her friends have opted to work in Canada, the Middle East or Spain instead of Hong Kong,' said Bonnie Ngan, general manager of Henderson Land Development.
Last year, the Hong Kong dollar, like the greenback, fell more than 15 per cent against the Canadian dollar.
It fell 9.89 per cent against the Australian dollar, 9.81 per cent against the euro, 6.24 per cent against the yen and 1.39 per cent against the pound. So, effectively the expatriates suffered corresponding pay cuts.
To solve the problem, some foreign firms were paying their expatriate staff in their home countries' currencies and giving them a premium housing allowance, Mr Chang said.
However, he said salary levels for senior executives in Hong Kong were 20 to 30 per cent higher than in Singapore or Malaysia.
In addition, Hong Kong's maximum individual salary tax is only 16 per cent, about half that of many countries, such as Singapore and Australia.
'As a result, Hong Kong is still attractive to expatriates,' Mr Chang said. 'But the city faces increasing competitive pressure from Shanghai as more and more expatriates want to capture the rising yuan and gain experience in the mainland market.'
The exchange rate is only one of many factors, and not even a major one, in any career consideration, according to Joseph Tong Tang, executive director of Sun Hung Kai Financial.
'Anyway, currency depreciation usually means higher inflation and, therefore, a higher salary increase, which can partly offset the effect,' he said.
The business environment, job security and promotion prospects should be more important factors, he said. In Hong Kong, the prospects are very good for all of those factors. And the rapid growth on the mainland meant many expatriates would be interested in working in Hong Kong, he said.
Tim Lui Tim-leung, a senior tax partner at PricwaterhouseCoopers, did not find the weak dollar affecting the international accounting firm's global recruitment.
'We recruit according to our own salary grids rather than looking at [how salaries] compare in the context of [the expatriates' home currency],' Mr Lui said.
'Of course, people no doubt do their own conversions and will be aware that perhaps their remuneration is not worth as much as it was in the past when converted into their home currency. But it does not have a large impact on people's decisions to join or leave the company.'
Financial Secretary John Tsang Chun-wah's office said the currency's weakness should not discourage people from coming to work in Hong Kong.
'The weak Hong Kong dollar, which is a consequence of the current US economy, is a cyclical situation. In view of Hong Kong's good fundamental framework, this temporary phenomenon should not harm its attractiveness as a workplace for outside talent in a longer-term perspective,' Mr Tsang said.
'Besides, many expatriates working in Hong Kong pay far lower taxes on salaries and investments than they would in their home countries.'
Cosco Pacific deputy managing director Kelvin Wong Tin-yau said his firm still had many mainland staffers who would like to work and gain international experience in Hong Kong.
'Job exposure and satisfaction are more important' than pay, he said.
'Our [mainland] colleagues receive Hong Kong dollars instead of yuan when they work in Hong Kong. Despite the recent weakness of the Hong Kong dollar against the yuan, we still have more mainland colleagues who would like to gain international experience by working here.'
Mark Konyn, Asia-Pacific head of global investment firm RCM, said his firm's international graduate recruitment programme still draws many expatriates interested in coming to Hong Kong.
'The strength of the local economy and being close to China positions Hong Kong favourably,' he said. 'And expatriates generally see the longer-term benefits of building experience here.'