The rising anti-Chinese sentiment in Hong Kong hurts the feeling of its mainland visitors, but might hurt Hong Kong where it really hurts: in its retail sales, as the super-wealthy might choose other destinations, says business analyst Shaun Rein in CNBC.
The damage to Hong Kong’s reputation as a place that welcomes mainland Chinese is serious. Losing mainland money could spell trouble for Hong Kong’s retail and real estate sectors, which over the past five years have become increasingly reliant on it.
Wealthy mainland Chinese, like billionaire Jack Ma, founder of Alibaba, who have bought homes there, propped up Hong Kong luxury home prices during the financial crisis. Retailers like Omega and Cartier have seen sales soar there because of mainlanders seeking to shop without the high value added tax and tariffs on the mainland. My firm estimates that more than 50 percent of luxury products sold in Hong Kong are to mainlanders.
It is highly unlikely that the tide of mainland tourists to Hong Kong will drop greatly – cheaper prices, short flights, and general fun outweigh the nastiness, but it is clear more mainlanders, especially the ultra wealthy, will travel elsewhere instead of Hong Kong.
Brands need to adjust to the potential shift in destinations frequented by mainland tourists. Instead of opening more stores in Hong Kong, brands should start getting ready for an influx of Chinese in Europe and other destinations in Southeast Asia.
According to a company announcement, Harrod’s in London saw a 40 percent increase in sales in the first quarter of 2011 to Chinese tourists after it installed 75 point-of-sale terminals accepting Unionpay, a Chinese competitor to Visa and MasterCard so that Chinese could easily access more cash. Other brands operating boutiques in Europe are hiring more Mandarin-speaking salespeople.
Shaun Rein will publish next month his book The End of Cheap China: Economic and Cultural Trends that will Disrupt the World. More in Storify.
- Luxury spending moves to smaller cities – Shaun Rein (chinaspeakersbureau.info)
- Locusts and running dogs in Hong Kong – Zhang Lijia (chinaspeakersbureau.info)
- Mainlanders vs. Hong Kongers (hjyaisiteru85.wordpress.com)
- Why Chinese are leaving Western companies – Shaun Rein (chinaspeakersbureau.info)
- What do Chinese tourists want? – Shaun Rein (chinaherald.net)