Mainland Chinese “Tourist-Shoppers” Critical To Hong Kong Economy

Sales Of Jewelry, Watches And Clocks Soared 52 Percent Year-Over-Year In July

Mainland Chinese tourists have become a critical source of revenue for luxury brands in Hong Kong

Mainland Chinese tourists have become a critical source of revenue for luxury brands in Hong Kong

It’s common knowledge that Hong Kong is one of the most popular destinations for mainland Chinese tourist-shoppers, mostly enticed by duty-free shopping, a relatively strong Chinese yuan, and often better selection and service,  to stock up on luxury goods. According to Jones Lang LaSalle, mainland Chinese tourists accounted for some 70 percent of the HK$19.8 billion (US$2.5 billion) spent by overnight visitors on apparel in Hong Kong last year, and easier (and cheaper) transit to the former British colony saw mainland Chinese travelers account for 22.7 million arrivals in 2010, a rise of 26 percent over 2009. Considering overnight tourists from mainland China spent on average HK$7,453 ($956) apiece on shopping on Hong Kong last year — over 30 percent more than the average for all tourists — it’s clear why this group of visitors has become so important to the Hong Kong retail market (and global luxury brands with outposts there).

This week, Bloomberg writes that mainland Chinese tourists have become not only a reliable source of revenue for Hong Kong retailers and hoteliers, but have become something of a lifeline for the city as its economy falters. These tourist-shoppers were instrumental in the 25 percent increase in sales seen in Hong Kong in the first seven months of this year, the biggest such sales leap since data began in 1981. Shoppers have been particularly profligate this summer, with sales increasing 29 percent to HK$35.2 billion (US$4.5 billion), and visitors homing in on jewelry, watches and clocks — which saw a 52 percent increase in sales over a year earlier — and electronics, which saw a 65 percent increase in sales this July.

From Bloomberg:

A gain in the past two years of about 8 percent in the yuan against Hong Kong’s dollar, which is pegged to the U.S. currency, has boosted the spending power of shoppers from China. Some of those visitors, including [shopper Lin Shasha], say that items in Hong Kong are less likely than in China to be counterfeit. In addition, buyers avoid the Chinese government’s taxes on luxury goods.

The number of visitors from China surged 33 percent to 2.68 million last month from a year earlier, Hong Kong Tourism Board figures show.

Visitors from China staying one night or more spent an average of HK$7,453 ($956) each per trip last year, the highest amount of any group, according to the Hong Kong Tourism Board. The nation also provided the top spenders in the same-day category at HK$2,356 each.

Despite strong retail sales, looming economic turbulence in Hong Kong means that mainland Chinese tourist-shoppers won’t just be seen as helpful boosters to the local economy, they’ll increasingly be seen as critical. As Bloomberg adds:

Hong Kong reported its fastest inflation since 1995 in July as rising rents and food costs and changes to government housing subsidies boosted the rate to 7.9 percent. HSBC’s Kwok said that she sees a risk that consumers will “eventually cave in” if inflation stays high and financial markets are turbulent.

The strength of retail sales in July was “certainly a surprise” and the numbers for August and September may be weaker, said Denise Yam, a Hong Kong-based economist for Morgan Stanley.

Were more of these tourists to do their high-end shopping elsewhere — such as Hainan island, where Beijing and the Hainan provincial government are experimenting with a pilot duty-free program, or Macau — the Hong Kong economy could be in for a rough ride.

 

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Travel, Watches & Jewelry