China agreed to limit visitors to Hong Kong after an increase in day-trippers and traders buying goods in the city led to weeks of protests this year.
Residents from Shenzhen city would be allowed one trip per week to neighboring Hong Kong as of Monday, the official Xinhua news agency said, citing China’s Ministry of Public Security. Visitors from the city didn’t previously face limits.
The change in policy will help ease tensions in Hong Kong, where scuffles have broken out between protesters and parallel traders, who buy daily necessities in the former British colony to resell them on the mainland. The city, which has come to rely on Chinese visitors, may see a 5 percent reduction in tourist spending, Goldman Sachs analysts wrote in a report.
“This policy targets the career parallel traders,” Hong Kong Chief Executive Leung Chun-ying told reporters Monday. “Hong Kong is still a city for tourists from all around the world including those from the mainland.”
The policy change won’t affect Shenzhen residents who have already been granted multiple-entry visas into Hong Kong, and will take some time to take effect, Leung said. Hong Kong plans to run campaigns to lure tourists, he said.
Shares of Sa Sa International Holdings Ltd., a cosmetics retailer, dropped 6.2 percent to HK$4.06 in Hong Kong trading, the stock’s biggest decline since May. Chow Tai Fook Jewellery Group Ltd. fell as much as 2.9 percent
The restrictions pose a “downside risk” to Hong Kong growth, said Raymond Yeung, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd. who forecasts the city’s gross domestic product to rise 2.9 percent this year. Chinese day-trippers account for about 15 percent of retail spending in the city, and malls and restaurants would be affected, he said.
“The way they handled the policy is too regressive,” said Yeung, who expects total retail sales to stagnate this year. “It would be better if the government addressed the needs of these tourists instead by improving tourism infrastucture such as by building a cross-border shopping area.”
Instead of rich Chinese flying in to purchase luxury items, Hong Kong is seeing more visitors buying shampoo, milk powder and other necessities. The demand has been fueled by concerns about the safety of products sold on the mainland.
Spending on luxury items plunged 14 percent last year, while the sales of medicine, cosmetics and groceries saw as much as a 9.3 percent gain, government data shows.
The trend has led to clashes between protesters and traders in border areas, spurring arrests and demands from lawmakers to curb visits. The incidents have stoked tension with the mainland, after Hong Kong students led months-long street protests demanding more autonomy in local elections.
Leung said that the city government put forth its proposals to limit Chinese visitors in June.
The change in policy would reduce the number of Chinese arrivals by 4.6 million visits, a Hong Kong official said Sunday. Tourists from China jumped 16 percent to 47 million last year, according to the Hong Kong Tourism Board.
Day trips accounted for a record 60 percent of these, compared with 38 percent in 2006.
The Hong Kong Retail Management Association said in a statement it was worried that the limits sent a message that mainland tourists weren’t welcome in the city. This might lead to a chain reaction and discourage visitors from other Chinese cities as well, the association said.
The restrictions would hurt cosmetics, food and alcohol sales, Goldman Sachs wrote in its report Sunday. Those of jewelry and leather goods would be less affected because they were mostly purchased by overnight tourists, it said.
Sa Sa said the company has no plans to change its expansion strategy and would continue to balance demand from locals and tourists. “We hope the government would consider measures to support healthy and sustainable growth in the retail industry,” it said in a statement.
Chinese visitors to Hong Kong have already been dropping. Arrivals from China fell 14 percent during the recent Ching Ming holiday, the city government said last week.
Two-thirds of the 743 people surveyed in February by the Chinese University of Hong Kong wanted the government to reduce the number of individual Chinese visitors. More than three-fifths of those polled said the tourists have brought inconvenience to their lives, the university said.