Kiki Yang brought an empty green suitcase from Shenzhen to Hong Kong this week to fill it with new things for her family and friends.
“I’ve been doing a lot of shopping these days,” she told CNN on Tuesday, pointing to her luggage, which she described as full of clothes, medicine and electronics.
Yang is one of tens of thousands of mainland Chinese visitors expected to be welcomed into Hong Kong this week as one of the world’s strictest border closures ends. On Sunday, residents of Hong Kong and mainland China were allowed to resume two-way travel without quarantine after three years, albeit in limited numbers.
For companies like beauty retail giant Sa Sa, the moment couldn’t come sooner: Danny Ho, its chief financial officer, told CNN that visitors from mainland China typically make up a staggering 70% of their business.
“That essentially dropped to almost zero after the border controls [were] in place,” he said, referring to the rules that began in early 2020 and required self-isolation of visitors in hotel rooms.
Not surprisingly, Sa Sa’s business declined. Once Asia’s biggest beauty retailer, the chain has fallen to fourth place, behind rivals such as LVMH’s Sephora, according to market research firm Euromonitor International.
Sa Sa, which counts Hong Kong and Macao together as its largest market, has seen sales roughly halve since 2019. The company has tried to stem the bleeding by closing stores, investing online and diversifying its product mix, including introducing non-cosmetic products such as face masks and tests for Covid-19, according to Ho.
Now things are getting better.
“I can tell you that everyone in Hong Kong retail has been very much looking forward to this event,” said Ho, a member of the Hong Kong Retail Management Association, referring to the reopening of the border.
The move is Hong Kong’s latest attempt to rebuild its status as a global business hub. For decades, the former British colony was seen as a friendly gateway to the huge mainland Chinese market, but its economy has taken a hit during the pandemic as Covid-19 restrictions take hold.
Hong Kong’s economy has slipped into recession in 2022, and is estimated to have contracted by 3.2% for the full year, according to a government forecast.
Restricted cross-border travel was the biggest concern for businesses across the city, according to a Hong Kong General Chamber of Commerce survey released on Monday.
“The worst is over,” the group said in a statement, although it warned of other lingering winds.
Businesses and economists are in no rush to improve their forecasts yet.
“In the first half of this year, the recovery will definitely be significant. We’ll see things really improve, but there won’t be a full recovery,” said Sheana Yue, China economist at Capital Economics.
Yue said hotels and restaurants could see a boom soon, especially as “the backlog of people getting their visas” from mainland China has been cleared.
Currently, as part of the gradual reopening, Hong Kong has a quota of 60,000 visitors from mainland China each day.
However, according to government statistics, so far less than 6,000 people from that category came daily. The city recorded a total of just under 21,600 arrivals from mainland China from Sunday to Wednesday, in the first four days of reopening, immigration department data showed.
While Yue expects Hong Kong to emerge from recession this quarter, she estimates it could take a full year for the city to recover, potentially until the first quarter of 2024.
Then the economy could finally return to the levels of early 2019, before it was hit hard by both mass protests and the pandemic, she added.
Louise Loo, senior economist at Oxford Economics, also said Hong Kong will take some time to turn around, particularly as it continues to grapple with “significant economic challenges”, including low property prices and the impact of high US interest rates.
But once all border restrictions are lifted, “Hong Kong stands to benefit the most from China’s reopening of the region,” she told CNN.
Ho, CEO of Sas, also did not raise sales projections for the quarter, although he said the company was hoping for an uptick during the upcoming Lunar New Year holiday.
The retailer has prepared special discount coupons on Alipay, Alibaba’s ubiquitous digital payment system, to offer mainland Chinese shoppers coming to the city to shop, although it is too early to see the immediate effect of their return, he said.
“We have to wait and see how much he actually recovers,” Ho added.
— CNN’s Marc Stewart, Sandi Sidhu, Jennie Chen, Kathleen Magramo and Simone McCarthy contributed to this report.