Luxury retail down, parallel trading strong as ever

What do you call a hundred watch retailers chopped into small, bite-size pieces of dripping flesh and fed to pigs? Answer: a start. Year-on-year luxury-goods sales in Hong Kong dropped by a fifth in January. As with the plummeting gambling revenues in Macau, this is the continuation of a trend going back months. Late last year we were invited to believe that the Umbrella movement protests were responsible for this pattern (you were supposed to hate the kids in tents for wrecking the economy, not rush to the bank to make a donation to Occupy). Now it must be clear that Chinese leader Xi Jinping’s crackdown on corruption is at work – though for some reason no-one is denouncing him for it.

The tycoon-friendly Standard finds a Chinese U professor to freak out about this terrible threat to landlords and civilization in general…

Stan-ShopsShock

The South China Morning Post finds another Chinese U academic – this time, one who is SCMP-LeungTinCheukeconomically literate and dismisses retailing’s contribution to GDP. Since tourism in Hong Kong boils down to little more than buying overpriced crap and taking a few selfies, he could have gone further and forecast great benefits from a decline in the parasitical industry: fewer tourists mean fewer luxury shops mean lower rents and prices mean higher purchasing power for the whole population and a more balanced and diversified economy. Next time, perhaps.

What we are talking about here is the ‘Causeway Bay money-laundering/gift-buying’ trade, not the ‘Yuen Long smuggling racket’ industry. Spending on cosmetics – and presumably milk powder and Yakult – hardly budged. Both types of ‘tourism’ benefit mainly landlords and harm ordinary residents, but the influx of Mainland shoppers in the New Territories is the really hot issue.

Officials are trying to cool expectations of a swift cut in the number of cross-border shoppers. Chief Executive CY Leung says it is not easy to curb Mainlanders’ existing rights, and it requires the consent of central and provincial authorities. (CY needs to ask the governor of, say, Fujian for permission to decide who can come to Hong Kong? You learn something new every day.)

All-purpose pronouncer of pro-Beijing waffle Rita Fan goes further, and claims that failure to pass the 2016-17 political reform package will harm attempts to restrict the Mainland shopper influx. Her logic is that this is all making Hong Kong look ungrateful. In other words, the continued flood of smugglers is punishment for being stroppy. This sounds more like the contemptuous fantasies of a sour and grumpy old woman than a reasoned analysis by Beijing officials – but this could so easily just be naivety on my part.

Another Hong Kong delegate to the ‘two meetings’ in Beijing is Stanley Ng. The patriotic labour leader has over the last week or so called for ‘Article 23’ national security laws to be imposed on Hong Kong, and then backtracked, in the way such people do when Communist Party minders phone them with new instructions. In today’s China Daily, he seems to be changing course again, specifically calling for action to ban ties between local and foreign political groups. Maybe this will inspire Rita Fan to come up with a new deal: implement Article 23 and in return we call off the hordes of Yakult-buying suitcase-draggers.

Even without excitable Communist loyalists complicating things, this is a conundrum for Beijing and the local administration. The multiple independent-visit scheme was packaged as a favour to help Hong Kong – for Mainland as much as Hong Kong audiences. It has massively benefited vested interests who have a highly developed sense of entitlement and are traditionally key allies of the government. Yet at the same time it is feeding nativism and hostility towards Mainlanders and China in Hong Kong. To curb Mainland visitor numbers would send a message to all Mainlanders that Hong Kong is all-important and precious and mollycoddled, and would be offensive to the whole post-1997 motherland-and-unity narrative. It would also be a concession to the umbrella-wielding radical anti-locust troublemakers. Who, with Sheung Shui, Shatin and Yuen Long under their belts, will be gathering for next weekend’s anti-smuggler rally in sunny, charming and exotic downtown Tsuen Wan.

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8 Responses to Luxury retail down, parallel trading strong as ever

  1. Stephen says:

    The conundrum has to be viewed against the most important edict which is the CCP’s divine right to rule. The economies of Macao and Hong Kong can go to shite and vested interests (e.g. Dairy Farm’s Caroline Mak) can go and feck themselves as the PRC must be loved and have unity. If the sheer number of mainland visitors is massively reduced then hey – no more scraps, protests, flying of the colonial banner etc.

    Of course once the Legislature agrees with Carrie that “Your vote. Gotta have it!” then the land of milk (not tainted with melamine) and honey beckons …

  2. reductio says:

    One month ago the basement “luxury goods” section of Hysan Place was packed with all-those lookalike watches: Tag Hauer, Mont Blanc (I thought they made pens), Movado etc etc. All with a low volume, cool jazz soundtrack, fake oak panelling and reduced lighting to give that sophisticated vibe. Just yesterday I took a short-cut through the aforesaid emporium and well, well… where are the watch shops? Gone, like dew in the morning sun. Everyone single one replaced be beauty products stalls. Hope those greedy Hysan b******ds are hurting, though I surmise not.

  3. Cerebos says:

    As someone who earns their bread by peddling spurious goods to our esteemed brothers beyond the border the 20% Jan drop is almost entirely due to the effect of Chinese New Year falling in Jan last year. Sales in Feb were up 20%. Sure – there’s been a softening but nothing like enough to break the luxury retail grip on our high streets.

    For an example of one of the few places that are genuinely in the toilet look no further than Pacific Place – it’s practically a morgue. Whatever will Swire do with the retail mix there? Have a giggle as they bring ever more desperately “on-trend” brands there in the next couple of years.

  4. Scotty Dotty says:

    Great summary.

    How DO university academics get hired? The ones quoted above are as thick as two short planks. Hemmers analysis is miles better.

  5. Real Tax Payer says:

    Hang all parallel traders, luxury watch shop owners and expensive mall retail shop landlords .

    Bring back the rack and flogging.

    Better still call on the name of the Lord for a universal flood which selectively drowns all the above ( and the pan-dems)

    Anarch for Noah rules OK

  6. Pacific Place Piker says:

    @Cerebos > Pacific Place a morgue? M’thinks the good sir embellishes. Being forced to commute through this megakitsch consumer cathedral nigh daily I’ve seen little to no difference in the composition of the mob. The iphone resellers are still squatting beside their mountains of boxes, the yuppie hoi polloi still putput forth and back with utmost urgency, tycoon wanna-bes and junior captains of industry buzzing in and out of the tower. Besides, how can IFC be a morgue? They planted the damned thing right on top of Central MTR and the HKIA rail. Half of Hong Kong island has to commute through the damned place whether they like it or not.

    I’ve seen no letup in the mobs of the suitcase tribe. If by “fewer” is meant frenzied mobs are now merely feverish mobs… I’ll give you that. There used to be days in Hong Kong you could plan a casual jaunt to anywhere avoiding crowds and mobs, even in Central. No more. Every day every hour is elbow to elbow jostling.

  7. Laguna Lurker says:

    It all sounds horrible. Glad I left when I did (2009).

  8. Qian Jin says:

    Re Article 23. The Pan-Democrats would surely accept similar legislation to “democratic” USA? This would solve unfinished business required under the Basic Law.

    Just copy the text and wording from US Federal law, substituting “China” in place of the United States: ” any person, owing allegiance to the United States, who gives their enemies “aid and comfort” is guilty of treason and shall suffer death, or shall be imprisoned not less than five years and fined under this title but not less than US$10,000 and shall be incapable of holding any office under the United States.”

    You never hear of US democrats complaining about this law.

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