Economy

Mainland shoppers trigger HK retail boom

By Wendy Leung and Kelvin Wong (China Daily)
Updated: 2010-04-13 11:48

HONG KONG: Ju Wei, the owner of an advertising company in the northwestern Gansu province, makes an 1,800 kilometer trek to Hong Kong at least six times a year to go shopping.

"Hong Kong is an international city, and that shopping atmosphere and environment is fantastic," said Ju, 29, who carries a shopping list from her friends in Lanzhou. "The stuff in Hong Kong has higher quality. It's so cheap."

Mainland residents, their wealth bolstered by an economy that grew at the fastest pace since 2007 in the fourth quarter, are visiting Hong Kong in record numbers and spending on luxury. February retail sales rose 36 percent from a year earlier, the fastest pace since 1988, the government said. They are also paying record prices for apartments, prompting the government to warn of a property bubble.

"The Hong Kong retail market would absolutely be devastated if mainland consumers stop visiting," said Kevin Lai, economist at Daiwa Capital Markets Hong Kong Ltd. "Half of the crowds in those shopping areas would disappear."

The wealthy are finding their way to Hong Kong. Tourist arrivals from the mainland gained 49 percent in February from a year earlier, driving total visitor arrivals to a record 2.87 million for the month, the Hong Kong Tourism Board said.

Sales at department stores that month surged 49 percent from a year earlier, and sales of luxury goods such as jewelry and watches jumped 48 percent. The mainland imposes taxes of at least 30 percent on cosmetics, 20 percent on high-end watches and 10 percent on golf equipment, according to the State Administration of Taxation. Those items aren't taxed in Hong Kong.

Mainland money has also helped fuel a 45 percent jump in prices of Hong Kong luxury homes last year, real estate broker Savills Plc said.