NEW YORK — As student demonstrators took to the streets of Hong Kong last week, retailers were being impacted during what is typically one of the busiest shopping periods of the year, “Golden Week.”
In the district surrounding the protests, many shops were forced to trim hours or close entirely on the heels of a six-month tourism and retail slowdown. “I know a large number of high-end retailers located in areas where the protests are occurring have had to either reduce store hours or close stores as a result, so this will have a real short-term impact on sales,” said Benjamin Cavender, senior analyst at China Market Research Group.
Beijing’s decision to suspend all tour group travel permits to Hong Kong drove some economic concern, too. The area’s less-expensive, tax-free luxury goods market is a major driver for retail and tourism, and without the support from mainland visitors, experts suggested that the business lag could weigh on protester support.
Both tourism and retail make up 10 percent of the area’s gross domestic product, according to Capital Economics. Already, 30 percent fewer travelers from China made their way to Hong Kong this year, figures from the Hong Kong Inbound Travel Association show.
“The bigger concern is if this drags on over the course of several months, the retail sector and tourism sector, which are important to GDP, will hit the economy quite hard,” said Gareth Leather, Asia economist of London-based Capital Economics. “China keeps favor with Hong Kong by encouraging Chinese tourists to visit as much as possible. If there is a way of punishing Hong Kong, [making it] difficult for groups to get to Hong Kong [will have] a big effect.”
On top of China’s flagging economy, President Xi Jinping’s ongoing crackdown on corruption has made mainland consumers less likely to spend big on luxury goods in Hong Kong, which has seen overall year-on-year sales of consumer goods fall 15 percent, according to government statistics released midyear.
“The anti-extravagance rules that have been introduced in mainland China are partly to blame for the slowdown in the retail sales of luxury goods in Hong Kong,” said Helen Mak, senior director of retail services at Colliers International, in a release. “The negative impact of social conflicts between Hong Kong and the mainland is also affecting the local retail sector’s performance.”
Political tensions first came to a head in August when Beijing leaders ruled that Hong Kong would only be able to vote for a mainland-approved candidate in the 2017 chief executive elections. Both governments have chosen to wait out the protesters. But threats by the protesters to occupy government buildings pose a big longer-term implication for China’s economy.
“So long as the protests are contained to Hong Kong, you won’t see something that affects the broader growth front in China. Where the greater risk lies is if they should spread outside of Hong Kong,” said David Doyle, North American economist at Macquarie Securities Group.