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Hong Kong Retailers Suffer

February 12, 1999

SHENZHEN, China (AP) _ Petula Chung posed for the camera in her tailor-made jacket, apparently a Christian Dior knockoff.

With mascara-thickened eyelashes and bright crimson lips, she was ready for a series of computer-generated glamour photos that would cost about half what she would have paid back home in Hong Kong.

Shenzhen, China’s freewheeling capitalist bastion across the border from Hong Kong, is where thousands of Hong Kong residents have been spending their free time _ and cash, which is harder to come by as Hong Kong struggles through its worst recession in years.

The growing trend of cross-border shopping is a testimony that Hong Kong, after years of robust growth, has priced itself out of many shoppers’ budgets.

Chung, a piano teacher, can buy a tailor-made suit in Shenzhen for 300 Hong Kong dollars, or U.S. $38. ``In Hong Kong,″ she said, ``you can’t even find a ready-to-wear suit for 1,000 dollars,″ or U.S. $130.

Shenzhen’s bargain prices even lured Amy Cheung, a struggling Hong Kong retailer.

``It’s ironic because I always complain that people don’t shop in Hong Kong anymore. And here I am, spending money in someone else’s territory,″ Cheung said, looking slightly embarrassed.

Cheung, 56, got a good deal on a tablecloth at the Shenzhen Commercial City, a five-story, nondescript mall by the train station where most Hong Kong shoppers arrive.

Business at Cheung’s store, Matthew Fisher Co., a high-end fashion boutique in the Japanese-owned Hotel Nikko in Hong Kong, has plunged into the red as the territory’s recession worsens.

Retail sales in Hong Kong have fallen 17 percent in the first 11 months in 1998, compared with the same period in 1997. However, passenger traffic on the trains from Hong Kong to Shenzhen rose 17 percent last year.

``The industry is going through a very tough time,″ said Philip Ma, chairman of the Hong Kong Retail Management Association. ``The last thing we need is for someone to take their hard-earned money to spend somewhere else.″

Shenzhen is a 15-minute train ride from suburbs in Hong Kong’s northern New Territories and less than two hours from the business district, known as ``Central.″

It is a designated ``special economic zone″ in communist China and easily one of the wealthiest and most commercialized spots on the mainland.

One recent weekday, women in small groups bargained with shop assistants at Shenzhen Commercial City for everything from tea to counterfeit designer bags, blouses and electronics. Others were pampered at massage parlors and hair salons.

Some stores trade solely in Hong Kong dollars instead of the Chinese yuan. A few Hong Kong retailers have also opened shop here.

David, a Hong Kong tailor who refused to give his last name, said he can offer services at half price because rent and labor costs are only an eighth of what they are in Hong Kong.

``We are competing solely on price,″ he said.

Anne Ling, a retail analyst at SG Securities (HK) Ltd., discounts the trend as a passing fad she says will post no real threat to Hong Kong. She said the products in Shenzhen are usually second-rate and prices are getting higher with the current boom.

But that doesn’t bother the bargain-hunters.

``Greed is human nature. The quality is poor, but you can buy two, three, four things for the price of one,″ said Cheung.

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