Hong Kong: Three years of democratic protests and subsequent pandemics have devastated Hong Kong retailers accustomed to relying on cash from tourists in mainland China. Markets have become craters in cities that once boasted some of the highest retail rents in the world.
However, the border town has seized the opportunity to develop its local economy. Sheung Shui was the first town from a major overland border crossing and once prospered as a snap-up location for resale of tax-exempt goods in mainland China. This is a process known as parallel trading.
“People’s impressions of Shen Shui are on parallel traders and mainland China,” said 22-year-old Eugene Chan, who has lived in the neighborhood since childhood. Chan recalled the pavement crowded with people stuffing their luggage with cosmetics, infant formula and household items to meet the vast cross-border demand.
But as a result of a large democratic rally and subsequent pandemic-related border closures, everything disappeared. In January 2019, just before the protests began, the number of arrivals from the mainland reached a record high of 5.5 million. This is an amazing number given that Hong Kong has a population of 7.5 million.
Two years later, that number was below 3,000. “This is a huge loss of demand,” said Simon Smith, senior director of research and consultancy at Savills. “The wave of mainland spending, with a particular focus on luxury goods, watches, jewelery and designer goods, has pushed rent to the highest level in the world.”
Hong Kong’s popular shopping district used to boast “Golden Street,” which is more expensive than Fifth Avenue in New York City. Currently, according to Smith, store rents in prime locations have undergone a “significant revision” and have returned to 2003 levels, down more than 75% from their 2013 peak levels.
Analysts have pointed out a rebalance to more local consumption, and some major location stores in the shopping area have been taken over by more budget-friendly businesses. In a large location in Hong Kong’s central district, which accounts for part of the world’s highest retail rent, luxury brand MCM was replaced last year by Decathlon, a sporting goods chain that surged in stores for HK $ 800,000 ($ 103,000) per month. I did. 70% discount, according to local media reports.
Similar rent declines have also been recorded in Causeway Bay, another once strikingly expensive shopping district. At Sheung Shui, entrepreneurs like Dream Law seized the opportunity to start a business that was more responsive to the locals (grocers in his case). “During the (mainland tourist) boom, 80 to 90 percent of businesses in the Sheung Shui market area catered to parallel traders,” the law said. Soaring rents mean that community businesses such as hardware stores, bookstores and movie theaters have been reduced, he said.
“I felt this community wasn’t ours. It’s been so for years.” The economic situation in border towns like Shenshui has boiled in protests since 2012 and in the past. It was a major factor in the heightened tensions between China and Hong Kong for 10 years.
When the pandemic broke out, Rho found a silver lining on the rocky bottom rent and launched the BeWater Mart, which focused on “Made in Hong Kong” products. His store, along with nearby cafes and pottery workshops, represents a wave of early companies seeking to meet local demand. “I hope the people of Shenshui can come back and live and spend time here,” Rho said.
Following China’s leadership by adopting a strict zero COVID policy, Hong Kong is currently in talks to resume regular travel to the mainland with limited capacity. According to polls, many Hongkongers are trying to cross the border for business, tourism and family reunion. The Hong Kong government’s daily quota proposal is reported to be around 1,000, but it has no “significant impact” on increasing tourist spending. Returning to pre-pandemic levels, Savills Smith said.
It remains unclear whether Hong Kong’s retail economy will return to a mainland-dependent model or take a new path the night before borders reopen. Mr. Chan, a resident of Shenshui, said the border closure was just a “stop” and worried about the return of parallel traders. But in the meantime, she will concentrate on enjoying the present.
“Finally one of my friends told me I wanted to come to Sheung Shui to try the restaurant (…) that’s a happy change,” Chan said. “The atmosphere is neither stuffy nor busy. Instead, it feels like a small community. I think everyone has a better breathing.” – AFP
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