The Hong Kong retail industry had high hopes for the Golden Week holiday in mainland China, expecting it to bring in a large number of mainland tourists to boost sluggish sales. However, the Retail Management Association of Hong Kong stated that despite an increase in mainland tourists compared to last year, their purchasing power was weaker.
The week-long Golden Week holiday ended on Monday (October 7). Fiona She, Chairperson of the Retail Management Association of Hong Kong, mentioned in an interview with RTHK’s program “Freedom Wind, Freedom PHONE” that this year’s Golden Week retail performance was mediocre. While overall foot traffic increased, business levels were similar to a typical weekend.
She explained that tourists had weaker purchasing power, and after passing through customs, they tended to engage in sightseeing rather than shopping or spending.
The economic downturn in China has led more mainland tourists to be cautious with their spending habits. According to a report by Nikkei News, 29-year-old Liang Qicheng from Beijing was strolling along the Avenue of Stars in Hong Kong, taking selfies with friends. During the recent Golden Week holiday in mainland China, she embarked on a four-day trip to Hong Kong. However, she was cautious about her expenses: choosing to stay at a B&B instead of a hotel and refraining from extensive shopping.
Liang mentioned, “Buying things in Hong Kong is no longer as cost-effective due to the unfavorable exchange rate.”
Many mainland tourists are seeking experiences in Hong Kong rather than spending their time and money in shops.
Winnie Guo, a 25-year-old IT worker from Nanjing, visited Hong Kong out of her interest in photography. She engaged in a “city walk” activity, a budget-friendly urban travel trend popular among young Chinese. Guo shared that on the first day alone, she walked over 20,000 steps exploring the densely packed streets of Kowloon.
Despite the recent economic stimulus plan announced by the Chinese government pushing up Hong Kong stocks, Fiona She from the Retail Management Association of Hong Kong remains cautious about the consumption outlook.
When asked if the wealth effect would drive consumption growth, she remarked, “The sluggish outlook will continue until the next Chinese New Year.”
She added, “It will take time to see if these factors can change the pessimistic view.”
Last Thursday, the Hong Kong government released the latest retail sales figures for August, indicating a year-on-year decrease of 10.1%, marking the sixth consecutive month of decline. In terms of quantity, there was an 11.8% drop in sales volume in August, the fifth consecutive month of double-digit declines.
During a media briefing on October 3, Fiona She mentioned that while there was an increase in foot traffic during the first two days of the Golden Week holiday, the growth in retail sales was only slightly higher compared to last year due to reduced spending by mainland Chinese visitors.
She noted, “This is very different from 2018, with a significant gap.” She explained that there has been a phenomenon of “downgrading consumption” in China, particularly since the COVID-19 pandemic, as people have lost confidence in the country’s economic outlook.
She also mentioned that despite recent rate cuts by the US Federal Reserve, the Hong Kong dollar pegged to the US dollar remains strong against the Chinese yuan. 55% of members of the Retail Management Association of Hong Kong expect a single to double-digit decline in revenue for local and visitor-related retail categories compared to last year during the one-week Golden Week holiday this year.
The weak economy in China has resulted in Chinese consumers becoming more frugal, impacting the catering industry and luxury goods sector.
In recent years, China’s monetary tightening has placed immense pressure on the economy and emerged as a top issue in China. With prices falling on the mainland, an increasing number of Hong Kong residents have been crossing the border to Shenzhen for shopping, posing a challenge to Hong Kong retailers. For the recent Golden Week holiday, the number of outbound travelers from Hong Kong exceeded inbound visitors from the mainland.
The latest data from the Immigration Department shows that from October 1 to 7, the number of mainland visitors to Hong Kong was 1.216 million, a 11.6% increase from last year’s 1.09 million. However, during the same period, 1.78 million Hong Kong residents traveled abroad for consumption.
According to a report by The Wall Street Journal, Junyu Tan, an economist at Coface SA, noted in a commentary that the behavior of Hong Kong residents traveling for shopping continues to pressure local retailers in Hong Kong, with partial recovery in the tourism industry and a slight decrease in visitor spending only partially offsetting the pressures faced by Hong Kong retailers.