Hong Kong-China travel flip is a new headache

Prada SpA

08/01/2024 03:20

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Chan Ka Sing
       HONG KONG, Jan 8 (Reuters Breakingviews) - Hong Kong
retailers and landlords who were hoping for a post-pandemic
rebound in Chinese tourism will have to wait longer. It is one
year since the border reopened and fewer mainland tourists are
arriving. Those that do are spending less in what was and
remains their most popular holiday destination. Meanwhile,
Hongkongers are flocking to Shenzhen and other cities up north
in increasing numbers. Part of this shift looks permanent and it
presents fresh headaches to the finance hub’s policymakers.
    According to figures from the Hong Kong Immigration
Department, tourism arrivals from China to Hong Kong amounted to
26.7 million in 2023, down from 43.7 million in 2019 before the
pandemic. The opposite traffic has been on the rise: Hongkongers
made more than 53.3 million trips to the mainland in the same
period, which includes journeys for leisure and business.
Shopping tours from Hong Kong to the Walmart-owned  WMT.N 
discount hypermarket, Sam’s Club, across the border are
particularly in vogue. 
    The reversal has become a headache for Hong Kong leaders
hoping to boost economic growth amid a downturn in the property
market. The tourism industry accounted for 3.6% of Hong Kong’s
GDP before the pandemic, yet its importance is greater. The
sector makes up 6% of total employment while spending from
Chinese tourists is a support to many retailers and luxury
brands including Louis Vuitton and Prada  1913.HK . Shares of
Wharf Real Estate Investment  1997.HK , which owns Hong Kong’s
iconic Times Square and the busiest malls, have fallen nearly
10% in the past 12 months. The landlord warned in August that
visitor arrivals and retail sales for the first half of 2023
across its properties have only recovered to 37% and 85% of
pre-Covid levels in 2019 respectively.
    While mainland Chinese consumers’ willingness to travel
abroad will improve once the onshore economy rebounds,
HongKongers have been gradually spending more and more of their
incomes up north – a trend that looks to be here to stay.
Besides cost, many simply prefer the facilities and customer
service across the border. Greater integration between Hong Kong
and mainland cities – such as in payment systems and
transportation links, have only made it easier. For many local
businesses in the finance hub, losing both tourist and local
consumers is a double whammy. 
    One quick solution might be the introduction of a departure
tax for outbound travelers. Such a scheme could bring a total
revenue of HK$2.3 billion ($295 million) annually if it charged
90 million folks HK$25 each, according to Citi analysts. Yet for
Chief Executive John Lee, that might go against Beijing’s policy
preference to push for quicker economic integration among
Greater Bay Area cities including Hong Kong. Whatever happens,
the centre’s competitiveness will continue to be tested. 

    CONTEXT NEWS
    Hong Kong residents made 53.34 million trips to mainland
China in 2023, according to Hong Kong’s immigration department,
with over 40 million people crossing the borders between Hong
Kong and Shenzhen. 
    Hong Kong’s border with mainland China reopened on Jan. 8,
2023 following Covid-19 pandemic restrictions.

 (Editing by Robyn Mak and Katrina Hamlin)
 ((For previous columns by the author, Reuters customers can
click on  CHAN/  
KaSing.Chan@thomsonreuters.com; Reuters Messaging:
KaSing.Chan.thomsonreuters.com@reuters.net))