Tags: china | shoppers | luxury goods | prada | necessities

Hong Kong Uneasy as Chinese Day Visitors Replace Wealthy Shoppers

Friday, 06 March 2015 06:09 AM

Hong Kong wants more Chinese shoppers, just not the kind they’re getting now.

Thinning out are the throngs of Chinese visitors snapping up Prada bags and Swiss watches in central Hong Kong as President Xi Jinping strengthens his campaign against graft and extravagance. Growing are the numbers of so-called parallel traders, who buy shampoo, milk powder and other daily goods to resell at higher prices in China, where concerns about the safety of local products put a premium on those from overseas.

That’s put Hong Kong Chief Executive Leung Chun-ying in a quandary between the city’s luxury retailers eager to see more Chinese shoppers and angry locals who accuse the visitors of pushing up the cost of necessities. Leung said Friday that leaders in Beijing are studying the issue after a discussion this week.

"The overall spending pattern of Chinese tourists has changed," Raymond Yeung, an economist at Australia & New Zealand Banking Group in Hong Kong, said by phone. "The real issue is how Hong Kong can cope with that change."

Sales of luxury goods plunged 14 percent last year, when the city saw its first annual drop in retail sales since 2003. The decline has continued into January, with total expenditure down 14.6 percent from a year ago.

With Chinese tourists making up 78 percent of Hong Kong’s visitors last year, their changing composition ripples through the economy and drags down luxury good companies, including Chow Tai Fook Jewellery Group and Prada SpA.

Big Luggages

Instead of rich Chinese flying in, the city is seeing an increasing number of visitors with big luggages hoarding up space in its subways, on its buses and on the pavements.

"Hong Kong is basically losing market share" of the rich Chinese, said Mariana Kou, an analyst at CLSA. Those are going to Japan, South Korea and Europe, while the tourists coming to Hong Kong now are spending less, she said.

While expenditure on luxury items fell last year, the sales of medicine, cosmetics and at supermarkets saw as much as a 9.3 percent gain, government data shows. That’s helping companies like YATA, an operator of seven department stores, which has seen Chinese tourists buy up the shampoo and groceries on its shelves, according to Chief Executive Officer Daniel Chong.

The new shopping habits, though, is riling residents.

In Hong Kong’s Yuen Long district, near China, there have been three protest marches in a month against the parallel traders and day visitors from the neighboring Chinese city of Shenzhen.

Limit Visitors

The solution is to limit the number of visitors who are here for just a day, according to Michael Tien, founder of clothing retailer G2000 Group. Those who come multiple times a year now make up 50 percent of Chinese tourists, compared with 20 percent five years ago, he said.

"Those visitors don’t stay overnight and their contribution is very limited," Tien said in an interview in Beijing where he was attending annual sessions of China’s top legislative body as a Hong Kong delegate. "I don’t want mainlanders to see Hong Kong in a negative way, but I hope more people other than those from Shenzhen could visit Hong Kong."

The police charged 12 people out of 38 arrested during a March 1 demonstration, and used pepper spray to break up confrontations between the protesters and their opponents, the South China Morning Post reported on March 3.

Two thirds of the 743 people surveyed last month wanted the government to reduce the number of individual Chinese visitors, the Chinese University of Hong Kong said March 4. More than three-fifth of those polled said the tourists have brought inconvenience to their lives.

"We have to strike a balance as we don’t want to see any policy changes leading to a drastic drop in visitor numbers and hence hurt the economy," Leung told reporters in Beijing after attending the Chinese legislative sessions. "The central government will see how it can support Hong Kong’s tourism industry while at the same time not impacting the people’s daily life."

Billy Chan and Fion Li in Hong Kong and Tian Chen in Beijing assisted with this report.

© Copyright 2018 Bloomberg News. All rights reserved.

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Hong Kong is seeing less of the throngs of Chinese visitors snapping up Prada bags and Swiss watches in central Hong Kong and more day visitors buying necessities and basic goods, like shampoo and dried milk.
china, shoppers, luxury goods, prada, necessities
Friday, 06 March 2015 06:09 AM
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