Hongkongers fall for China’s big box stores

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Eve Leung has the run of the luxury retailers that proliferate in Hong Kong’s glitzy malls. But in recent months she has preferred the lure of something far more prosaic: a big box retailer across the border in southern China.

Every few weeks, she spends as much as HK$2,000 (US$256) in Sam’s Club, an American membership warehouse chain, in Zhuhai. “Things are much cheaper than Hong Kong,” said Leung, in her 40s. Fresh fruit, tissue paper, toothpaste and chocolate are among the items that she has brought back to Hong Kong.

Hongkongers are increasingly flocking to mainland China on weekend getaway trips, attracted by cheaper groceries and American-style wholesale warehouses. Thousands have signed up for local travel agency tours to these warehouses, including to a new Costco opening on Friday in Shenzhen.

After both Hong Kong and China emerged from the Covid-19 pandemic, and the border reopened, retailers and politicians hoped it would be the catalyst for a revival of the consumer spending that is central to the Chinese territory’s economy. Instead, the most striking flow has been in the other direction, as Hongkongers have flocked to cheaper China, in part encouraged by a strong Hong Kong dollar. The currency is pegged to the US dollar.

Hong Kong residents spent about HK$50bn in mainland China in 2023, estimated Heron Lim, an economist at Moody’s Analytics, about 12.5 per cent of his forecast total retail value for Hong Kong for the year. Natixis senior economist Gary Ng, meanwhile, estimated Hongkongers spent about HK$67bn in the whole of 2023 on trips to Guangdong.

More than 3,000 people have already booked to go to Sam’s Club in the next few weeks, according to EGL Tours, a Hong Kong-based travel agency, which is already signing people up for trips to the new Costco.

The number of people taking tours from Hong Kong to mainland China tripled last year compared with the pre-Covid era, said executive director Steve Huen. “Apart from going to [warehouse retailers], our trips also offer other attractions,” he added, such as a visit to a historic village in Dongguan.

Such is the alarm prompted by these trips that one pro-Beijing political party in Hong Kong floated the idea of a “departure tax” on the border, including to the mainland.

Michelle Lam, greater China economist at Société Générale, said it was “likely” that the trend of Hong Kong residents spending in mainland China would accelerate given the attractive prices of goods in places such as Shenzhen. If it does, this “could knock as much as 1 percentage point off Hong Kong’s gross domestic product in 2024,” she said.

More concerning was “the lack of Chinese spending power in Hong Kong, as Hong Kong fades in appeal to Chinese shoppers still willing to spend to other locations,” Moody’s Lim said, noting that “prime among them is domestic Hainan that has really upped its game in duty-free shopping”.

While mainland Chinese visitors accounted for nearly 80 per cent of tourists in Hong Kong post-pandemic, the number of visitors over the first 11 months of 2023 was about 40 per cent lower than the same period in 2019. Hong Kong retailers also say that mainland visitors are not spending as much as they used to do.

“That just reinforces the urgency for Hong Kong to develop a tourist offering because it’s a very important part of the economy,” said Frederic Neumann, chief Asia economist at HSBC. “It needs to be something beyond luxury retail and I think we haven’t fully cracked the formula yet.”

Many like Monica, a 26-year-old who works in finance in Hong Kong and frequently travels to Shenzhen for weekend trips, said she would keep going this year.

“Dining out is something I do on a frequent basis. In Hong Kong, it’s normal that a meal costs more than HK$200 per person,” she said. “But in Shenzhen, I can order any food I fancy at a restaurant without batting an eyelid.”

Other examples include 400 grammes of pork bone for soup, which costs twice as much as in Hong Kong than in Shenzhen.

“Across the border, you can spend less money but enjoy a whole day of great activities,” said Sonia Cheng, in her 30s, who visits the mainland two to three weekends each month.

Additional reporting by Gloria Li in Hong Kong