New Hong Kong Tourism Restrictions to Boost Japan, Korea

Mainland shoppers are increasingly skipping Hong Kong (above) for South Korea and Japan. (Shutterstock) Long considered the go-to destination for mainland Chinese gray-market vendors (stocking up on everything from luxury handbags to diapers), Hong Kong is set to crack down on unlimited visits by residents of nearby Shenzhen. According to the BBC, this week China announced that it will stop issuing multiple entry Hong Kong visas to Shenzhen residents, in an attempt to cut down on the booming "parallel trade" industry, which has long clogged the border crossing with resellers. Under the new law, Shenzhen residents can only enter Hong Kong once per week and stay no longer than one week at a time—still plenty of time to do a lot of gray-market shopping, but less than in years past. Last year, mainland Chinese visitors made 47 million trips to Hong Kong, with approximately 10 percent doing so more than once per week—mostly coming from Shenzhen. This week's moves are likely aimed at quelling opposition to the rising tide of mainland visitors among Hong Kong locals, which has flared up over the past year in particular. Although this new law is aimed at cutting down on gray market vendors or so-called goudai (buy and carry back) visitors, the appeal of Hong Kong is long-gone for serious mainland tourists, or even serious tourist-shoppers. With the flood of mainland tourists packed into stores, making for an occasionally miserable experience, and a decidedly more antagonistic environment, a growing number of affluent Chinese travelers now turn to nearby Japan and South Korea to get their travel and shopping fix. This nearby-outbound travel boom looks set to continue, as this week the tourism ministers from all three countries met in Tokyo to launch the new "Visit East Asia Campaign," aimed at boosting visits from travelers from Asia and around the world. According to a statement, the three tourism ministers are hoping to boost visitor numbers among the three countries to 30 million by 2020, up from around 20 million last year. The ministers have a particular eye on increasing cross-border travel in advance of a possible Asian Olympic three-peat in the years ahead. (Korea's PyeongChang Winter Olympics in 2018, Tokyo's Summer Olympics in 2020, and a possible Beijing Winter Olympics in 2022.) Although Japan continues to rise in popularity among younger wealthy Chinese travelers, in recent years it has been South Korea that's benefited the most from Hong Kong's fading appeal. Korea is now the third most popular Asian destination for mainland Chinese tourists, behind Hong Kong and Macau, with Chinese travelers making over 6 million visits last year. Boosted by a weaker yen and an expansion of a sales-tax exemption for overseas visitors in October, Chinese tourist arrivals in Japan surged by 83 percent, to 2.4 million in 2014. This year, arrivals have continued to jump, reaching 359,000 in February, a rise of nearly 160 percent year-on-year. Mainland China is now Japan's third-largest source of foreign tourists, trailing just Taiwan and South Korea. Barring a large-scale diplomatic scrap (such as a flare-up of the long-simmering Senkaku/Diaoyu spat that caused Chinese visits to plummet in Japan and skyrocket in South Korea nearly five years ago), we can expect Japan to remain a prime destination for the more affluent of Chinese tourist-shoppers this year. Attracted by the air of sophistication, massive selection of luxury and beauty brands (both Western and Japanese), and the tax incentives, Chinese luxury shoppers who don't want to trek to New York or Paris will continue to opt for Tokyo. Meanwhile, South Korea will remain a top draw for mass-market travelers and bargain-driven shoppers—as well as gray-market vendors, potentially making for tough situations down the road for Seoul or Jeju retailers but leading to near-term gains. Avery Booker is a partner at China Luxury Advisors.

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New Hong Kong Tourism Restrictions to Boost Japan, Korea