• Thu
  • Dec 25, 2014
  • Updated: 6:24pm
CommentInsight & Opinion
LEADER

There's a silver lining even as retail sales take a downturn

PUBLISHED : Wednesday, 06 August, 2014, 4:35am
UPDATED : Wednesday, 06 August, 2014, 8:41am

The city's retail scene stood to win or lose from policies that impact on mainlanders who throng our shopping malls. On one hand, President Xi Jinping has led a crackdown on corruption that targets extravagance and conspicuous consumption. On the other, the central government has introduced selective measures to stimulate investment and spending to keep the economy on track to achieve growth goals.

If Hong Kong's latest retail sales figures are anything to go by, Xi's anti-graft campaign is having a bigger impact here so far. Government statistics show that sales revenue declined in June for the fifth consecutive month, down 6.9 per cent compared with June last year by a sustained plunge in demand for luxury goods.

Sales of high-end jewellery, watches and valuable gifts fell more than 28 per cent year on year, following a 40 per cent plunge in April. In the first six months retail sales fell 1.3 per cent, the worst first-half performance since during the global financial crisis in 2009.

Many retailers affected by the slowdown put their faith in the theory that it is temporary and will be reversed by the measures to underpin economic growth. These may already be having a positive impact on the mainland, but not in Hong Kong yet, going by anecdotal evidence like shuttered shops in expensive shopping areas such as Causeway Bay.

That said, it is a question of which factor drove retail operators out first - high rents or falling sales revenue that ultimately made them unaffordable. In many cases it would surely have been both.

However, the spurt in retail sales growth by double-digit margins that ran until last year was exceptional. It could never be sustained. Growth rates were bound to return to more normal patterns. There is an upside. Cooling sales should help rein in rents for retail premises, blamed for driving out traditional local businesses and a factor in high prices.

Counter intuitively, local diners rescued the restaurant trade from the downturn by increasing their spending on meals by 3.6 per cent in the first half, compensating for curbs by Xi that discouraged mainland companies from hosting expensive entertainment. It now remains to be seen if restaurants driven to upper floors by soaring retail rents will be able to return to better street-level positions.

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This article is now closed to comments

johnyuan
Normal life in Hong Kong was disrupted by the conspicuous consumption on luxury goods and property by mainlanders. That is to say those pots of gold obtained by the retailers, landlords and developers are just extra fortune accumulated all at the expanses in disrupting the normal life of the locals. I shed no tears for the downturn and neither these money digger should.
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The real lesson to learn from the ‘falling’ in retail sales is that Hong Kong’s economy at the very basic level is intrinsically intertwined with political policy in the mainland. Hong Kong’s normal life has been in the hands of few influential and greedy individuals who have the power to dictate how we should change and suffer. So much so that Hong Kong is like one big company town with a ruthless boss over all powerless employees.
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I like the Hong Kong General Chamber of Commerce in particular to be publicly shamed of its collective shallowness indulging in greed that can’t see reason over dirty money.
virokick
Better street level positions for the general HK public.
Removing these jewellery shops and luxury shops for the general public.
Great news , I've been waiting for this great news for 10 years.

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