From December 30 to January 1, a total of 145,757 mainlanders visited Hong Kong, according to Hong Kong's Immigration Department.

Mainlanders now comprise half of the tourists in Hong Kong who account for up to 8 percent of the city's economic activities.

"Shoppers have always been the greatest boon for a service-led economy like Hong Kong," says Bank of East Asia economist Paul Tang, citing history to prove his point.

Post-SARS, it was the influx of mainland tourists that helped Hong Kong recover from the economic downturn. And thanks to them to a large measure, the city has seen rapid growth after 2003 - the longest economic upswing cycle since 1997.

A lot of small Hong Kong retailers, who earlier were reluctant to accept yuan notes, have now joined their bigger counterparts to not only accept the mainland's currency, but also offer a 1:1 ratio.

"There's no reason to say no to the yuan now. It'll soon be more valuable than the HK dollar," says Sally Ng, a saleswoman in a 10 square-meter outlet in Hong Kong's food and shopping district of Wan Chai.

Market bullish

Hong Kong's retail and tourism sectors will not be the only ones to share the spoils of an appreciated yuan. Its stock market, too, stands to benefit. The world's seventh largest bourse, along with its ancillary sectors, generates almost 70 percent of the city's GDP.

Seeing Hong Kong as a proxy to gain from the yuan's appreciation and the Chinese mainland's robust economy, more international investors will flood into the city to buy H-shares, or Hong Kong-listed mainland companies. After all, 2006 gave them more than they expected.

1

2

3

(For more biz stories, please visit Industry Updates)