The Effect of Recent Multi-Entry Permit Scheme of Mainlanders on Hong Kong Economy with an Emphasis on the Tourist Industry

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1. Introduction
1.1 Background Basically, there are nine types of entry-permit arrangements for Mainland visitors to Hong Kong. They are Settlement, Official visits, Private visits, Transit, Employment in Hong Kong, Training in Hong Kong, Study in Hong Kong, Residence in Hong Kong, and Holders of foreign passports in the Mainland.1 The Individual Visit Scheme (IVS) is part of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), which was launched in 2003.2 Mainland visitors spent a huge amount of money in Hong Kong that fire up the recovery of HK’s economy, which was badly hit by the SARS outbreak in 2003. Under the IVS, entry permit scheme is implemented, which influences the four key industries of Hong Kong, such as financial services, tourism, trading and logistics, as well as product and professional service. 1.2 Assumption Since there was an Economic Crisis in 2008, the visitor arrivals in Hong Kong from other countries/ territories are decreasing since the year 2008 (Figure 1), except those visitors from Mainland China are increasing from year 2003 to year 2011 (Figure 2). 1 Arrangement for Entry to Hong Kong from Mainland China http://www.immd.gov.hk/ehtml/hkvisas_9.htm#settlement 2 2010 Update of CEPA's Impact on the Hong Kong economy (Individual Visit Scheme) http://www.tid.gov.hk/english/cepa/statistics/files/individual_visit.pdf

It is assumed that this is mainly because of the implementation of individual visit scheme that have motivated Mainland Chinese visitors to come, as well as both the legal and illegal attractions to Mainland China visitors. In the legal way, it can be viewed as the attractions of high quality goods (for example, luxury products, and infant formula); duty-free shops; and tourist attractions (for example, the Ocean Park and the Peak). In the illegal way, Hong Kong attracts numerous of traders coming here for buying goods and trade back to the Mainland. We will probe into these issues in the later parts of our report. According to the Figure 3, we have selected five types of entry-permit arrangements of Mainland visitors to further evaluate on which industries in Hong Kong would be affected. As a result, it is indicated that the increasing numbers of Mainland visitors affect the tourist industries, especially in hotel, catering, retail trading, transportation, and tourist attractions; and it would be deeply investigated what are the affections in the later parts of the report. Furthermore, Figure 4 shows that the total amount of overnight Mainland China visitors to Hong Kong per capita spending from 2003 to 2011. It is doubtless that the fact that their per capita spending is increasing year by year will benefit Hong Kong’s economy, especially in tourist industry. When the IVS visitors with high spending power benefit Hong Kong’s economy, they also bring a variety of issues to the society as well. This topic is

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ECON 7090 BUSINESS ECONOMICS

currently a controversial social issue that covered numerous news headlines on this issue involving local residents and mainland tourists. In order to probe into this hot topic, we will investigate both the positive and negative sides of how the multi-entry permit scheme affect the Hong Kong economy especially in tourist industries, specifically in hotel, catering, retail trading, transportation, and tourist attractions on both sides. In the last section, we would extend our analysis on the strategies that Hong Kong Government has implemented in order to overcome the problems. 2 Analysis on segment market

2.1 Retail trading Hong Kong's retailing industry consists of enormous shopping centers, department stores, chain stores, supermarkets, groceries, convenience stores and bazaars, etc.3 The following table shows the visit visas processed for visiting Hong Kong.4 (Based on the data released by the Immigration Department of HKSAR.) It shows that on average, the immigration department will process about 5000 of...
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