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  • Dec 18, 2014
  • Updated: 1:56pm
Chinese tourists
CommentInsight & Opinion

Hong Kong must find a way to resolve dilemma of mainland visitor numbers

Bernard Chan notes the effect of Beijing's crackdown on corruption

PUBLISHED : Thursday, 21 August, 2014, 12:54pm
UPDATED : Friday, 22 August, 2014, 1:50am

Recent figures show that Hong Kong's economy slowed in the second quarter of the year. Analysts say a marked drop in mainland visitors' spending on luxury goods is part of the reason. Representatives of the retail sector have expressed concern about what this could mean in the long term.

There are probably several reasons for the year-on-year fall in luxury goods sales. But Beijing's clampdown on official gift-giving and corruption must play a role. Assuming this is so, it implies that Hong Kong has been benefiting economically from misbehaviour among some mainland officials.

We all know the mainland's corruption problem is extensive, but is it right for Hong Kong to capitalise on it?

You could argue that Hong Kong is no different from many other destinations who attract high-spending visitors. But even leaving ethical issues aside, would this be a sustainable or desirable way for our city to make a living?

A Legislative Council research paper earlier this year looked at the impact of the individual visit scheme, which has allowed far more mainlanders to visit Hong Kong since 2003. The intentions behind boosting mainland visitor numbers were good, and the initiative was widely welcomed when Hong Kong was recovering from an outbreak of the severe acute respiratory syndrome.

However, total mainland tourist or shopper arrivals have increased hugely since, helping push visitor numbers up from 16.6 million in 2002 to 54.3 million last year. Many are shoppers who want to buy particular kinds of high-value items, so this influx has disturbed the retail mix. The Legco paper notes a 1,500 per cent increase in cosmetics and personal care outlets, and a 31 per cent increase in jewellery and watch stores from 2004 to last year.

At the same time, hefty rises in retail rents have led to the closure or relocation of many shops serving locals. Some observers are sceptical of tourism's economic benefits. According to the Legco paper, the individual visit scheme added only 1.3 per cent overall to our gross domestic product last year. This is probably because the majority of such visitors do not stay overnight, and the goods they buy are tax-free and essentially re-exports, so not much of the expenditure stays in the economy.

The paper says the impact on employment is bigger, creating jobs for 3 per cent of the workforce. But sceptics could argue that a similar number of jobs may have been lost as rising rents closed other businesses.

If Hong Kong benefited significantly in material terms from large numbers of mainland visitors, you would expect ordinary people to support it. However, as far as we can tell, public opinion is more negative than positive.

Complaints about the closure of local shops and overcrowding in the streets and MTR are well known. Now we are hearing the same thing about mainland visitors competing with locals for scarce space in swimming pools and at barbecue sites. This is deepening divisions between Hong Kong and the mainland. It is also feeding the bitterness we see in society right now.

It is unrealistic and indeed unfair to expect Hong Kong people to suffer just to benefit particular retail sectors. If something boosts the economy but harms quality of life, we should ask: what's the point?

At the same time, we must recognise a real problem with our reputation and image on the mainland. How can we handle this situation without appearing ungrateful and inhospitable? Pointing fingers - especially at mainland visitors who clearly like our city - does not help.

Maybe Beijing's clampdown against corruption will help solve this problem. Certainly, luxury retailers cannot complain about measures that improve governance for the nation.

Bernard Chan is a member of the Executive Council

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This article is now closed to comments

acny
Just cut off the inflow completely. All luxury stores will be replaced by wonton noddle shops or mom and pop stores. No more queues going up to the Peak. People can finally afford buying a flat or finding a seat in the MTR. You WILL be served promptly in an electronic store. Turning Hong Kong back into a sleeping fishing village is not bad an idea. No need to hear about how well we do in all those world rankings day in and day out. Beijing will then leave us alone.
shouken
Limiting the number of weekly visits allowed to Shenzhen residents to 1 (or at most 2) may reduce the total volume of cross-border traffic considerably. It is certainly worth trying.
--
But I think the most hideous truth about dramatic growth of cross-border tourism is that it hardly benefit the average HKer in any noticeable way. Most of the benefits, as always, flow to the 1-2% who are structurally poised to collect the profits, leaving the large majority out of the picture. So the crux to solving the problem is juster wealth distribution.
keithkklau@gmail.com
What is so disappointing is C Y Leung administration fails to address the problem deliberately and simply protecting the property tycoons' interest.
lucifer
Pretty much on point....now lets do something about it...
virokick
CY Leung should be given credit for his courage to raise up the issue of limiting tourist numbers. The CE fully well knows it will summon the wrath of business - such as the General Chamber Of Commerce.
This is HK's curse, a CE that doesn't have an ultimate say- due to our political structure.
However in most democracies- it will also be in certain ways similar ,and the president will need some finesse in balancing the wants of various interest groups.
1)Raising taxes and imposing tariffs will be one way to indirectly kill of the supply of mainlanders to HK.
2) another way is to raise the value of the HKD/USD peg, make it equivalent strength to RMB.
3) third way is to impose higher specific taxes on business that benefit from retail tourism- a compensation for higher social cost.
4) CY Leung to get help from Beijing - to restrict visa issuance to HK.
5) getting full universal suffrage- the majority of HK can vote a CE to mandate mainlanders number restriction into HK. And most importantly shut up the General Chamber Of Commerce and property developers and landlords.
lucifer
They are going to have to cut the taxes and import duties if they ever want to rebalance the economy and rely more on household consumption. They have already started several months ago, but its not enough. The result will be an eventual decline in tourist shopper and smugglers.....howver, if the entire economy is geared toward retailing, we will be caught with our pants down and to ally unprepared. You can see its already happening now.
53e4c087-7564-4e13-8ee4-74210a320969
Good points made in this column.
True, the influx of mainland visitors benefits 1% or 2% of the population, while making life more difficult for the remaining ones.
True too: the luxury goods shops have been making money largely on the back of a corruption-driven trade. Their complaints are pure hypocrisy and show a complete lack of moral considerations.
One may then ask: how on earth did we get to this absurd situation?
The cynic in me will tell that that easy and selective flow of money was designed to gain support of Beijing's politics from HK business circles. It can be easily controlled, expanded or reduced to make a point. It's the perfect leverage.
cindyyv
40 million tourists a year - there is no denying that Hong kong is bearing the blunt of this, and the only sector these tourists benefit are transport and some retail. Consider how much rubbish, waste and carbon footprint of these tourists? What is the impact of this on the Hong Kong people? Hong kong is running out of landfills and how much waste is really the result of 7 million people?
virokick
It will be easier to impose tariffs from HK than to ask China to lower taxes upon themselves.
In fact it is China that's doing the right thing - with redistribution and taxes.
It is HK that has not played by the rules.
Any developed civilised nation on earth has high taxes.
The more civilised = the higher the taxes.
johnyuan
It seems all the questions about the overcapacity of mainland visitors in Hong Kong has been asked. Too all the answers by implication have been supplied. Bernard Chan should still give us some real up today information if CY Leung has made a sensible decision to reduce the visiting number.
.
Had the CE made that decision it might be a moot one as Xi Jinping’s timely anti-corruption campaign has the same effect; CY Leung nevertheless should be praised for his courage to defy the local special interest groups that selfishly has had normal life disrupted greatly in Hong Kong.
.
Bernard Chan’s question and answer piece lacks of such acknowledgement.

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