Deep Dive: Supporting Hong Kong businesses as many head to mainland China to shop

Hong Kong homemaker and part-time teacher Tam Mei-ling is on a mission to preserve her city’s cultural identity.

One way the 48-year-old mother does so is by supporting local businesses. She refrains from joining the crowds of Hongkongers heading to mainland China to shop and eat.

She said this was important for people like her, who had chosen to stay in Hong Kong. Many have left amid the wave of emigration following the social unrest of 2019, Beijing’s imposition of the national security law and the Covid-19 pandemic.

Tam is sad to see so many Hong Kong shops and other businesses closing. “It’s heartbreaking to see how much things have gone downhill,” she said.

As for those who prefer to stretch their dollar on the mainland, she said: “I don’t want to use the word ‘abandon’, but it does feel that way ... they have abandoned the city they are still living in. I find it hard to understand.”

Tam said she was loyal in patronising some shops, even those far from her home in Sai Kung. She is part of a shrinking minority of Hongkongers who are outspoken about their support of local businesses.

Kelvin Chan, 42, works in the manufacturing sector. He has not been to the mainland for a long time. He acknowledged the advancements on the mainland over the years but remained concerned about quality.

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He cited past working experiences where he found the quality of mainland Chinese products uneven, unreliable or subject to less stringent standards. “When it comes to food or other items that enter the body, that can be risky,” he explained.

Although he supports local businesses, he still feels uncertain about their future. “Sometimes, I feel it’s a kind of blind, pure stubbornness to persist,” he said. “I know the HK$500 (US$64) I occasionally spend at a shop isn’t going to do much.”

Hong Kong businesses have struggled with ongoing store closures since the city reopened its borders in February 2023, following three years of strict anti-pandemic restrictions.

One reason is that high-spending mainland visitors have not returned in as large numbers. This is due to factors such as the unsteady economy across the border and Hong Kong’s relatively strong dollar.

Meanwhile, Hongkongers have begun flocking to places such as Shenzhen for dining and entertainment. They even shop for their groceries on the mainland.

Staff writers

1. List TWO reasons why Hongkongers like Tam and Chan choose to support local businesses despite the higher costs.

2. What does Chan mean when he says he supports local shops out of “pure stubbornness”?

3. How has the reopening of the border between Hong Kong and mainland China impacted local businesses? What factors have contributed to the decline in consumer spending in Hong Kong? Explain using News and your own knowledge.

1. What is the person in the illustration doing? Who do they represent?

2. To what extent do you believe that shopping locally can help revive the city’s struggling businesses? Explain using News and Glossary.

• Factors such as rising rents have harmed Hong Kong shops, while economic uncertainty has changed spending habits

• Some say better-off Hongkongers are still willing to spend money, but have become more selective

The latest official data showed the value of total retail sales in Hong Kong in September dropped by 6.9 per cent to HK$29.6 billion compared with the same month in 2023. It was the seventh consecutive month of decline

One local business hit by post-pandemic woes was Be Water Mart, which opened in 2020. At its peak, it had four outlets selling made-in-Hong Kong goods such as locally brewed beers, snacks and cosmetics.

It closed its last store in Tai Wai in February.

Co-founder Dream Law Ting-fai said that while the brand expanded during the pandemic, it faced challenges after restrictions were lifted, such as rising rents.

“My team and I were pessimistic about the outlook for Hong Kong’s retail market, as fewer tourists were coming while locals scrambled to leave for holidays,” he said. The brand has since switched to concentrate on e-commerce.

Yong Chen, a professor based in Switzerland who focuses on Chinese economics, marketing and tourism, said many would choose to shop where their dollar stretched furthest. This makes it hard for the city’s businesses to rely on sentiment alone.

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Chen said the ongoing business closures contributed to a vicious cycle. Hong Kong’s rising costs made its prices less competitive compared to the mainland, leading to more closures.

Some experts argued that while better-off Hongkongers might not be interested in spending on the mainland, economic uncertainties still affected their shopping habits.

“This group is supposed to be the core pillar of consumption, but waning confidence about the economic outlook may still lead them to spend more cautiously,” said Gary Ng Cheuk-yan, a senior economist with Natixis Corporate and Investment Bank.

Hong Kong pastry chef Amely Au Yee-tung runs an online business selling treats like scones and apple pies. She aims to build a clientele of Hongkongers willing to support a local business.

After completing her studies at the Cordon Bleu culinary school in London last December, she chose to return to Hong Kong despite having a job offer there.

She realised there were many people similar to her, “quietly working for their dreams” in an effort to diversify Hong Kong products beyond the offerings of chain stores.

“Hong Kong truly has many hidden gems, I hope it will not be solely dominated by mainland or foreign brands,” she said.

Though her business is still new, she already has a group of loyal customers despite her pastries being pricier than on the mainland.

“This shows that Hong Kong people are willing to spend, but they have just become more selective,” she said.

Staff writers

1. Using Issue, give ONE example of how the city’s rising costs and increased access to cross-border shopping have impacted Hong Kong businesses.

2. How can Hong Kong’s retail sector balance economic challenges with fostering local support? Explain using News and Issue.

3. To what extent do you believe Au made a good decision when she set up her business in Hong Kong? Explain your opinion using News, Issue and Glossary.

1. What is pictured in the photo? How is it related to the information in News and Issue?

2. Give TWO suggestions for measures to help local businesses. Explain using News, Issue and your own knowledge.

cultural identity: the factors that make a place or culture special and create a sense of belonging for people who live there. Things like food, language, history and beliefs can all contribute to a place’s cultural identity.

stringent: very strict and without compromise

patronising: from the verb “to patronise”, it means to be a regular customer of a shop or business

vicious cycle: a continuing unpleasant situation, created when one problem causes another problem that then makes the first problem worse.

clientele: a group of regular customers who consistently purchase goods or services from a particular business.

1. They choose to shop locally because they want to preserve Hong Kong’s unique cultural identity, and they are concerned about the quality and reliability of mainland products.

2. Chan’s “pure stubbornness” refers to how some Hongkongers insist on buying goods and services made and sold in Hong Kong regardless of the price tag, even though their efforts could be insignificant to the survival of a business.

3. The reopening of the border has hurt Hong Kong businesses, leading to store closures and declining consumer spending. Many Hongkongers are choosing to spend their money on the mainland, where goods and services tend to be cheaper. In addition, fewer mainland Chinese tourists are visiting the city than before Covid-19.

1. The person in the illustration appears to be someone who supports made-in-Hong Kong goods and services like Tam. He represents the small group of Hongkongers who mainly support local shops.

2. Hongkongers who remain loyal to local shops play an important but limited role in reviving the city’s struggling businesses. People like Tam are committed to preserving Hong Kong’s cultural identity by avoiding shopping on the mainland, but there are challenges. Chan, despite his preference for local products due to concerns about mainland quality, admitted that his occasional spending feels insufficient.

High costs in Hong Kong and the appeal of cheaper mainland options limit the effectiveness of such loyalty. Additionally, there are fewer high-spending mainland visitors, which further strains local businesses. While these efforts provide hope, broader economic changes are needed to make local businesses competitive and ensure recovery. (other possible answers also accepted)

1. Rising costs in Hong Kong make local prices less competitive compared to the mainland, where shoppers can stretch their dollar further. This, coupled with increased cross-border shopping, creates a vicious cycle of business closures and reduced consumer confidence. Businesses like Be Water Mart struggled to sustain themselves despite selling locally-made products, ultimately leading to closures.

2. Hong Kong’s retail sector could focus on cultivating consumer loyalty and showcasing unique local products to compete. Examples include Amely Au Yee-tung’s pastry business, which attracts customers by offering high-quality, locally-made items, but for higher prices. Experts suggest that although better-off Hongkongers are cautious due to economic uncertainties, they are willing to spend money when they see the value of a product or enterprise.

3. Au’s decision to set up her pastry business in Hong Kong appears to be well-considered, despite the challenging retail environment. She has already built a loyal clientele by targeting a niche market of customers willing to support local businesses. This demonstrates that there is still demand for unique, high-quality, locally-made products, even if they are pricier than mainland alternatives. Her belief in the city’s “hidden gems” and her desire to diversify products beyond chain stores align with her business strategy, which leverages the distinctiveness of Hong Kong-made goods.

However, her success will depend on several factors. Economic uncertainties have led many middle-class consumers to spend more cautiously. While her business has potential, sustaining growth may require a balance between maintaining her premium positioning and adapting to shifting consumer habits. Ultimately, her ability to attract a consistent and growing customer base among locals will determine whether her shop can thrive long-term.

1. The shop featured in the photo is closed, like many other local shops affected by the trend to spend across the border and rising operation costs in Hong Kong.

2. To help struggling local businesses survive, encouraging consumer loyalty is key. Campaigns promoting “shop locally” initiatives can raise awareness about the importance of supporting home-grown businesses. Entrepreneurs like Au show that offering unique, high-quality products could attract selective customers willing to pay more for local goods.

Also, fostering innovation and diversifying product offerings can make businesses more resilient. Investing in e-commerce and digital marketing could help local shops reach a wider audience, including overseas buyers, creating new revenue streams and reducing reliance on the local market.