What: Hong Kong's retail sales plunged 13% in February 2025, marking the steepest decline in a year, despite government initiatives to boost visitor numbers and spending.

Why it is important: This significant drop, occurring alongside rising visitor numbers, reveals how currency strength and regional competition are reshaping Hong Kong's position as Asia's premier shopping destination.

Hong Kong's retail sector faces unprecedented challenges as sales dropped to HK$29.4 billion in February 2025, marking the most significant decline in a year. Despite welcoming 3.67 million visitors, including 2.77 million mainland Chinese tourists, the retail landscape shows signs of structural transformation. The strong Hong Kong dollar has created a dual impact: deterring tourist spending while encouraging locals to shop across the border in mainland China. Luxury sectors, particularly jewellery and watches, experienced a 13.5% decline, while clothing and footwear sales fell by 14.7%. The government acknowledges these challenges stem from changing consumption patterns, with both visitors and residents altering their shopping behaviours. While measures such as increased duty-free quotas aim to stimulate spending, the retail sector continues to grapple with regional competition and evolving consumer preferences.

IADS Notes: As observed in March 2025, Hong Kong's retail landscape has undergone significant structural changes, with tourist expenditure falling 48% below pre-pandemic levels despite increased visitor numbers. The July 2024 increase in duty-free quotas aimed to boost sales, but December 2024 data showed continued decline at 9.7%, highlighting the disconnect between visitor numbers and spending. This trend aligns with broader shifts in consumer behaviour, where mainland Chinese tourists increasingly prioritise experiential activities over traditional shopping, while competition from destinations like Hainan's duty-free zone further fragments the Asian retail market.

Hong Kong retail sales plunge 13 per cent – the highest rate in a year