Expanded Visitor Program a Boost to Hong Kong’s Tourism and Economy
The unwavering support from the central authorities for Hong Kong has been a constant amidst the flux of the external environment. This support materialized recently with the expansion of the Individual Visit Scheme (IVS), now extending its reach to include Xi’an and Qingdao. Initially available to 49 mainland cities such as Beijing, Shanghai, and Shenzhen, the program permits residents to visit Hong Kong individually, moving away from the traditional group tours. Notably, before the pandemic hit in late 2019, IVS tourists constituted 57 percent of mainland visitors to Hong Kong, marking a significant jump from 35 percent in 2004.
The inclusion of Xi’an, a city of nearly 13 million people known for the Terracotta Warriors and its historic significance as the starting point of the Silk Road, introduces Shaanxi Province into the IVS fold. Similarly, Qingdao, a beautiful coastal city with a population of 10 million in Shandong Province, joins the program. Hong Kong’s Chief Executive John Lee Ka-chiu has welcomed these additions, highlighting the potential economic uplift from the high incomes and spending power of the residents of these cities. In fact, in 2023, Xi’an and Qingdao reported GDPs of 1.2 trillion yuan ($166.7 billion) and 1.6 trillion yuan ($222.2 billion), experiencing growth rates of 5.2 percent and 5.9 percent, respectively. This expansion, according to Lee, promises to bolster the local tourism sector and economy significantly.
Despite some skepticism regarding the economic impact of this expansion, the importance of the tourism industry to Hong Kong’s economy cannot be understated. Historically, tourism has been one of the city’s pillar industries, contributing 3.6 percent to the gross domestic product and employing about 232,700 individuals, which constituted approximately 6 percent of the total employment before the pandemic. The sector provides vital employment opportunities in hospitality, retail, transportation, and entertainment, playing a crucial role in sustaining the city’s lower-income groups. Moreover, in light of recent large-scale layoffs in the tech industry, the stability offered by tourism and related industries becomes even more crucial.
The arrival of more IVS tourists is anticipated to spur further development in the city, including incentives for property developers to build more hotels, thereby amplifying the tourism sector’s contribution to infrastructure development and economic expansion. However, the potential for a resurgence in the demand-induced shortage of household goods, reminiscent of pre-2019 issues, calls for proactive measures by the HKSAR government to prevent such situations. Unlike their predecessors, today’s IVS tourists show a tendency towards less frenzied shopping, potentially alleviating some of the past pressures on local supply chains.
Moreover, as Hong Kong welcomes an increased influx of IVS tourists, it is imperative to prevent the revival of anti-mainland sentiment that characterized certain periods in the past. Scholars and industry officials alike assert the unlikelihood of a return to the kind of radical anti-mainland movement seen pre-pandemic, emphasizing the need for tolerance and understanding in welcoming visitors.
While the latest extension of the IVS may have fallen short of some expectations within the tourism industry, it presents an opportunity for the sector to enhance its competitive edge. Preparing for the increased arrival of IVS tourists is critical, especially as Hong Kong faces stiff competition from other destinations like Singapore and Thailand, which have recently benefited from new visa-free arrangements with China. The success of this expansion might pave the way for further extensions, which could prove beneficial to all stakeholders in the long term.
In summary, the expansion of the Individual Visit Scheme represents a significant opportunity for Hong Kong’s tourism sector and overall economy. Embracing and optimizing this opportunity will be key to ensuring the city remains a top destination for travelers from the mainland and beyond.
