Retail in Asia


A closer look at China’s cross-border consumption recovery trends for 2023

As the impact of the pandemic on regular business and social activities in China gradually subsides post-Covid, the region is witnessing a steady recovery in cross-border travel and consumption in 2023.

SEE ALSO: China continues to lead global e-commerce market with expected USD 2.2 trillion sales in 2023

In the first half of 2023, total consumer retail sales in China were up 8.2 percent year-over-year, with Hong Kong-mainland China cross-border consumption showing notable signs of recovery, according to research firm, Cushman & Wakefield and its ‘China Cross-Border Consumption Recovery Trends’ report.

However, the post-pandemic era has seen a change, with the number of outbound Hong Kong residents crossing the border now outnumbering mainland Chinese coming south for leisure and shopping, among other key trends.

In light of these shifts, Retail In Asia takes a closer look at China’s cross-border consumption recovery trends in 2023.

Hong Kong citizens embrace mainland travel with weekend stays,  visits on public holidays

More Hong Kongers are heading to the mainland for leisure and shopping, according to the Cushman & Wakefield report.

The average weekly flow of Hong Kong residents departing the city via land and sea boundary control points rapidly returned to approximately 1.05 million passenger trips within one month after the full border reopening earlier this year, and remained at an average of 1.1 million for the following three months, with the exception of major public holiday spikes, according to the Hong Kong Immigration Department.

During each of the Hong Kong public holidays of Good Friday, The Buddha’s Birthday, and Hong Kong SAR Establishment Day, more than 330,000 Hong Kong residents made trips to the mainland, of which more than 240,000 visitors entered Shenzhen.

On a weekly base, Sunday departure numbers from Hong Kong fall, while the number of inbound passenger trips increase, often surpassing Saturday’s figures, the data showed. This suggests that Hong Kong residents are not only coming for a day-trip, but are increasingly extending mainland trips into weekend travel, staying overnight and returning to Hong Kong on the Sunday.

Shenzhen: The shining star of Hong Kong tourism travel

As the nearest mainland China city to Hong Kong, Shenzhen is normally the first stop for Hong Kong residents travelling north, and it also records the highest number of inbound Hong Kong visitors.

In addition to weekend trips, same-day travel between Hong Kong and Shenzhen has become increasingly popular in 2023.

According to the Hong Kong Immigration Department, between February 6 and the end of July this year, Hong Kong residents completed more than 22.45 million passenger trips into Shenzhen via the six land boundary controls points of Lo Wu, Heung Yuen Wai, Man Kam To, Lok Ma Chau, Lok Ma Chau Spur Line and Shenzhen Bay.

This equates to an average weekly inflow of about 900,000 trips, and this figure could potentially reach 1 million if the Express Rail Link and sea boundary control points are included, said the report.

Within Shenzhen, high-end shopping centers, located in core areas such as Luohu, Futian, and other districts near the Hong Kong border crossing points are attracting Hong Kongers to cross the border to shop.

Many of these retail malls are part of transport-oriented development projects and are connected to Mass Transit Railway (MTR) stations, enhancing accessibility and travel convenience for tourists and domestic consumers to take advantage of.

Value for money options are trending for Hong Kongers too

Value for money is a significant factor driving cross-border consumption for Hong Kongers, according to Cushman & Wakefield.

Disparities in income levels and prices between the mainland and Hong Kong have seen Hongkongers earning their income in Hong Kong and spending it in Shenzhen as a cost-effective lifestyle option, especially so for service-based consumption such as F&B, spa treatments, and health, beauty and dental services.

In addition, the exchange rate of the Hong Kong dollar (HKD) against the Chinese Renminbi (RMB) has been consistently rising since the border reopening in January.

According to the State Administration of Foreign Exchange, the median price of the HKD against the RMB reached a high of 92.2 on July 6 this year, similar to the level observed in 2008. This indicates an appreciation of 7.7 percent compared to the exchange rate of 85.6 in early February.

Expansion of diversified consumer offerings a bright spot for Hong Kongers

From 2020 to mid-2023, approximately 1.85 million square metres of new retail space has entered the Shenzhen market, including shopping centers such as C Future City, Houhai Harbour, and MixC+, combining technology, art, youth activities, culture, food, and bazaars, into a single retail destination, and making the city an attractive shopping hub for Hong Kongers.

In addition, non-traditional commercial hubs such as OH Bay offer tourist seafront views, parks, and ecology and costal-based activities that keep visitors entertained outside of shopping.

As for the retail brand landscape, retail operators are also enhancing the consumer experience via social interactions, experiences, wellness offerings and other innovative ideas.

Recent openings include Sam’s Club and Hema Xiansheng, Chinese bakeries such as Master Bao, tea beverages such as Ah Ma Handmade, local specialties such as Sichuan and Hunan cuisine, as well as Xinjiang cuisine and other F&B concepts.

Mainland China cross-border travel to Hong Kong still in recovery mode

While recovery is in full swing in mainland China, mainland China visitor arrival numbers into Hong Kong in the first half of 2023 have not recovered to pre-pandemic levels.

According to the Hong Kong Immigration Department, during the half-year between February 6 and the end of July 2023, approximately 12.7 million mainland visitors travelled to Hong Kong through air, land and sea ports. This compares with 51.04 million arrivals in 2018 and 43.77 million in 2019, according to Hong Kong Tourism Board data.

The numbers show that the inflow of mainland visitors to Hong Kong is still in a recovery stage, and has yet to return to the level witnessed in previous years, said Cushman & Wakefield in its report.

Despite the changing consumption habits of mainland visitors, the Hong Kong retail market has gradually recovered following the border reopening, with total consumer goods retail sales in the first half of 2023 growing by 20.7 percent.

By sector, retail categories popular among tourists saw the most rapid growth, with jewelry, watches and gift products surging by 74.3 percent. Clothing, footwear and related products increased by 50.4 percent, while medicines and cosmetics categories rose by 39.1 percent.

Cultural and experience-based tours emerge as key trends when visiting Hong Kong

Since the border reopening, mainland visitors have, however, embraced experiential travel when visiting Hong Kong, such as urban walks that prioritise lighter consumption, and more culturally immersive activities.

Besides shopping, inbound mainland tourists are now demonstrating a preference for exploring venues with unique local styles and cultural significance, such as the Hong Kong Palace Museum and M+ Museum in the West Kowloon Cultural District, said the report.

Furthermore, smaller retailers such as bookstores, record and video stores, animation and comic game stores, as well as antique stores, have become popular attractions for younger travellers and enthusiasts.

Finally, large-scale cultural entertainment events and exhibitions are proving a drawcard to Hong Kong, including the Clockenflap Music Festival, Art Basel Hong Kong, and concerts by the Singaporean artist JJ Lin.

Enhancing the cross-border retail experience to further boost spending

In 2023, the governments and businesses of Guangdong, Hong Kong and Macao are redoubling efforts to promote cross-border consumption growth in the post-pandemic era. This includes shopping mall operators, transportation infrastructure, government initiatives and financial services.

Since the border reopening in January, the Greater Bay Areas cities, and especially the Shenzhen government, have ramped up retail promotional activities targeting Hong Kong and Macao consumers, while local retailer have been introducing exclusive offers for Hong Kong and Macao residents.

Meanwhile, policies boosting transportation infrastructure and financial services have also continued to support further integration and connectivity in cross-border retail consumption.

Creating win-win scenarios for cross-border consumption via Greater Bay Area integration

Integration within the Greater Bay Area (GBA) has strengthened connectivity within the region, prompting growth of cross-border exchanges, said the Cushman & Wakefield report.

This trend has transformed the previous “unilateral-led” consumption pattern, with mainland tourists the key drivers, into a mutual consumption phase, where Hong Kong residents are exploring the mainland for cross-border consumption.

Starting from border control points and neighbouring areas, these inbound consumers are now further penetrating into GBA cities, thanks to a better transportation network, in turn strengthening GBA integration.