As the world watches President Xi Jinping reiterate pledges to open up China, Beijing is undertaking an equally important mission -- to take back its shoppers.
Soon, consumers desiring the latest luxury handbag, gamblers keen for a punt or unprofitable tech startups wishing to list won’t have to go abroad. That’s good for the mainland, but not so great for special administrative regions like Hong Kong and Macau.
Earlier this month, authorities announced plans to bring offshore tech companies home via Chinese depositary receipts. Crucially, profitability requirements were removed for “innovative” firms. That’s taken the wind out of the sails of Hong Kong, whose biggest publicly traded internet stock is Tencent Holdings Ltd.
In an apparent push to lure New York-traded Alibaba Group Holding Ltd., Hong Kong Exchanges & Clearing Ltd. has rushed through moves to permit companies that have multiple classes of stock, along with loss-making biotech startups.
New York, the world’s No. 1 IPO venue in 2017, can’t rest easy either. While Baidu Inc.’s Netflix-style video streaming service iQiyi Inc. is there, and Huya Inc. wants to be, regulatory changes in China will probably prove magnetic. And this isn’t chump change. The nation’s new-economy firms are expected to raise hundreds of billions of dollars in coming years.
China’s 1.4 billion consumers represent big business also, and they’re likely to find the tropical island of Hainan quite appealing.
If Beijing expands duty-free access beyond the few shops with that privilege currently, or legalizes gambling, the province’s economy could boom. Hainan’s tax-free sales jumped 32 percent last year to 8 billion yuan ($1.3 billion), foretelling the possibilities.
Making Hainan a free-trade port would also encourage more consumers to go there rather than Hong Kong for their luxury shoes and handbags, not to mention the extraneous income around hotels and dining that would entail. It could also dent Macau’s push to cater more for the mass-market tourist rather than VIP high-rollers. Vietnam and the Philippines, both building casino resorts to draw mainland punters, should also be worried.
To be sure, a New York listing or an overseas holiday has the allure of being, well, overseas. Shoppers keen for an Instagram snap on the Champs-Elysees will still head for international departures. And the ultra-rich will always prefer Macau’s discreet betting rooms.
But it seems bringing consumers and business back home is a priority for China, and regulators are keen to smooth the path. Some things, like the opening up of the nation’s financial markets, move at glacial speed. Beijing’s definitely picking up the pace on this one.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.
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