Commercial & Industrial Property News Update

Hong Kong - China's Slowdown Takes Shine Off Golden Week


October 9, 2012

Luxury stores in Hong Kong bore the brunt of a lacklustre Golden Week Holiday, as retail spending falls following China's economic slowdown.


On the back of an economic slowdown in China, mainland Chinese shoppers have cut spending during the Golden Week holiday, a traditional shopping and vacation eight-day period which began on 30 September. Hong Kong, long the favourite destination for Chinese holidaymakers, bore the brunt of the fallout, with luxury stores feeling the keenest pinch.


Joseph Tung, executive director of the Travel Industry Council, predicted that luxury goods sales would fall by as much as 10% during the week-long holiday. This was despite an increase in the number of tourists from China.


"The global economic downturn has affected China's economy and subsequently taken a toll on the demand of goods," said Tung. "The falling trend of luxury goods demand is visible."

The decreased spending is hurting international retailers which have set up shop in Hong Kong to profit from mainland Chinese shoppers. The weakened retail sales also increase the risk of a recession in Hong Kong, where declining exports have caused the economy to shrink by 0.1% in the second quarter.

"The number of big-ticket transactions has shrunk," said CCB International Securities analyst Forrest Chan, referring to holiday spending. "Fewer people will spend several hundred thousand bucks for a luxury watch. The macro-economic situation is dreadful."

The reduction in Golden Week sales is attributed to a slump in exports and a contraction in manufacturing in China, the world's second-largest economy. Caroline Mak, chairman of the Hong Kong Retail Management Association said that it is “highly likely” that this year's Golden Week could post a year-on-year decline in sales.

This year, Hong Kong posted the slowest growth in retail sales since the global financial crisis in 2008, growing by 4.5% by value in August, below the median estimate of 5.8% from 10 economists. Hong Kong attracts mainland Chinese buyers because of its lower taxes.

Retail sales grew by a mere 3.9% in July, the least since September 2009. The Hong Kong Retail Management Association has also cut is forecast for full-year sales growth to 7% from a previous estimate of 10% to 13%.

A weakened euro - which has fallen about 2.5% against the yuan over the past 12 months - has also lured shoppers away from Hong Kong. Shoppers said that better choices in Europe and other parts of the world have captured their interest.

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