That ‘giant sucking sound’ again

More whining as 1.5 million Hongkongers leave the city – mostly over the border – during the Easter long weekend…

…[Restaurants lobby head] Simon Wong Ka-wo warned that the trend of people spending holidays in the mainland will rock the catering sector’s confidence in the short term.

…”Overall, the catering business dropped more than 30 percent compared to the Easter holiday last year, when many Hongkongers stayed despite the border reopening.”

…He urged the government to promote local consumption by hosting large-scale events across the city, not just in specific areas such as West Kowloon and Tsim Sha Tsui.

Wong said around 200 to 300 restaurants ceased operation over the past month and he believes the market will not improve this year.

…”I haven’t seen such a bad situation during holidays in Sai Kung for decades,” a restaurant owner said.

He added: “People either traveled overseas or visited the mainland – not many people stayed in Hong Kong. Authorities should pay attention to the situation. Building the Greater Bay Area is a good thing but we cannot push everyone there. What about Hong Kong?”

Restaurants demand more Mainland tourists – and government handouts in the form of ‘holiday vouchers’.

From Bloomberg

The record outflow was largely the result of people heading across the border to the mainland and Macau, where they can enjoy cheaper and a larger variety of entertainment, food and shopping. Hong Kong residents last month made 8.3 million departures via border checkpoints — another record since at least 1997…

…Hong Kong is increasingly losing out to nearby Chinese cities including tech hub Shenzhen and casino town Macau as a high-speed rail and a mega cross-sea bridge make cross-border travel faster and easier than ever before. 

The FT notes that it’s not just retailing…

Container throughput in Hong Kong fell 14 per cent last year to 14.3mn twenty-foot equivalent units (TEUs), according to figures from maritime consultancy Drewry.

This was the biggest percentage drop among the world’s biggest ports last year. Hong Kong is now the 10th-largest port in the world by volume

… Once the world’s busiest port, according to Hong Kong government data, volumes have fallen as the city’s manufacturers shift to mainland China and competition from other Chinese ports rise, analysts said.

…“It is always inevitable that Hong Kong would contract as a port,” said Tim Huxley, chair of Hong Kong-based shipping investment company Mandarin Shipping.

(Let’s not have a huge port! Think what the city could do with all that space.)

From Wikipedia

Arbitrage has the effect of causing prices in different markets to converge. As a result of arbitrage, the currency exchange rates, the price of commodities, and the price of securities in different markets tend to converge. The speed at which they do so is a measure of market efficiency.

Twenty years ago, Masters student Li Na at Lingnan U wrote a thesis titled ‘Price Convergence between Hong Kong and the Chinese Mainland’, saying… 

I … find … a strong border effect between Hong Kong and the mainland. The nature of such a border effect may be due to big income gaps between the two places … Looking into [the] future, one would have the confidence to say that the speed of price convergence might accelerate in future years, owing to the increased economic integration of Hong Kong and the mainland, and reduced income and productivity gap. 

Weakening the ‘border effect’ through ‘integration’ and better transport links is longstanding government policy. But it apparently never occurred to officials that Hong Kong’s costs might have to come down as a result. Their obsession with cramming more tourists into the city reflects an instinct to keep the gap in rents and labour costs intact (partly to keep land revenues high). But not only is Hong Kong overpriced (and overcrowded) – it’s becoming less and less cool…

As an SCMP op-ed puts it…

International visitors go to places to experience what locals enjoy – Bangkok and Taipei, with their famed night markets, are classic examples – and not some artificial tourist construct.

…Taxpayer-funded gimmicks such as monthly fireworks displays and drone shows – tired, clichéd “attractions” disdained anywhere above fourth-tier mainland Chinese municipalities – will achieve little.

Absent from current debates – or what pass for them – are serious evaluations of whether earlier tourism-industry formulas are now outdated. Expecting further growth from a clearly declining model by continuing to offer more of the same past offerings cannot guarantee any pathway to success.

Rather than fight cost adjustment, why not embrace it and take advantage of it? Imagine how much more vibrant and diversified the economy could be if the rents were lower.

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9 Responses to That ‘giant sucking sound’ again

  1. Jimmy's Bitchin says:

    Eventually reality (and economics) will take hold, and HK’s greedpig landlords will have to lower rents. But don’t count on it happening soon.

  2. wmjp says:

    How long before border crossing and shipping stats are classifies as state secrets?

  3. Joe Blow says:

    Half the shopfronts in CWB are boarded up but the landlords are still trying to jack up the rents. Of course they would.

    On another note, I DEMAND that the Government vouchers away the blues of the catering sector with our tax dollars. How else are we going to survive without those exciting “concept” restaurants, aka “dining by numbers”?

  4. Sic Lee Sik says:

    @jimmy’s bitchin – I agree it won’t happen soon. In fact I wonder if it will happen at all. These morons are all suffering from acute affluenza. They have so much money after decades of greed that they can afford to believe that 100% of no rent is a better deal than 100-x% of some rent. They truly are the cream of Hong Kong – very rich and very thick.

  5. Stanley Lieber says:

    Empty shopfronts everywhere in Lockhart Road, Hennessy Road & Queen’s Road East.

    In the Gweilo Ghetto, empty shopfronts litter the landscape in Castle Road, Caine Road & Aberdeen Street. Even Wellington Street & Lyndhurst Terrace are like a smile with missing teeth.

    The problem is not only stubborn landlords, it is also a lack of demand. Some of these places could cut their rents by 50% and there’d still be no takers.

    The golden goose has been slaughtered.

  6. MeKnowNothing says:

    “Eventually reality (and economics) will take hold, and HK’s greedpig landlords will have to lower rents. But don’t count on it happening soon.”

    Landlords here are just an extension of the ultimate rent-seeker: gov’t. Not sure how anything will change significantly as long as the root problem remains (Bremridge’s time delay poison pill: the Capital Works Fund).

    The no-income-is-better-than-some-income mentality Sic Lee Sik mentions is okay for the indiginites, who are only out-of-pocket for the cost of building their village houses.

    The same Hon redeye disease (if you lease/buy my property [or anything else] for even one penny less than what I think it’s worth, you’ve ripped me off – DLLM!) undoubtedly afflicts the likes of Uncle Four, Superman, the Kwoks/Ngs/Chengs, etc – but they’ve put squillions into land leases & constructing their stacks of shite concrete boxes. At least we can enjoy watching that lot get its just rewards as we all go down together on this ship ‘o fools…

  7. Asia's World Pity says:

    There will likely be several tent cities across Hong Kong before local landlords get to lowering rents. Maybe now’s a good time to be stockpiling tents and camping gear and buying shares in Decathlon.

  8. HK-Cynic says:

    KS Li was a genius in selling his HK ports when he did. Great foresight.

    Li Ka-shing sells bulk share of port terminal to mainland shipping giants
    Tycoon unloads 60 per cent of Terminal 8 West to mainland shipping giants for HK$2.5 billion, raising doubt over commitment to Hong Kong


  9. Mary Melville says:

    Its not just the more upmarket hoods that are ghosting, I was stunned when I went over to To Kwa Wan last weekend by the number of shuttered shops. Pals there told me that three of the cha chan teng they frequented shut down end of March.
    But mo man tai, we have the 2,999 strong district not “pork barrel appointments” committees who will sort things out.
    Canny LKS is also offloading his Harbour Plaza suites in various districts via applications to convert them to residential units to flog off. Has to get around the zoning issues that he manipulated in the first place in order to build housing on land designated for commercial use. Most plans have sailed through the process.
    The redevelopment of some of the, soon to be redundant, port facilities to tech parks and residential would tick much of the landbank boxes but would get in the way of chopping down hundreds of thousands of trees, levelling hills, filling in fish ponds and marshes and massive reclamation that generate billions in …………………. ‘elite’ pork barrels.

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