Hong Kong's surprisingly strong retail sales in August were supported by a rise in tourism and a thriving local stock market, although the recovery is still inconsistent, as companies selling popular consumer products get ready for possible price battles due to the reduced cost of living on the other side of the border.
Official statistics published on Thursday indicated that retail sales increased by 3.8 percent compared to the previous year, representing the fourth consecutive month of growth.
It came after 14 straight months of decrease from March 2024 to April 2025 and marked the highest level since December 2023, when sales increased by 7.8 per cent.
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"Tourism contributed, although the growing stock market also generated a wealth effect," said Terence Chong Tai-leung, executive director of the Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong, to the Post.
Annie Tse Yau On-yee, chairwoman of the Hong Kong Retail Management Association, mentioned that although sales have stabilized, they have not yet entered the recovery phase.
She mentioned that merchants were starting to show faith in the future prospects.
A rise in the number of tourists visiting the city since the beginning of summer has partially counteracted the adverse effects caused by Hongkongers traveling across the border to shop, according to some economists.
For instance, categories that showed the highest performance were those usually preferred by visitors. This encompassed sales of jewelry, timepieces, clocks, and premium gifts, which increased by 16.4 percent, non-specific consumer items that went up by 14.2 percent, and pharmaceuticals and beauty products, which experienced a 5 percent rise.
The Hong Kong Tourism Board reported that preliminary visitor numbers in August increased by 16 percent compared to the previous year, reaching a post-pandemic peak of 5.15 million.
In the meantime, the local stock exchange has increased by almost 2,000 points in the last month, driven by a rise in the technology sector and new stock listings. The benchmark Hang Seng Index was 7.6 percent higher at 27,287 points on Thursday, compared to 25,343 points on September 3.
Customers crowded the IFC Mall in Central on Thursday, following the start of the eight-day National Day "golden week" holiday on Wednesday.
Mainland Chinese travelers were observed leaving stores with their recently purchased items, while some looked for shade outside.
Within the Apple Store, locals gathered close, eager to obtain the newest iPhones.
A delighted customer was Jack Lee, a 23-year-old from Shenzhen, who left with a brand-new Apple Watch.
He mentioned he spent approximately HK$4,000 (US$514) for his new watch, saving HK$300 in comparison to the cost in the mainland.
"The trade-in deals are more appealing here, and I can receive a tax refund for my purchase," the student mentioned, having traveled specifically to Hong Kong for shopping.
The Laopu Gold store inside the mall was also crowded, with a long queue of customers outside waiting to get in.
A legal professional from Jiangsu, named Wang, mentioned that she spent over HK$10,000 on a gold necklace.
"It appeared quite nice, so I purchased it," said Wang, who is set to mark her 35th birthday on Friday.
She intended to stay in Hong Kong for three days, but would spend the first night at a hotel in Shenzhen, which she claimed was more affordable, and then move to the Disneyland resort on Lantau Island.
"The gap in hotel rates between Shenzhen and Hong Kong is quite noticeable," she mentioned.
Nevertheless, notable declines were also seen in areas usually linked to local expenditure, with fuel sales decreasing by 11.4 per cent, motor vehicles and components dropping by 8.9 per cent, and furniture and fittings declining by 3.9 per cent.
Food, alcoholic beverages, and tobacco also fell by 3.6 percent, while supermarket goods declined by 0.8 percent.
Gary Ng Cheuk-yan, a senior economist at Natixis Corporate and Investment Bank, noted that Hong Kong retailers of well-known consumer products are modifying their pricing strategies to match those of the mainland.
"The trend of involution originating from mainland China has arrived in Hong Kong," he stated, mentioning the widely recognized Chinese phrase that signifies intense, counterproductive competition, and noted that residents now have more options for online shopping via mainland platforms like Taobao and Pinduoduo.
Hong Kong merchants have responded by providing additional sales to keep their customers. This could be the beginning of the competition.
Taobao is part of the Alibaba Group, which also controls the South China Morning Post.
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This piece was first published in the South China Morning Post (www.scmp.com), a top news outlet covering China and Asia.
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