Hong Kong retailers count on duty-free quota increase to boost sales


By Jessie Pang and Marcus Lum

HONG KONG (Reuters) – An increase in Hong Kong’s duty-free quota for Chinese tourists could provide some support to the city’s retail sector, but mainland visitors say prices remain unattractive.

The Chinese and Hong Kong governments are trying to attract cross-border tourists by expanding the scheme for single Chinese travellers to Hong Kong and increasing the quota for duty-free shopping in May.

This is because Hong Kong residents are increasingly flocking to the mainland for shopping and entertainment, where they say prices are generally lower and service is better. In addition, Asia’s financial hub is struggling to recover from the pandemic.

From July 1, duty-free shopping rates for Chinese tourists in Hong Kong have been increased from 5,000 yuan ($688) per trip to 15,000 yuan for visitors passing through six land border checkpoints.

The new measure will be extended and apply from August 1 to Chinese visitors entering Hong Kong through all border checkpoints.

The government expects the measure to lead to additional retail spending of between HK$8.8 billion ($1.13 billion) and HK$17.6 billion for the city.

Annie Tse Yau On-yee, chairman of the Hong Kong Retail Management Association, said it would take some time for the benefits of the changes to be seen.

Hong Kong retail sales fell 11.5% in May from a year earlier, government data showed on Tuesday, reflecting a surge in outbound travel, a strong local currency and a high comparison base for tourists’ spending last year.

“Given the rapid economic downturn, high rental and staff costs and other economic factors such as the strong Hong Kong dollar also pose challenges for the retail sector,” said Bond Law, an executive director of the association, adding that the situation is expected to remain difficult for some time.

Harbour City, a shopping mall in the Tsim Sha Tsui tourist area, said it believes “this policy change will have a positive impact, boosting retail sales and attracting more tourists to Hong Kong and our mall”.

Hong, 49, and his wife Chen, 43, who visited Hong Kong for the first time from China’s Guangxi province, said the cost of dining out in the city was still a barrier.

“The food here is five times more expensive than in the city where I live now,” said Chen, who asked to be identified only by her last name, as she held bags full of clothes and cosmetics from various luxury brands.

According to data from the tourism bureau, the number of Chinese visitors has increased in recent months, but analysts say consumption trends have changed.

The budget-conscious Chinese tourists have replaced the open-minded Chinese tourists who once flocked to Hong Kong, with some only interested in free walking tours of the city and taking photos.

Sienna Zheng, 29, a tourist from the southern Chinese city of Shenzhen, said she did not plan to buy many luxury goods during her fourth visit to Hong Kong.

“I came here to visit different places to take photos and taste the food,” Zheng said, adding that while products in Hong Kong are duty-free, prices are similar to those on the mainland.

($1 = 7.2701 Chinese yuan)

($1 = 7.8093 Hong Kong dollars)

(Reporting by Jessie Pang and Marcus Lum; Editing by Anne Marie Roantree and Jacqueline Wong)

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