As a trend nowadays, Hong Kong residents' northbound consumption has long been cited as one of the main reasons for weak local consumption. However, a study titled "Hong Kong Travelers in Mainland China: Scale, Destinations, and Expenditure Patterns" by the Department of Economics under the Faculty of Social Science at The Chinese University of Hong Kong (CUHK) found that northbound consumption has a limited impact on the local retail market.
The study analyzed data from payment platforms, discovering significant differences in the consumption patterns of Hong Kong residents in the mainland and Hong Kong.
Professor Song Zheng, Wei Lun Professor of Economics and Head of the Department of Economics at CUHK, and his research team yesterday released the findings of their study titled "Hong Kong Travelers in Mainland China: Scale, Destinations, and Expenditure Patterns." The team analyzed data from the SAR Government Census and Statistics Department and AlipayHK's frequent users to understand the consumption patterns of Hong Kong residents traveling north and their impact on local consumption.
Local consumption mostly in retail and dining sectors
The study examined data from AlipayHK's frequent users who conducted transactions in the mainland and found that Hong Kong residents have distinct consumption preferences locally and in the mainland. On the mainland, consumption is primarily service-oriented (47%), with lifestyle services such as beauty, massage, and wellness accounting for the largest share, while retail makes up only 28%. In contrast, local spending in Hong Kong is concentrated in retail (58%) and dining (29%).
Comparing the number of trips Hong Kong residents made to the mainland before and after the pandemic, it was found that last year's northbound trips only returned to pre-pandemic levels. The proportion of outbound consumption by Hong Kong residents of total consumption was only about 9%, with outbound spending amounting to approximately HK$50 billion. These two metrics were similar before and after the pandemic and remained relatively stable, indicating that the "northbound wave" is not a new phenomenon but rather a "reversion" post-pandemic.
Weak Local Market, multiple factors
Prof. Song noted, "The reason for conducting this survey is that there has been extensive public discussion linking Hong Kong residents' northbound consumption with weak local consumption, suggesting that Hong Kong's sluggish market is due to the impact of northbound spending. However, the study proves that the scale of northbound consumption is only similar to that of 2018 and 2019. Therefore, current spending by Hong Kong residents in the mainland does not crowd out their consumption in Hong Kong, and weak local market conditions cannot be blamed on the northbound trend."
As for why local consumption is weak, Song believes the phenomenon is more complex and involves multiple factors, requiring further research. This study aims to clarify the notion that "Hong Kong residents' northbound consumption is causing poor market conditions."
The study also found that Hong Kong residents' consumption in the mainland, previously concentrated in first-tier cities in the Greater Bay Area (GBA), has gradually spread to other regions, such as second- and third-tier cities in GBA and even farther north to Chongqing and Changsha, which indicates an increasingly integrated cross-boundary consumption market.
With the current insufficient domestic economic consumption in the mainland, Hong Kong residents' northbound spending acts as a timely boost. The northbound trend and the convenience and popularity of payment methods have brought about significant spillover effects on consumption.
Venetia Lee, CEO of AlipayHK, stated that over the past year, more than 2 million users have traveled north to spend. The usage of services within the app related to northbound consumption, such as booking mainland medical services and scanning restaurant QR codes to order, has surged by 450% year-on-year this year. The company hopes to promote the local economy by assisting merchants in digitalization, making it more convenient for mainland tourists to spend in Hong Kong.
(Source: Wen Wei Po; Journalist: Wang Xi; English Editor: Darius)
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