Unlock Editor’s Digest for free
FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
Yves Leung runs the luxury retail stores that are mushrooming in Hong Kong’s glitzy shopping malls. But in recent months, she has preferred a more mundane temptation: that of a major retailer across the border in southern China.
Every few weeks, she spends as much as HK$2,000 (US$256) at Sam’s Club, an American membership warehouse chain in Zhuhai. “Prices are much cheaper than in Hong Kong,” said Leung, who is in his 40s. Some of the items she brought back to Hong Kong include fresh fruit, tissue paper, toothpaste, and chocolate.
A growing number of Hong Kongers are flocking to mainland China for weekend getaways, attracted by cheap groceries and American-style wholesale warehouses. Thousands of people have signed up for local travel agencies’ tours of these warehouses, including the new Costco opening in Shenzhen on Friday.
As both Hong Kong and China emerge from the coronavirus pandemic and reopen their borders, retailers and politicians hope this will spark a resurgence in consumer spending, the heart of China’s territorial economy. I expected. In fact, the most obvious trend is in the opposite direction, with Hong Kongers flocking to China, where living costs are lower, also encouraged by the appreciation of the Hong Kong dollar. The currency is pegged to the US dollar.
Moody’s Analytics economist Heron Lim estimates that Hong Kong residents will spend about HK$50 billion in mainland China in 2023, about 12.5% of Hong Kong’s total retail sales forecast for that year. Meanwhile, Natixis senior economist Gary Ng estimated that Hong Kongers spent about HK$67 billion on travel to Guangdong province in all of 2023.
Hong Kong-based travel agency EGL Tours said more than 3,000 people have already booked trips to Sam’s Club in the coming weeks and have already started applying for trips to the new Costco.
Executive director Steve Huen said the number of people taking tours from Hong Kong to mainland China tripled last year compared to pre-COVID-19 levels. “In addition to going to… [warehouse retailers]Our trip will also offer other attractions, such as a visit to the historic villages of Dongguan,” he added.
The alarm caused by such travel was so great that one of Hong Kong’s pro-Beijing political parties floated the idea of introducing an “exit tax” at the border, including to the mainland.
A snapshot of the interactive graphic is shown. This is most likely because you are offline or have JavaScript disabled in your browser.
Michelle Lam, Greater China economist at Société Générale, said it was “likely” that Hong Kong residents’ tendency to spend in mainland China would accelerate given attractive commodity prices in places like Shenzhen. If that happens, “Hong Kong’s gross domestic product could fall by as much as 1 percentage point in 2024,” she said.
Of further concern is “the lack of Chinese purchasing power in Hong Kong, making the city less attractive to Chinese shoppers who still prefer to spend elsewhere,” Moody’s Lim said. “The most important of these is the domestic province of Hainan, which is actually increasing consumption.” A game at the duty free shop.
A snapshot of the interactive graphic is shown. This is most likely because you are offline or have JavaScript disabled in your browser.
In post-pandemic Hong Kong, tourists from mainland China accounted for nearly 80% of tourists, but tourist numbers in the first 11 months of 2023 were down about 40% compared to the same period in 2019. . Hong Kong retailers also say there are many tourists from the mainland. Visitors are not spending as much money as they used to.
“Hong Kong is such an important part of our economy that there is even more urgency to develop services for tourists,” said Frederick Newman, chief Asia economist at HSBC. “It has to go beyond luxury retail, and I don’t think we’ve quite figured out that formula yet.”
Many people like Monica, 26, who works in finance in Hong Kong and frequently takes weekend trips to Shenzhen, say they will continue working this year.
“Eating out is something I do often. In Hong Kong, it’s normal for a meal to cost more than HK$200 per person,” she said. “But in Shenzhen, you can order whatever food you want at a restaurant.”
Another example is 400 grams of pork bones for soup, which costs twice as much in Hong Kong than in Shenzhen.
“Crossing the border allows you to enjoy a full day of great activities for less money,” said Sonia Chen, a 30-something who visits the mainland two or three weekends a month.
Additional reporting by Gloria Lee in Hong Kong