Distinction in travel journalism
Is independent travel journalism important to you?
Click here to keep it independent

7 Aug, 2014

Mainland Chinese visitors lose shopping enthusiasm for Singapore

By Brian Leonal

Singapore, (China Daily) August 05, 2014 – Retailers billed it as the Great Singapore Sale. Chinese tourist Zhu Liang bought it, only to regret it afterward.

“We will never come here again on purpose to shop,” said Zhu, a 35-year-old businessman from Hangzhou, in East China’s Zhejiang province.

Visiting the city during the final days of the summer sale season in July, he purchased a Loewe handbag for his wife, only to discover he could have paid less in Hong Kong.

Behind the mark-up: a strengthening exchange rate, rising labor costs and a sales tax Chinese tourists do not encounter in Hong Kong. A reduction in visitors from Asia’s largest economy contributed to a sales slide of as much as 4 percent in Singapore’s annual shopping festival, according to the retailers’ association.

Visitors from China to Singapore dropped 27 percent in the five months through May from a year earlier, amid slower economic growth on the mainland and the impact of a new Chinese law that clamped down on cut-price shopping tours. Total tourist arrivals slid 1.7 percent, according to the Singapore Tourism Board.

Singapore’s retailers, already facing growing regional competition, are under the most pressure since the Asian financial crisis, Singapore Retailers Association Honorary Treasurer Kesri Singh Kapur said.

“It is that grim,” Kapur said. “Both the sides of consumption, which are the domestic customers and tourists, are not spending. I anticipate that at least for the next 12 months, the market will be sluggish.”

Losing allure

While China’s anti-corruption campaign against extravagant spending by government officials and State-owned companies has also damped spending by Chinese at home and in Hong Kong, retailers in Singapore are grappling with the threat of a broader decline in appeal.

Singapore’s average retail sales growth dwindled to less than 1 percent in the two years through May, according to government data that excludes motor vehicles. In Hong Kong, the average was 6.9 percent in the 24 months through June.

The Southeast Asian island, home to an Asian leg of the Formula 1 race and two casino resorts, has seen its currency strengthen about 3 percent against China’s yuan in the past year, the most after the Korean won among major Asian currencies tracked by Bloomberg. The Hong Kong dollar has gained 0.9 percent.

“If we change our renminbi to Hong Kong dollars, it seems like we have a huge amount of money. With the Singapore dollar, you just feel like it is little money,” Zhu said last week as he walked empty-handed out of the Paragon mall on Orchard Road with his family. Singapore retail goods are generally about 10 percent more expensive than they are in Hong Kong, he said.

Singapore imposes a 7 percent goods and services tax. While tourists can claim back part of that on departure, “there is still a differential of 2 to 3 percent,” said Kapur, who is also Asia head of Dubai-based Al-Futtaim Group, the operator of retail chains such as Royal Sporting House and Robinsons department store in Singapore.

Singapore Tourism Board data show that Chinese visitors spent S$800 million ($642 million) in Singapore in the first quarter, of which almost half was on shopping.

Revenue during the Great Singapore Sale that ran from May 30 to July 27 showed a 2 percent to 4 percent decline from the 2013 period, Kapur estimated.

Arrivals from China have also been hurt by political turmoil in Thailand and the March disappearance of a Malaysian plane carrying many citizens from China, whose travelers often include Singapore as part of a broader Southeast Asian vacation, said Song Seng Wun, a Singapore-based regional economist for CIMB Research.

“It all adds up to a fairly bearish picture for the retail sector,” said Selena Ling, an economist at Oversea-Chinese Banking Corp in Singapore. “It’s hard to see immediate light at the end of the tunnel.”