(Bloomberg) -- One of Hong Kong’s top foreign business groups warned the city still faces challenges in trying to revive its reputation as a global financial hub, even after it ditched almost all of its Covid curbs.

In a sweeping overhaul of policies that kicked in Thursday, residents and travelers alike will find their lives a bit easier. People coming into the city won’t have to fill in a health declaration or take PCR tests after they arrive. Venues like bars and restaurants won’t have capacity limits and will no longer require proof of vaccination for entry, while close contacts of Covid-positive people don’t have to quarantine any more.

Chief Executive John Lee says the city has been preparing for the changes for six months. And while the timing has puzzled some in the hub — the border with mainland China will soon reopen even as the latter struggles with a record wave of infections after abandoning Covid Zero — health experts say any influx in visitors is unlikely to overwhelm Hong Kong’s health-care system.

But even as the Covid-rule changes put Hong Kong’s battered economy on track to rebound over the course of 2023, there’s uncertainty around when the benefits will start to flow as it’ll take time for travel to recover. At least one major foreign business group has warned the city has a long road ahead to assure international investors of its attractiveness.

“We welcome the measures. Again a great step forward in the right direction,” said Inaki Amate, chairman of the European Chamber of Commerce in Hong Kong, adding the city now just needs to remove a small number of rules like its mask mandate. “Opening was the first step, but the hard work starts now to regain the trust from the rest of the world.”

‘Very Normal’

The dismantling of Covid measures tells the world that “Hong Kong is very normal now,” Lee said on Wednesday as he announced the changes.

But Hong Kong’s normal is remarkably different to before the pandemic. As well as nearly three years of strict virus curbs, an ongoing crackdown on dissent has seen scores of journalists, politicians and civil society figures jailed. It’s sparked a population exodus, damaged the city’s status as a liberal finance center and prompted concerns that its rule of law is deteriorating. 

Read more: How China’s Influence Is Reshaping Hong Kong’s Landscape

While the rest of the world pivoted to living with the virus, both Hong Kong and mainland China remained notable outliers in their zero-tolerance approach throughout 2022. The city could have even announced its latest Covid changes more than six months ago, according to Ben Cowling, chair of epidemiology at the University of Hong Kong’s School of Public Health. 

The incremental pace of easing since Lee assumed office in July contrasts with the abrupt U-turn in mainland China this month that’s sparked the world’s biggest outbreak. And the apparent desire for Hong Kong officials to wait for the mainland to make changes is fueling concerns about the appetite for making policy choices. Health Secretary Lo Chung-mau said in September that any easing in Hong Kong must not cause an outbreak across the border.

Read more: Hong Kong Seeks to Prove It Can Still Be ‘Asia’s World City’

“If people are questioning Hong Kong’s autonomy and governing style, it will not disappear even if Covid policy in Hong Kong is relaxed,” said Dongshu Liu, assistant professor specializing in Chinese politics at the City University of Hong Kong. Combined with the city’s political situation, it “will continue to be a challenge for Hong Kong to win back people’s confidence in its competition with other places like Singapore.”

The Southeast Asian nation has been a major beneficiary of Hong Kong’s brain drain. And while it’s unlikely to topple Hong Kong’s standing in some areas — it’s home to nearly 44% of hedge fund managers operating in the region, according to Preqin Ltd. data — it’s ability to attract top talent underscores how the center of financial gravity in Asia has been shifting.

China Pivot

Still, Hong Kong has long been an important gateway between mainland China and the rest of the world. In 2018 — before Covid and before the pro-democracy protests that rocked the financial hub — mainland China accounted for about 76% of the city’s total visitors. 

That means it’ll be one of the biggest beneficiaries of China’s border reopening next month. Hong Kong may get a 7.6% boost to gross domestic product as exports and tourism income climb, Goldman Sachs Group Inc. economists said in a note published before the latest Covid easing.

Yet weakening prospects for global growth, ongoing Covid uncertainty and geopolitical tensions will likely remain risks for Hong Kong’s outlook, said Thomas Shik, chief economist at Hang Seng Bank Ltd., who expects the economy to grow 2.5% next year after a 3% contraction this year. The median estimate among economists surveyed by Bloomberg is a 2.7% expansion in 2023.

It’s also unclear how quickly the economy will get its boost, as it may take some time to see the effects of policy shifts, Shik said. On Wednesday, Hong Kong’s leader cautioned the border reopening would be gradual, and he’s aiming to come to an agreement with mainland authorities and ask for approval from the central government by mid-January. 

Read more: Hong Kong’s Daily Entry Quota to China Set at 30,000: Sing Tao

While the restoration of cross-border travel has stoked concerns about a worsening flareup in Hong Kong, health experts say the city can cope as omicron tends to cause milder illness, meaning fewer people will need to be hospitalized, and there’s untapped capacity in the private sector.

The reopening may even pave the way for the removal of one of the last-standing — and most intensely disliked — Covid rules in place in Hong Kong: outdoor mask mandates.

“It is very likely that the political pressure for removing mask mandate will be high, especially since mainland China now has a much more severe Covid situation but no mask mandate,” said Liu, the assistant professor at CityU. “It is likely that government may cancel the mandate for political reasons sooner than what medical experts suggest.”

--With assistance from Jill Disis.

©2022 Bloomberg L.P.