The Pros and Cons of Mainland Residents Visiting Hong Kong in an Individual Capacity

CHINA Ruby News

Ruby Zhu, Assistant Economist of the Hong Kong General Chamber of Commerce. Email: [email protected] Vol II, No.8 August 2003

The pros and cons of Mainland residents visiting

Hong Kong in an individual capacity M embers of the Hong Kong business community are percent of their pre-SARS level and are expected to exploring how they can benefit from CEPA. While top 1 million during the “Golden Weeks” holiday the measures on trade in goods and services period in October. Most importantly, Mainland covered by the arrangement don’t go into effect until visitors are Hong Kong’s biggest spenders, with January 1, 2004, plus many of the finer details, each visitor on average spending HK$5,000, such as rule of origin, have yet to be finalized, compared to HK$4,430 for the U.S., and HK$3,832 tourism-related sectors have already started feeling for Japanese visitors. the benefits of the agreement. Sectors worse hit by SARS, such as hotels, shops, Currently, the Mainland tourism market has opened restaurants, airlines, and other tourism-related its doors to Hong Kong businesses on a limited sectors, are expected to recover rapidly and gain basis. According to Article 14 of CEPA, Mainland momentum over the short-term as more Mainlander residents in Dongguan, Zhongshan, Foshan and freely visit Hong Kong. Over the long-term, this Jiangmen, from July 1, 2003, were allowed to visit increased activity will create a run-off effect as Hong Kong individually, as opposed to only as part industries in the tourism sector, stimulate demand in of a group tour previously. This measure is other sectors, and with it Hong Kong’s economic expected to mark a turning point for Hong Kong’s growth. In fact, although “individual tourism” started weak economy. just one month ago, demand has created a shortage of hotel rooms. To meet demand, the The measure, which started with Guangzhou, government has decided to convert two blocks of Shenzhen and Zhuhai, will be extended to Beijing vacant Home Ownership Scheme (HOS) flats into and Shanghai from September 1 and the entire hotels, which are scheduled to open by the end of Guangdong Province from May 1, 2004. Some this year. This move will also indirectly affect the regard the move as the Central Government’s property sector by easing pressure on prices from “crowd strategy” to rescue Hong Kong’s economy. HOS flats on the market. However, it is worth pointing out that around 700,000 Mainland residents were already visiting We would be naive to believe, however, that the Hong Kong every month before the SARS outbreak. relaxation of “individual tourism” will not be without Mainland visitor arrivals have now returned to 80 problems. In a vast country like China, despite the

www.chamber.org.hk growing middle-class, the standard of living for most people remains low and unemployment high. As such, it is inevitable that some people will try to take advantage of the “individual tourism” initiative and break the law. A number of Mainland residents holding two-way permits illegally work in “entertainment parlours,” construction sites or even as part-time domestic helpers. If they are willing to take pay below the market level, it will be very difficult for Hong Kong’s low-skilled workers to find work, which will add to current social problems.

Illegal Mainland workers in Hong Kong mainly come from neighboring regions like Guangdong and Fujian and do low-skilled jobs on a day return basis. If “individual tourism” is open to qualified Mainland residents only, the negative aspects would be limited; if not, the problem runs the risk of spiraling out of control.

Certainly, the advantages of Mainland tourists coming to Hong Kong on an individual basis outweigh the disadvantages. They will help drive local consumption and revive the economy. However, the negative impact should not be ignored. Hong Kong can take full advantage of the concept of “one country, two systems” to seek the best solution with the Mainland to achieve a win-win situation.