Why did Hong Kong retail sales fall after a strong rebound?

Retail sales initially surged following Hong Kong’s border reopening in January 2023.

Retail sales growth in Hong Kong slowed to 12% in the second half of 2023 and fell by 1% in Q1 2024. 

This decline follows a strong rebound after the city’s border reopening in January 2023, which saw a 21% increase in sales and a 5% rise in street shop rents during the first half of 2023. Retail rents, which had stabilised, also dropped by 3% after mid-2023.

The downturn in the retail market coincided with a significant increase in northbound travel. Hong Kong residents' trips through land control points rose from 3.9 million per month in the first half of 2023 to 6.1 million in the second half, reaching 7.0 million trips per month in early 2024. Many of these trips were same-day visits to Shenzhen and other Greater Bay Area (GBA) cities.

The strong Hong Kong dollar, bolstered by high interest rates, has contributed to this trend. Over the past two years, the RMB and Euro have depreciated by around 10% against the Hong Kong dollar, whilst the Japanese Yen has fallen by over 30%. This, combined with a surge in ‘revenge travel’ after three years of border closures, has led to increased local travel abroad.

Inbound tourism has not recovered as quickly as expected. Tourists, facing higher prices in Hong Kong compared to four years ago, spent significantly less in 2023, with total tourist spending declining by 48% to $18.1b (HK$141.3b)— $16.64 b(HK$130b) less than 2018 levels. 

Mainland tourists also reduced their spending, with same-day and overnight expenditures falling by 43% and 8%, respectively, from 2018 to 2023.