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Wednesday, August 6, 2014, 08:32

Retail sector warns against tourist curbs

By Kahon Chan in Hong Kong
Retail sector warns against tourist curbs
Pedestrians walk outside an electronics store (bottom center) measuring just 130 square feet in Causeway Bay in March, following its sale for more than HK$180 million ($23 million) on March 14. (ANTHONY WALLACE / AFP)

Secretary for Commerce and Economic Development Gregory So Kam-leung said on Tuesday there was “no deadline” for imposing controls on inbound mainland visitors.

So made the comments as representatives of the retail industry warned, at a Tuesday press conference, that falls in the number of visitors would hurt their sector.

They said this could potentially affect hundreds of thousands of employees in the retail sector.

At present Shenzhen residents with local hukou (permanent residence permits) are eligible for multiple-entry permits to Hong Kong.

While mainland authorities are considering capping the frequency of these visits to 52 per year, So told reporters the government was still open to suggestions.

“We must take a cautious view on this matter under the current economic circumstances,’’ he said.

“I’m not fixing a deadline to launch these measures and we will maintain close contacts with mainland authorities for the time being,” So added.

Stressing the importance of tourism to Hong Kong’s economy, So said only “concrete” suggestions would allow the healthy development of tourism.

While the number of in-bound mainland tourists is still rising, the retail industry has seen revenues drop for four consecutive months since March.

Retailers have warned against restrictions on tourist numbers and instead called for more retail space for tourists.

Economist Lam Pun-lee — in a research commissioned by major chambers representing grocery and luxury goods retailers — noted the phenomenal growth in personal spending over the past decade. Lam said this was primarily fueled by tourist-spending which had become a key economic driver.

For instance, the addition to personal spending between 2004 and 2013 was circa HK$820 billion. This was higher than the value added to the GDP — which was around HK$800 billion. The jump in tourist spending has also offset a sluggish export sector.

While landlords have gained from rent hikes, Lam said retail workers had earned 33 percent more in gross wages over the past decade. In real terms salaries for the working population have only risen 8.3 percent during the same period.

Tourist spending, however, seems to be falling from its peak. Retail values have slipped by 1.3 percent over the first six months of the year. Supermarkets have reported healthy sales rises of 6.5 percent, but sales of electronic and luxury goods have suffered a double-digit fall.

Diamond Federation of Hong Kong President Lawrence Ma Yung-yi, who owns chain jeweler MaBelle, said the dramatic fall in revenue was partly due to greater demand for gold in 2013, which had followed a sharp fall in gold prices.

The slowing mainland economy, coupled with Beijing’s tightening grip on the giving of extravagant gifts, has boosted demand for expensive goods, explained Ma.

Mainland customers had turned to more affordable goods, but this could never make up for lost sales.

Even if the industry manages to end the year with single-digit growth, Hong Kong Retail Management Association Chairwoman Caroline Mak Sui-king said it would be its worst year since 2004.

About 350,000 people work in the retail sector. Mak said jobs could be lost and everyone would, in some way, be affected by flat retail sales. But jeweler Lawrence Ma said he was still a long way from considering lay-offs.

Indeed retailers still have over 9,600 vacancies to fill as of March, according to government figures.

Leo Sin Yat-ming, director of the Master of Science Program in Marketing of the Chinese University of Hong Kong, said he was not convinced that proposed limits on Shenzhen visitors would hurt the industry as much as others have predicted.

He said mainland customers’ visits have now shifted to different areas. Sin said the big spenders were being lured to other places. The market has become dominated by Guangdong residents who are commuting to Hong Kong for groceries. Some may make bulk purchases to sell-on to other mainland buyers, he explained.

Limits on multiple-entry visas may have a short-term impact on pharmacies, chain healthcare stores and local fast food chains. But he said this might also bring greater diversity to the retail market.

However Billy Mak Sui-choi, an economist at Baptist University of Hong Kong, said any restrictive policies targeting tourists from a particular area will upset them. This will ultimately hurt the territory’s reputation as a welcoming place to visit.

“People travel for pleasure. If they no longer feel happy about coming to Hong Kong, they will abandon their trips,” said Mak.

He believes the city will remain attractive to mainland shoppers in future. This is because of the differences in import duties between the two places and the excellent reputation of Hong Kong retailers.

Instead of squeezing demand, Mak urged the government to boost the supply of retail space near the Shenzhen border. This could also create more opportunities for economic growth.

Officials, however, have said there is no government land available to build malls near border control points.


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