Economy

Do your duty

Guangdong’s plans for tax-free shopping may hurt Hong Kong

Shoppers from mainland China walk with their luggages on Russell Street at the Causeway Bay district in Hong Kong

Primed for purchases

The antics of Chinese tourists overseas have received much comment in these pages. Generally, their hosts welcome business from Chinese visitors, but less so some of their more outlandish behaviour.

The latest traveller to cause a stir is a native of Shandong surnamed Wu, who was videotaped at Hong Kong’s airport making his lunch with a rice cooker.

Many Hongkongers are sensitive to what they perceive as crass behaviour from mainland Chinese and Wu was soon being lambasted by Hong Kong netizens.

But what was interesting, says the Hong Kong Daily News, is how quickly they reconsidered their prejudices once newspapers had uncovered Wu’s full story.

Wu turned out to be a luckless labourer transiting from Singapore. Having sent his savings home ahead of him, he had missed his flight and was stuck in the departure hall. Instead of derision, he won widespread sympathy from Hongkongers. Some travellers even started taking selfies with him before he departed Hong Kong the next day.

Still, elements of the mainland media are miffed at Hongkongers’ attitudes towards their compatriots. “Some on the Chinese mainland feel the friendliness of Hongkongers only comes from a sense of superiority,” the Global Times has observed. “Hongkongers are caring only if you lead a miserable life.”

Why the unfriendly tone? The Global Times notes Wu’s story was being told in the wake of fresh protests in the former British colony against mainland tourists. Hundreds of activists stormed shopping malls, and chased off mainland shoppers, clashing with police (see WiC271).

These demonstrations are primarily targeting so-called parallel traders who buy cheaper goods in Hong Kong and resell them for profit across the border.

Hongkongers complain that malls are now overcrowded and unpleasant, and that shelves are quickly emptied by bulk-buying, making it difficult for locals to do their own shopping.

Most Chinese tourists believe the quality of goods sold in Hong Kong is better and safer (think infant milk formula). Because most Hong Kong goods are duty free, it is cheaper to shop there too. As such, mainland shoppers have been a driving force for the Hong Kong economy for more than a decade. But the governments on both sides of the border are under pressure to resolve the social strains that the spending is causing.

According to Singtao Daily, one solution is to rethink the multiple entry permits that Shenzhen residents use to enter Hong Kong. Other ideas include getting the Chinese to spend more of their money on the mainland side of the border. For example, in January Guangzhou opened a pilot shop in which customers could buy duty free goods. It offers imported goods from Hong Kong at prices 30% lower than retail outlets in downtown Guangzhou (primarily because of the reduced tax).

However, the experimental store soon suspended most of its services because it was just too popular. More than 5,000 shoppers crowded the outlet in the first day of operation. “We are unable to provide quality service for our customers due to the heavy flow of people,” the store manager confided to the China Daily.

The Guangzhou government hasn’t abandoned the idea altogether and is working on creating a larger retail hub for duty free goods. Officials in Shenzhen’s new financial zone Qianhai (see WiC180) are working too to set up a similar zone this year.

These efforts look to be a practical means by which local governments in Guangdong can tackle the problem of parallel traders visiting Hong Kong. While that may please many Hongkongers, it won’t be such good news for the property firms and shop owners who benefit from the influx. Singtao Daily warns: “Once a precedent is created, people will no longer need to come to Hong Kong for shopping… Hong Kong’s retail industry must respond to this policy challenge.”


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