19 April 2019
Unlike previous years, mainland shoppers haven't invaded Hong Kong during the latest Chinese Golden Week holiday. Photo: HKEJ
Unlike previous years, mainland shoppers haven't invaded Hong Kong during the latest Chinese Golden Week holiday. Photo: HKEJ

Why Hong Kong’s retail sector may face more pain

More than four million mainlanders are said to be traveling abroad during the one-week-long National Day holiday.

Japan and South Korea have become the hottest destinations, with Chinese visitor numbers in the two nations seen rising as much as 40 percent from the previous year.

In contrast, Hong Kong streets have been fairly quiet during the holiday, with the inflow of mainlanders down significantly from the year before.

The number of Chinese tourists going abroad is expected to rise over 15 percent overall during the Golden Week. As I’ve said before, Tokyo, Seoul and Taipei will replace Tsim Sha Tsui as the “new TST”, as Hong Kong has lost its appeal as a shopping haven in the eyes of mainlanders.

As a tourist destination, Hong Kong relies heavily on shopping attractions to lure visitors, as the city has failed to diversify the sector enough.

Now, as many mainland tourists prefer South Korea and Japan over Hong Kong, the city’s retail sector is feeling the pinch.

Currently, a number of Chinese have negative feelings about Hong Kong following a series of anti-mainlander protests in the recent past. In the meantime, Japan has become more open and welcoming to Chinese tourists, prompting more people to travel to the country.

Among other factors, spiking rental costs have also reduced the competitiveness of Hong Kong’s retailers compared to their peers elsewhere in the region.

Despite being an international hub of China, Hong Kong no longer has any emotional bonding for mainland tourists. The city’s retail sector has paid a hefty price, and even the broader economy could suffer.

In fact, the retail industry is grappling with a double whammy. The Hong Kong dollar has kept appreciating against the Chinese yuan since the start of the year, while other Asian currencies have gone the opposite way.

As a result, Hong Kong has become less attractive for mainland tourists, prompting them to switch to other cities in Asia or Europe. 

Hong Kong is already more expensive than Tokyo, a fact that should worry local retailers and authorities.

While there is no accurate data for calculating the retail sector’s contribution to the overall economy, I believe the sector and various supporting industries account for a very large share of Hong Kong’s economic pie.

And the contribution is even larger if one were to add the financial sector.

As the city faces reduced mainland tourist inflow and other headwinds, it should brace for some challenging times.

This article appeared in the Hong Kong Economic Journal on Oct. 5.

Translation by Julie Zhu

[Chinese version中文版]

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Senior investment banker

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