Increased duty-free allowance boosts consumption in Hong Kong and Macao

Hong Kong, Macau

The economic landscapes of Hong Kong and Macao are set to experience significant positive shifts following the Chinese mainland’s decision to increase the luggage duty-free allowance for residents entering from these Special Administrative Regions (SARs). This strategic move, announced by the mainland’s Ministry of Finance, is anticipated to further bolster the retail and tourism sectors in Hong Kong and Macao, aligning with the broader goal of regional integration.

Starting from July 1, residents aged 18 or above entering the mainland from Hong Kong and Macao can now bring in personal items worth up to 12,000 yuan ($1,651) tax-free. Furthermore, they have the option to shop at duty-free stores at the border, bringing in additional items worth up to 15,000 yuan tax-free. This adjustment in policy represents a significant increase from the previous allowance of 5,000 yuan, aiming to enhance consumer convenience and spending capacity.

The Hong Kong SAR government estimates that this policy change will inject an additional HK$8.8 billion ($1.13 billion) to HK$17.6 billion into local shopping expenditure. This surge is expected to generate an economic value-added of about HK$2.7 billion to HK$5.4 billion. John Lee Ka-chiu, the Chief Executive of the Hong Kong SAR, emphasized that this measure reflects the central government’s unwavering support for Hong Kong’s economic growth. By stimulating tourism consumption, the policy is set to benefit numerous small and medium-sized enterprises, invigorating the local economy.

Ken Wong, director of the Hong Kong-based All Times Healthy Co, highlighted the opportunity this presents for local retailers. “This policy will bring great convenience for shopping and stimulate tourism in Hong Kong and Macao. It’s a great opportunity for Hong Kong retailers to introduce high-quality products from Hong Kong and around the world to attract mainland tourists. We must seize this opportunity and make the most of Hong Kong’s advantages as a free port to consolidate our title as a shopping paradise,” Wong stated.

Similarly, Macao stands to gain from this policy change. Ho Iat Seng, Chief Executive of the Macao SAR, noted that the increased duty-free allowance would stimulate tourism consumption and benefit small and medium-sized enterprises. This, in turn, is expected to inject new momentum into Macao’s overall economic development.

The retail and tourism sectors in Macao, which have been gradually recovering post-pandemic, will likely see an uptick in activity. The increased allowance will enhance the shopping experience for mainland visitors, granting them greater flexibility and encouraging higher expenditure. This aligns with Macao’s ongoing efforts to diversify its economy beyond its famed gaming industry, fostering a more balanced and resilient economic structure.

The policy change is well-timed, as the tourism sector in both SARs has been on an upward trajectory. In Hong Kong, the number of visitor arrivals has seen a substantial increase over the first five months of the year, with the total reaching 18 million by the end of May. This marks a 78 percent rise compared to the same period last year, with 13.8 million of these visitors being from the mainland, representing a 74 percent increase year-on-year.

The retail sector, which is closely intertwined with tourism, stands to benefit immensely. The ability to purchase higher-value items duty-free is expected to encourage mainland visitors to spend more during their trips. This will not only boost sales in retail stores but also drive growth in related industries such as hotels, restaurants, and entertainment. Wang Peng, a research fellow from the Beijing Academy of Social Sciences, underscored this sentiment, stating, “This will directly stimulate sales growth in the retail industry, as well as the development of related industries such as hotels, restaurants, and entertainment.”

The increased duty-free allowance is part of a broader strategy to enhance economic integration and collaboration between Hong Kong, Macao, and the mainland. Over the past 27 years since Hong Kong’s return to the motherland, trade between the Chinese mainland and Hong Kong SAR has grown 3.8 times, reaching 2.03 trillion yuan in 2023. This policy is one among many measures introduced by the central government to support the SARs.

Other supportive measures include adding 10 more individual visit scheme cities, extending the period of stay for holders of an exit endorsement for business visits to Hong Kong, and launching the high-speed sleeper train between Hong Kong, Beijing, and Shanghai. These initiatives aim to strengthen the economic, cultural, and technological exchanges between the mainland and the SARs, leveraging their respective strengths to boost international competitiveness.

The increase in duty-free allowances for residents entering the mainland from Hong Kong and Macao marks a significant step towards fostering economic growth and regional integration. By enhancing the shopping experience and stimulating tourism consumption, this policy is expected to generate substantial economic benefits for both SARs. As Hong Kong and Macao continue to attract more mainland visitors, the resultant boost in retail and related sectors will contribute to the long-term prosperity and stability of these regions, reinforcing their status as premier shopping and tourism destinations in the region.

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