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  • Dec 20, 2014
  • Updated: 8:14pm
Jake's View
PUBLISHED : Sunday, 15 June, 2014, 3:55am
UPDATED : Sunday, 15 June, 2014, 3:55am

Mainlanders' spending in Hong Kong doesn't show up in our GDP - that's statistical reality

Cutting the number of solo travellers to Hong Kong will hinder the city's economic growth but only in the short term, according to a think tank's economic simulation.

South China Morning Post, June 13

Not much thinking going on in this think tank, methinks, at least not if it comes up with a howler like this. Contrary to what is implied here, non-resident spending is deducted from the raw figures on consumer activity when gross domestic product is totted up.

That's right. It is deducted from, taken away from, subtracted from the figures, not added to them.

When our statisticians tally up total consumer spending in Hong Kong they create two additional categories - non-resident spending in the domestic market and resident spending abroad.

They then take all that non-resident spending out of the figures so that it has no effect on GDP and they add in the amounts that Hong Kong residents have spent abroad. Thus if mainland tourist spending here now crashes, our economy will march on untroubled.

But I hear you. This is all wrong, you say. Things should be the other way round. What non-residents spend here is a boost to our economy and what Hong Kong people spend abroad is lost to us.

Go argue the toss with the Census and Statistics Department if that's what you think. All I can tell you is how they do it and, if you think it's wrong, then don't pay any attention to our economic growth numbers. They are all mixed up from the start anyway by your reckoning.

In fact, there is effectively a double deduction. The value of imports is deducted from the trade figures that go into GDP and pretty much all of what mainland tourists buy in our shops is imported.

But consider some other things. You may say that a drop in mainland tourism will put a number of people out of work and push up our unemployment figures. Yes, hurrah, it will. Our unemployment rate is 3.1 per cent, which is effectively full employment.

Construction bosses and restaurateurs are complaining loudly that they cannot find low-end manual labour anywhere.

And now they will be able find it with little need of re-training or dislocation. We won't have to open the gates to migrant labour. If falling tourist expenditure puts shop clerks on the street, there will be better jobs aplenty waiting for them. Less stress too.

Then there is that matter of sky-high shop rents and entire shopping districts turned into cheap jewellery outlets where Hong Kong people are not really welcome and where they have sense enough not to go anyway.

Hurrah! We shall get our shopping districts back. I may actually have reason to poke around Causeway Bay again some time. I certainly do not at the moment.

The long and short of it is simple. Tourism is a great starter industry for a bombed-out economy that is trying to get on its feet and has an oversupply of unskilled labour for menial jobs. That's not us.

In last Sunday's column I wrote that I thought the government's consultation on sourcing part of our electricity supply from the mainland (Option 1) is a fraud, as Beijing has already decided we must go that way.

Christine Loh Kung-wai, the undersecretary for the environment, has written me to dispute this. "Saw your piece on Sunday. You concluded that the government must have received pressure to propose Option 1. This is wrong. Just wanted to let you know. There has not been any pressure from the mainland or anyone else," she wrote.


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This article is now closed to comments

JVDK has been very consistent over a decade or so rightly to discard tourists who stay in our hotels and eat imported steaks don’t really add too much revenue to Hong Kong’s economy except to the foreign operators.
With our tourists nowadays mainly coming from mainland, even their instant noodles they eat are imports. In fact, Hong Kong just doesn’t make anything anymore. But as far as product goes I could only think one remains plentifully made locally is concrete. May be it is lucrative to the producers (mostly local property developers). The government too wouldn’t let go any chance to place concrete anywhere at anytime so as to look good on our yearly GDP. Probably shop clerks salary aggregately is too low to account for in GDP meaningfully.
The slow down in construction in housing and MTR tunnel digging etc must have a terrible blow to this year’s GDP with a slow down in concrete production.
Are Hong Kong people happier with a lower GDP? Canada focuses less on GDP but more on a people happy index as a value of substance.
I think with less concrete produced and used, less crowding and polluting and most of Hong Kong people shouldn’t be more unhappy at least. May be Hong Kong should stop using GDP to measure its yearly economic performance so we may see blue sky.
John Adams
macook64 : Unless you are the Commissioner for C & S writing under a pseudonym I think you are on exceedingly shaky ground when you challenge Jake on factual matters like this.
I have only known Jake to be proved wrong about once a year , and those occasions were on matters of opinion, not matters of fact.
John Adams
What an excellent comment ! I fully agree
To hell with GDP ! Let's have blue skies, space to move around, less concrete, lower shop rents, more mom and pop stores and a LOT more happiness !
(and please NO more doom-and-gloom / chicken licken the-sky-will-fall-down / cry wolf financial secretaries)
I think Hong Kong should definitely import electricity from China. Hong Kong needs to do everything it can to reduce pollution. Also due to economy of scale it makes no sense that HK produces its own electricity we are just to small. A city the size of HK should just have 1 electricity supplier CLP. Time to get rid of HK electric. It mave have made sense when HK had a harbour that met something but laying cables across the HK stream is not pretty simple.
The article is misleading and the headline is, factually, untrue.
Spending by tourists is counted as part of exports, not consumption. Since exports are part of GDP, tourist spending is counted part of GDP.It is true that the value of imported inputs is deducted from GDP. So, only that part of tourism spending which is value added w/in HK is included in HK GDP.
There are many valid arguments against encouraging the tourism industry. No need for an invalid one.
Sorry, fanboys. Not associated with Census & Statistics but here is their definition of Trade (export or import) in Travel Services:
"Travel covers expenditure on all goods and services acquired by travellers for personal use from the territory in which they are travelling, e.g. expenditure on lodging, meals, entertainment, transportation within the territory visited and articles purchased. Travellers include those travelling for business and personal purposes (including study)."
Have a look for yourself:
Upshot is foreign visitors spending in HK is exports. HK visitors spending abroad is imports. Former included in HK GDP, latter not.
"Saw your piece on Sunday. You concluded that the government must have received pressure to propose Option 1. This is wrong. Just wanted to let you know. There has not been any pressure from the mainland or anyone else," she wrote.
I assume you reported it verbatim here without any subtraction. You add no comment and I assume CL’s personal integrity remains unchallenged. But I am less concern if pressure from mainland is applied. What matters is that Hong Kong Electric must stop polluting air and accept electricity import from Guangzhou to achieve it. I know you are more politically inclined which prompt CL to drop you a line to correct your view.


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