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Hong Kong Protests Threaten Retail Business During Key Holiday Sales Period

The political unrest that began last week in Hong Kong continued for a fifth day on Wednesday, and threatened to derail the region’s weeklong National Day Holiday, an important period for the retail trade in the Chinese territory, according to industry sources.

The holiday, which celebrates the anniversary of the founding of the People’s Republic of China in 1949, usually brings an influx of tourist from mainland China to shop, and is the second-biggest annual retail sales period, after December. Chinese mainlanders come to Hong Kong to avoid the excise tax on discretionary goods purchases in China, which run 30 percent for cosmetics, for example. Last year, Chinese tourists accounted for almost 40 percent of total retail and restaurant spending in Hong Kong.

Many schools, banks, retail stores and other businesses remained closed as pro-democracy protests continued in some key parts of the city. The protests, which were started by university students but quickly drew many older citizens, stemmed from an August 31 decree by the Chinese government that it would vet candidates running for election to Hong Kong’s leadership in 2017, limiting voter rights.

Riot police used tear gas and pepper spray against the protestors over the weekend to try to quell the unrest, but tensions have eased since then as both sides continue to stand their ground for the most part peacefully, according to news reports.

Protests spread from four of the busiest areas of the city to Tsim Sha Tsui, one of the city’s most popular shopping areas for mainland Chinese, which would typically be doing gangbuster business over the next several days.

Hotels reported a decline in business, and economists fear that the Hong Kong economy could slow to the point of recession in the third quarter due to the turmoil and resulting decline in tourist visits. Luxury goods retailers in Hong Kong have already been hurt by the crackdown on gift-giving in China and the mainland’s slowing economy.