20th May 2024 – (Hong Kong) Hongkongers are flocking northwards in droves, drawn by the allure of mainland China’s booming Greater Bay Area. This shift in consumer behaviour is reshaping the economic landscape, with significant implications for local businesses in Hong Kong.

The phenomenon of northbound consumption has gathered momentum, seducing even the younger generation previously influenced by separatist ideologies. The vibrant, evolving metropolis of Shenzhen, with its bustling malls and expansive leisure offerings, has become a particularly magnetic destination. The result is a palpable shift in spending patterns that is leaving Hong Kong’s local tourism, dining, and retail sectors grappling with a sustained downturn.

Statistics from Mainland media illustrate a drastic reversal in cross-border human traffic. Since the resumption of normal travel operations last year, the number of Hongkongers heading to Shenzhen has nearly doubled compared to mainland visitors coming to Hong Kong. In a single month, the expenditure of Hong Kong residents in Shenzhen hit a staggering HK$4 billion.

This burgeoning trend is facilitated by seamless transport links, a plethora of shopping destinations right next to border checkpoints, and a payment ecosystem that caters adeptly to Hong Kong shoppers. Mainland businesses have adeptly adapted to the preferences of Hong Kong consumers, further enhancing the cross-border living standard.

Conversely, the influx of Mainland tourists, which many local businesses in Hong Kong had hoped for, has failed to materialise at the same scale. This growing disparity is illustrated by recent figures: on a typical day this month, approximately 310,000 Hong Kong residents crossed northwards while only about 120,000 mainland visitors came south.

The economic impact of this trend on Hong Kong is multifaceted. On the one hand, Hong Kong’s retail and F&B sectors are experiencing what some have termed a ‘closure wave’, struggling to compete with the more attractive pricing and variety offered in the mainland. On the other hand, this cross-border consumer flow is an economic boon for Shenzhen, manifest in its thriving marketplaces and gastronomy scene.

This shift also reflects deeper economic currents, including the favourable exchange rate between the Hong Kong dollar and the Renminbi, and the perceived higher value for money on the mainland. Many Hongkongers find the trip north worthwhile, not just for shopping, but for a variety of dining options and entertainment activities that are perceived as superior or more affordable than those available locally.

In response, the Hong Kong government has exhausted numerous strategies to rejuvenate its economy. High-profile events and promotional gimmicks aimed at attracting visitors from the mainland have seen limited success. Upcoming relaxations in travel restrictions are anticipated to bring in around 300,000 visitors annually, potentially boosting local spending by HK$1.2 to HK$1.5 billion. However, whether these measures will suffice to stem the tide of outbound consumption remains uncertain.

The situation is a stark reversal from a decade ago when mainland shoppers were derogatorily dubbed ‘locusts’ by some locals as they flooded Hong Kong’s shopping districts. Today, Hong Kong residents are doing much the same in Shenzhen, drawn by a potent combination of favourable economics and appealing lifestyle offerings.

This shift in consumption presents both significant challenges and opportunities for Hong Kong. It highlights the necessity for local businesses to innovate and adapt, while also emphasising the need for more refined and effective government policies to boost the domestic economy’s competitiveness. As Hong Kong manoeuvres through this complex environment, finding the right equilibrium between encouraging local patronage and accessing the profitable Mainland market will be key to defining the city’s economic trajectory.