Residents of Hong Kong are flocking to the neighboring mainland city of Shenzhen to shop, dine and spend their weekends, posing a new challenge for their own city’s economic recovery.
Hong Kongers heading north to Shenzhen outnumber mainland tourists heading in the other direction after China relaxed its border controls following three years of tight pandemic restrictions. The imbalance is straining Hong Kong’s small and midsize businesses—a problem the city’s government appears to have recognized.
It took 32-year-old Annie Chan less than an hour to get across the border one recent weekend. Once there, she spent most of her time walking around the shopping malls, getting a massage and eating in more “budget friendly leisure places.”
“There are just so many more food options,” she said. “My Hong Kong dollar goes a lot further than if I stayed home.”
Besides the weaker yuan—which is down 6% to the US dollar this year amid a slowing Chinese economy, whereas the Hong Kong dollar is pegged to the strong greenback—Shenzhen is actively courting such spenders. The city is offering online consumption vouchers along with kiosks to make currency exchanges a snap. It has also become much easier to link Chinese online services WeChat and AliPay with offshore bank accounts. And Hong Kongers can easily cross with their “home return permits.”
Since cross-border movement resumed in January 2023, Hong Kong residents have made more than 48 million trips to Shenzhen, far above the 19.8 million crossings by mainlanders the other way, according to Hong Kong immigration statistics.
Just in the past month, the number of Hong Kongers who went to Shenzhen was almost triple the corresponding figure for mainlanders.
The Chinese government has long wanted to integrate Hong Kong with the mainland, after the British colony was returned to Chinese rule in 1997. Beijing has stepped up these efforts since it imposed a national security law in mid-2020, increasingly unifying Hong Kong’s economic goals, political system and educational curriculum with its own.
The traffic trends, however, are now hurting business sentiment, particularly in Hong Kong’s retail and hospitality sectors.
Annie Tse, chairwoman of the Hong Kong Retail Management Association, said retailers are “extremely worried.”
“More Hong Kongers will head north next year compared with the first half of this year, when the exodus had not really surfaced following the city’s reopening of its borders with the mainland,” she said.
The difference between pre- and post-pandemic is striking.
Hong Kong’s retail economy boomed before Covid-19, as hundreds of thousands of mainland tourists shopped for duty-free luxury goods and cosmetics. Now, the tourists that do come tend to skip the stores and focus on taking selfies at scenic spots. In the evenings, the financial hub famed for its nightlife is noticeably quieter than it used to be.
Gary Ng, senior economist at Natixis, said Hong Kong was held back by various restrictions during the pandemic. On the other hand, the hospitality industry in Shenzhen managed to grow as life went on as normal for the better part of two years even under China’s zero-Covid policy, making it more attractive now.
The stiff competition is not lost on Hong Kong officials. This weekend, authorities planned a series of large-scale events coinciding with the city’s District Council elections, attempting to entice residents to stay and vote—and spend. It also announced on Friday that it would streamline travel documents for Shenzhen residents coming to Hong Kong.
But Ng said the Hong Kong government’s policies have not boosted the city’s attractiveness.
“They’ve just been Band-Aid solutions,” he said. “At the moment I haven’t seen any comprehensive policies that make the city more appealing.”
Meanwhile, the Development and Reform Commission of Shenzhen Municipality in November proposed a raft of measures dedicated to attracting Hong Kong and Macao tourists.
Some Hong Kongers are even crossing the border just to buy groceries. Lee Shuk-mei, a homemaker who lives in Tin Shui Wai, a residential suburb in the north of Hong Kong, travels to her favorite grocery store—Sam’s Club—in Shenzhen’s Nanshan district to do her weekly shopping.
She said it is not unusual to hear other people in the store speaking Cantonese, the language spoken in Hong Kong.
On a recent visit to Shenzhen, this reporter bought a bowl of rice noodles for RMB 27 (USD 3.8) and a drink for RMB 18 (USD 2.5), equivalent to a total of HKD 49.50 (USD 6.3) according to that day’s exchange rate.
The same beverage and a similar bowl of noodles would set you back HKD 66 (USD 8.4) in the financial center.
At a Shenzhen grocery store called Hema, chicken breast, choy sum greens, butter, and garlic cost the equivalent of HKD 55 (USD 7). The same brand of butter alone costs around HKD 57 (USD 7.3) in Hong Kong.
The incentive for consumers to do their shopping on the mainland poses another headwind for a Hong Kong economic recovery that Ng predicts will be even more difficult next year. Natixis forecasts Hong Kong’s gross domestic product will grow 2.8% next year, versus an estimated 3.4% this year.
“I’m not sure I can say that the confidence in consumption and other fundamental factors of economic growth for next year will be very strong,” Ng said.