Beijing set to raise duty-free limit for mainland tourists in Hong Kong but figure ‘far below’ industry hopes
- Industry representatives hope limit will be increased to 30,000 yuan but insider says it could even be under 20,000
Beijing is planning to increase the 5,000 yuan (US$688) duty-free shopping allowance for mainland Chinese tourists visiting Hong Kong, but the amount will be “far below” the 30,000 yuan proposed by industry representatives in the city, government sources have said.
Visitors from across the border currently need to pay tax of 13 to 50 per cent to the mainland government for purchases made in Hong Kong above a threshold of 5,000 yuan per trip, a measure introduced in 1996.
Tourism and retail industry insiders have been urging mainland authorities to increase the threshold since the reopening of borders after the pandemic as big-spending visitors were found to be opting for more cultural experiences rather than pure shopping. The city’s currency is also expensive because it is pegged to the US dollar.
There were hopes the limit would eventually be increased to the level of Hainan Island’s current 100,000 yuan per year, with a rise to 30,000 yuan in the first phase.
An increase to 30,000 yuan would be in line with the change Hainan got in 2018. The duty-free allowance for the island province – also a popular destination for mainland travellers – rose from 5,000 yuan, an amount in place since 2011.
But a source familiar with the matter said Hong Kong’s initial increase would be “far below” 30,000 yuan and could even be under 20,000 yuan.
Gary Ng Cheuk-yan, a senior economist with Natixis Corporate and Investment Bank, said the lower-than-expected rate of increase and differential treatment from Hainan might be related to the city’s separate financial system.
“There is always competition between different provinces or cities in China,” he said.
“In addition, Hong Kong is under a different financial system than the mainland. As Hong Kong’s quota is per trip, raising the limit can imply capital outflows from the yuan.”
Pam Mak Mei-yee, permanent honorary president of the Hong Kong Federation of Small and Medium Enterprises, said while she still hoped authorities could raise the level to the hoped 30,000 yuan, she would still appreciate a lower figure to start with.
“The most important thing is, they have kicked things off,” she said.
“Perhaps they have various considerations, including avoiding too much competition with Hainan, or they worry Hong Kong may not be able to handle a potential, sudden, sharp increase in shoppers.”
She said from previous experience, mainland authorities tended to prefer a “step by step” approach.
Latest numbers from the Census and Statistics Department showed retail sales in April dropped 14.7 per cent year on year, following a 6.9 per cent decrease in March.
While declines were observed across the board, those typically associated with mainland tourist shoppers saw the biggest drops.
Jewellery, watches, clocks and valuable gifts were the worst performers at 28.7 per cent, closely followed by electrical goods at 26.5 per cent.
Footwear and other clothing accessories at 26.3 per cent, and Chinese drugs and herbs at 25.1 per cent.
Last month, Annie Tse Yau On-yee, chairwoman of the Hong Kong Retail Management Association, renewed calls for the tax threshold to be increased, saying more visitors to the city might not help much if the duty-free amount remained the same.
She added retail industry surveys conducted by her association reflected continued pessimism for May and June even with the Labour Day “golden week” holiday on the mainland, with around half of businesses saying the gap was “very large” between what they had expected and actual performance.
Tse also said she expected overall sales to decline by a low double-digit percentage this year.
