Chinese tourists are rapidly deserting Hong Kong, leaving retailers who built businesses around once insatiable demand from mainland neighbours with bigger but emptier stores and squeezing the whole city’s visitor-dependent economy.
With cross-border tensions exacerbated by pro-democracy Hong Kong protests, tour groups visiting Hong Kong from China plunged about 80 percent in early March. A Beijing crackdown on conspicuous spending by mainlanders also shows no signs of letting up, sending tourists further afield.
While day trippers from just outside Hong Kong continue to buy daily essentials there, Chinese travellers with cash to burn are homing in on places like South Korea and Japan.
In the past few weeks, protests targeting mainland parallel traders, those who buy goods in Hong Kong to sell across the border, have turned violent.
Queuing outside a Chanel store on the luxury shopping street Canton Road, Wendy Wa from Guangdong province said she was worried about the protests and said she would go elsewhere if they escalate.
“Yes, of course I’m scared (of the protesters). I mean, it’s not the government’s problem. Hong Kongers are very disruptive,” she said adding that she was looking at destinations such as Paris and Japan.
According to the Japan National Tourism Organization, Chinese visitors lured by the weaker yen and easier visa rules nearly tripled in February to a monthly record.
With one in four tourists in Japan, Chinese became the biggest visitor group in a country with which relations have often been fraught.
That’s bad news for Hong Kong retailers. To the chagrin of some Hong Kongers, these firms expanded networks in the former British colony by about 50 percent over the past five years to cater to then-surging demand from Chinese tourists.
But Hong Kong student, Gallant Wong, said he thought Hong Kong tourism could withstand these pressures.
“I think actually the tourists from China have their own thoughts and I don’t think they will just stop coming because of those protests,” said the 20-year-old.
The net effect is a tourism slowdown that leaves a gaping hole in an economy where Chinese visitors – 47 million last year, about 40 percent of them from areas beyond border zones – account for about a third of retail spending.
In a report this week, Credit Suisse cut its economic growth forecast for Hong Kong to 1.6 percent from 2.4 percent for this year, citing weaker mainland tourist spending, and rated stocks dedicated to the city “underweight”.
CLSA retail analyst, Mariana Kou, said that if the drop in shoppers led to shop closures and job losses, the situation could become very alarming.
“I think the impact could be pretty substantial, so based on our estimates about 40 percent of the Hong Kong retail market is actually driven by mainland tourists. So with that already coming in with Chinese New Year data, we’re already seeing the tourist flow turning flattish from double digit growth in previous years. So this is pretty concerning. Pretty worrying set of data,” said Kou.
Like Japan, South Korea is a big beneficiary thanks to its currency weakening even as the strength of the U.S. dollar eroded competitiveness in Hong Kong – its currency is pegged to the greenback. More than 6 million mainland Chinese visited South Korea last year, up 42 percent from 2013, spurred by an easing of visa rules.
Reuters
