Shenzhen's rich buy basics in HK

PUBLISHED : Friday, 04 May, 2012, 12:00am
UPDATED : Friday, 04 May, 2012, 12:00am


Shenzhen's wealthier residents are relying on regular shopping jaunts to Hong Kong for not only big-ticket purchases, but everyday items, such as toothpaste, spending 20 billion yuan (HK$24.6 billion) annually when the central government hopes to boost domestic consumption.

The spending in Hong Kong is equivalent to about 6 per cent of Shenzhen's total retail sales volume last year, or 352 billion yuan, according to a survey by the Shenzhen Retail Business Association.

The size of the figure is a concern to some economists, who say the mainland's high taxation rates imposed on products as they make their way from customs to the store shelves are partly to blame for the displacement in spending between the two cities.

The survey interviewed 2,116 Shenzhen residents and found that more than 27 per cent had shopped in Hong Kong last year, and a quarter of those had visited at least once a month, the Southern Metropolis News reported.

The most frequent shoppers tended to be the wealthier residents, or ones with a university education, the survey found.

'Nearly 17 per cent of Shenzhen residents who earn more than 20,000 yuan [a month] and 9 per cent of those with a tertiary education are frequent spenders in Hong Kong, while less than 7 per cent of those earning between 8,000 and 19,000 yuan said they frequently shopped in Hong Kong,' it said.

'For those earning less than 5,000 yuan a month, only 1.5 per cent are frequent visitors.'

In addition to clothing, shoes, cosmetics and electronic appliances sold in Hong Kong, daily commodities have become popular items among the better-off residents, as they are taxed less and perceived as being of higher quality.

'We estimate that Shenzhen residents spend more than 20 billion yuan a year to shop in Hong Kong, and the number is growing every year,' said Hua Tao, chairman of the Shenzhen Retail Association, in the report.

He attributed the trend to the appreciation of the yuan amid high domestic inflation, frequent scandals over food safety and other mainland products, high consumer taxes, as well as the convenience afforded by permits allowing unlimited crossings

Professor Lin Jiang, an economist at Sun Yat-Sen University, said the spending pattern was a dangerous sign for mainland manufacturers when consumers tended to buy daily commodities over the border.

'It's ridiculous that after 30 years of economic reform, Chinese consumers refuse to buy domestic-made products,' he said. 'It extends to something as basic as toothpaste - the rich want a product made in the US after so many mainland products were caught up in safety scandals.'

Lin said heavy taxes were another concern. 'Our research suggests taxes on a single product sold by mainland retailers can amount to 55 per cent of the retail price, including customs, consumption taxes, sales taxes, value-added taxes and others.'

Experts from the Shenzhen-based China Development Institute suggest the city government offer a tax rebate on imported goods for mainlanders visiting Shenzhen to boost domestic consumption as authorities in Hainan have done. But there are concerns that such a tax rebate would only prompt domestic tourists to buy more imported products as the quality is often better. A rebate could end up discouraging people from buying mainland-made goods, Lin said.

The Hong Kong Tourism Board said overnight mainland visitors spent an average of HK$8,220 per person last year, while one-day visitors spent HK$2,439.