Multiple shops and restaurants shutting down in Hong Kong; Economic reform or Economic recession?

By Benedict Lam

During the COVID-19 pandemic, global and local markets were declining, creating challenges for both governments and corporations in international and domestic economies. Although there were some improvements in the economy after the pandemic, the Hong Kong retail and catering market has not demonstrated significant improvement.

Post-COVID, Hong Kong citizens have started a trend of “Heading North.” This term describes the cross-border consumption by residents who travel to Shenzhen and other Guangdong Province cities through land ports on weekends. There are several reasons for this phenomenon. One is “revenge spending.” During the pandemic, Hong Kong citizens were unable to consume as they normally would, both within the city and in Mainland China. This created pent-up demand, causing them to spend more now to make up for lost opportunities and driving the “Heading North” trend.

Another main reason is the continuing economic rise of Shenzhen. In recent years, according to China Daily, Shenzhen's GDP reached 3.68 trillion yuan, making it the city with the third-highest GDP in China. This growth has helped attract multiple national and international corporations to establish headquarters there, promoting Shenzhen's tourism and cultural attractions. All these factors contribute to the trend, resulting in fewer citizens staying and consuming in Hong Kong.

This trend can create many challenges for businesses in Hong Kong. According to Hong Kong 01, Chui King Lau, a sixty-year-old restaurant in Wan Chai specializing in Hakka cuisine, announced its closure due to a deteriorating business environment. This illustrates how the "Heading North" trend is decreasing opportunities for local Hong Kong businesses.

This trend affects not only the catering sector but also the retail sector. AEON is a famous department store in Hong Kong with business across multiple sectors, making it a powerful and significant corporation. However, four AEON-affiliated homeware stores called “Living Plaza” were closed down in August. This highlights that even an influential corporation is experiencing difficulties due to the “Heading North” trend.