Pro-democracy protestors in Hong Kong directed their dissatisfaction at so-called Mainland Chinese ‘parallel traders’ at the weekend as the downward pressure on retailers in the special administrative region is showing no signs of abating. 

Skirmishes erupted between Hong Kong police and protestors during a mass demonstration held at the border town of Sheung Shui yesterday (5 January).

Video footage from the South China Morning Post showed demonstrators shouting anti-government slogans and refusing to leave the area.

International media reports claim pepper spray was used as tensions ignited after the police ordered people to disperse.

The Hong Kong Police confirmed via Twitter that petrol bombs were thrown at Sheung Shui Police Station and tear gas was used outside the building.

Sheung Shui is a border town located in the New Territories.

TARGETED PROTESTS 

The anger is understood to be directed at those Chinese shoppers who purchase goods in bulk to resell across the border in the Mainland to circumnavigate certain import duties and taxes.

Consternation against this sort of practice is being linked to convenience product shortages, which are blamed for driving up commodity prices, shop rents and indirectly causing overcrowding.

Speaking to several well-informed sources on the ground in Hong Kong who preferred not to be named, TRBusiness learns it is these highly sought-after convenience products such as infant formula, toiletries, skincare goods, cosmetics and medicine that are the target for traders at border towns such as Sheung Shui.

This is contrary to the loose reference used in some media reports of ‘duty free’ goods being bought, which [depending on how you read it – Ed] suggests items such as liquor, tobacco or luxury goods are also being traded.

“Traders are not buying luxury goods in these border towns – premium goods, but not luxury,” clarified one source.

Another observed: “Actually, the Hong Kong people were never against parallel importers or daigous buying high-end luxury goods such as jewellery, watches, fashion or duty free goods.”

One source said that should there have been a high prevalence of luxury ‘duty free’ goods being shipped across the border, this would manifest itself at all luxury retail locations in Hong Kong.

“It clearly doesn’t,” they stated. “Instead what we have seen are protestors repeatedly targeting malls and other areas frequented by Chinese visitors.

“The unhappiness at cross-border traders is mainly about two things: A) it’s changed the economics of the border towns making rents for retail places and costs of living much higher; and B) it’s an opportunity to deliver political messaging directly to Chinese visitors and China.

“There’s always been a section of the HK population that resents the fact that Chinese shop across the border for goods and bring them back to the Mainland to sell.

“Cross-border shopping has become the latest target for the recent protest movement mainly because of the visibility it accords – in terms of highlighting the unhappiness of Hong Kong people directly to Chinese, as opposed to media reports.”

It  is also important to point out that incidents such as the one witnessed at the weekend are not new, points out one source.

“This issue has been around far longer than the current protest activity which was triggered by the extradition bill seven months ago.

Anti-government protests have persisted in the months since Hong Kong formally shelved its controversial extradition bill in October. Source: Studio Incendo.

DWINDLING SALES

The flare-up in Sheung Shui follows swiftly on from data released on 3 January via the government’s Census and Statistics Department (C&SD).

This revealed a 23.6% plunge in retail sales for November to HK$30bn, according to the latest provisional figures. October’s results told a similar story in terms of depressed growth (-24.4% yoy).

Revenue for the 11 months of 2019 based on sales receipts decreased by 10.3% year-on-year.

After negating the impact of price differentials, provisional estimates indicate the decrease to be -11.4% compared to the same period in 2018.

The November figures underpin months of political agitation and violent demonstrations against Hong Kong’s controversial – now suspended – extradition bill.

Jewellery, watches, clocks and valuable gifts experienced the biggest hit in revenue (-43.5%), while apparel (-31.9%), medicines and cosmetics (33.4%), footwear, allied products and clothing accessories (-31.5%) and books, stationery and gifts (-20.8%) among other products to bear the brunt of consumer discontent.

On the other hand, the C&SD noted that sales of commodities in supermarkets rose by 2.6% in November year-on-year.

The C&SD pointed to retail sales maintaining a sharp decline in November, with protests ‘turning extremely violent, causing very severe disruptions to tourism- and consumption-related activities and further dampening consumption sentiment’.

It adds that the near-term outlook for retail hinges squarely on the how such incidents evolve.

“Ending violence and restoring social order are essential to the recovery of the retail trade and indeed that of the whole economy.”

Asked for the retail prognosis in the context of a seemingly cyclical process of antagonism between citizens and the government, one source added: “I don’t believe [the situation] is subsiding. If anything, it’s setting a ‘new normal’ of what to expect as we move ahead.

“The biggest impact of the protests – from a retail perspective – is that Chinese tourists have largely stopped coming to Hong Kong. This, coupled with severe disruptions and store closures over many weekends, inevitably results in a hit to retail and allied services transactions.”

Another source added: “The mainstream pro-democracy protests are continuing to impact on mainstream retail. November sales were down by almost the same rate is October’s. That said, there was an element of calm in much of December (until New Year’s eve).

“Anecdotally, I have heard that retailers enjoyed some respite; there were fewer store closures due to protest activity and locals may have spent more time in stores as the holiday season arrived. However, inbound tourist numbers were unlikely to have picked up – and foreigners account for about 50% of Hong Kong retail sales in any month.

*Main/hero image: 2019 Hong Kong anti-extradition bill protest. Source: Incendo.