China Clamps Down On Grey Market Tourism


Avery Booker | April 14, 2015

Avery Booker of China Luxury Advisors investigates why China will stop issuing multiple entry Hong Kong visas to Shenzhen residents, and how it might impact parallel trade

China will stop issuing multiple entry Hong Kong visas to Shenzhen residents in a bid to reduce parallel trade, explains Avery Booker of China Luxury Advisors.

Long considered the go-to destination for mainland Chinese grey-market vendors (stocking up on everything from luxury handbags to diapers), Hong Kong is set to crack down on unlimited visits by residents of nearby Shenzhen.

According to the BBC, this week China announced that it will stop issuing multiple entry Hong Kong visas to Shenzhen residents, in an attempt to cut down on the booming “parallel trade” industry, which has long clogged the border crossing with resellers.

Under the new law, Shenzhen residents can only enter Hong Kong once per week and stay no longer than one week at a time — still plenty of time to do a lot of grey-market shopping, but less than in years past.

“ Mainland Chinese visitors made 47 million trips to Hong Kong in 2014 ”

Last year, Mainland Chinese visitors made 47 million trips to Hong Kong, with approximately 10% doing so more than once per week – mostly coming from Shenzhen. This week’s moves are likely aimed at quelling opposition to the rising tide of mainland visitors among Hong Kong locals, which has flared up over the past year in particular.

Although this new law is aimed at cutting down on grey market vendors or so-called goudai (buy and carry back) visitors, the appeal of Hong Kong is long-gone for serious Mainland tourists, or even serious tourist-shoppers.

With the flood of mainland tourists packed into stores, making for an occasionally miserable experience, and a decidedly more antagonistic environment, a growing number of affluent Chinese travellers now turn to nearby Japan and South Korea to get their travel and shopping fix.

“ A growing number of affluent Chinese travellers now turn to Japan and South Korea ”

This nearby-outbound travel boom looks set to continue, as this week the tourism ministers from all three countries met in Tokyo to launch the new “Visit East Asia Campaign,” aimed at boosting visits from travellers from Asia and around the world.

According to a statement, the three tourism ministers are hoping to boost visitor numbers among the three countries to 30 million by 2020, up from around 20 million last year.

The ministers have a particular eye on increasing cross-border travel in advance of a possible Asian Olympic three-peat in the years ahead. (Korea’s PyeongChang Winter Olympics in 2018, Tokyo’s Summer Olympics in 2020, and a possible Beijing Winter Olympics in 2022.)

Tokyo, Japan

Although Japan continues to rise in popularity among younger wealthy Chinese travellers, in recent years it has been South Korea that’s benefited the most from Hong Kong’s fading appeal. Korea is now the third most popular Asian destination for mainland Chinese tourists, behind Hong Kong and Macau, with Chinese travellers making over 6 million visits last year.

Boosted by a weaker yen and an expansion of a sales-tax exemption for overseas visitors in October, Chinese tourist arrivals in Japan surged by 83%, to 2.4 million in 2014.

This year, arrivals have continued to jump, reaching 359,000 in February, a rise of nearly 160% year-on-year. Mainland China is now Japan’s third-largest source of foreign tourists, trailing just Taiwan and South Korea.

“ Chinese tourist arrivals in Japan surged by 83%, to 2.4 million in 2014 ”

Barring a large-scale diplomatic scrap (such as a flare-up of the long-simmering Senkaku/Diaoyu spat that caused Chinese visits to plummet in Japan and skyrocket in South Korea nearly five years ago), we can expect Japan to remain a prime destination for the more affluent of Chinese tourist-shoppers this year.

Attracted by the air of sophistication, massive selection of luxury and beauty brands (both Western and Japanese), and the tax incentives, Chinese luxury shoppers who don’t want to trek to New York or Paris will continue to opt for Tokyo.

Meanwhile, South Korea will remain a top draw for mass-market travellers and bargain-driven shoppers — as well as grey-market vendors, potentially making for tough situations down the road for Seoul or Jeju retailers but leading to near-term gains.

To further investigate the Chinese luxury consumer on Luxury Society, we invite your to explore the related materials as follows:

- Can Spain Compete With France For Chinese Tourists?
- Where Are China’s Global Shoppers Headed For Chinese New Year?
- Easing of US Visas for Chinese Travelers Heralds a Business Boom

China | Travel