The proposed 20 percent cut in the number of mainland visitors by the HKSAR Government triggered a huge reaction. The day after the announcement companies such as Wharf (Holdings) Ltd and Sa Sa International Holdings Ltd saw billions of dollars wiped off their stock values.

Ordinary news readers might regard this "20 percent" as nothing more than a number. But consider it from another angle. Last year, the number of mainland visitors to Hong Kong was 40 million people, and a 20 percent cut could mean a reduction of 8 million visitors. By similar calculations, spending by mainland visitors in 2013 accounted for 22.2 percent, or HK$110 billion, of the total volume of annual retail sales. The new proposal actually anticipates a HK$20 billion loss for the retail industry.

After considering this, it is obvious that tourism, catering, retail and hospitality sectors and other related businesses will be severely affected by a reduction in the number of visitors. Businesses and employees are also likely to be hard hit. Referring to a 9.8 percent drop in retail sales in April, marking the worst performance for the sector since February 2009, the public naturally reacted strongly against the proposal.

From a practical point of view, there are obvious obstacles to implementation of such a proposal. How can it be done? What measures should we adopt? Which would be more effective - the cut-off mechanism, or a daily quota for the 49 mainland cities which implement the Individual Visit Scheme (IVS)?

It seems that no matter how we try to achieve a 20 percent reduction, new problems will inevitably emerge. At such short notice, it would be almost impossible for government departments in Hong Kong and their counterparts on the mainland to work out effective measures to deal with the situation. Moreover, preventing tourists from spending money in Hong Kong is irrational from any perspective. They are boosting the city's economy. If a reduction in numbers is directed solely at mainland visitors, Hong Kong might also be accused of discrimination.

I believe that no mandatory policy should be imposed on the IVS. The only aspect open to debate is the potential cancellation of multiple-entry permits. These are enjoyed exclusively by Shenzhen citizens. Canceling "multiple-entry permits" would be a practical solution. On the one hand, this would not restrict visitors from the other 48 cities, while on the other, it would help ease the number of parallel traders coming to Hong Kong.

In the long run, Hong Kong should actually be prepared to expand its capacity to receive more tourists. We should also try to court big-spenders interested in buying quality products. The retail industry has suffered declines for three months in a row. As a key economic indicator, the poor performance of this important sector sounds alarm bells concerning Hong Kong's economic future. The downturn in the retail industry has come about for several reasons. The first is the current social climate in Hong Kong. A small group of Hong Kong people have indulged in irrational behavior in harassing mainland visitors, possibly with the aim of provoking antagonism between the mainland and Hong Kong. This behavior has definitely dampened the desire of some mainlanders to come shopping in Hong Kong.

Recently, there has been a significant decline in the sale of luxury goods in Hong Kong. Compared with previous years, the mainland's social and economic climate has evolved and become more pragmatic. So, naturally people have started to reduce their purchases of luxury goods.

The business climate in Hong Kong has also become more challenging because in recent years there have been dramatic increases in rents and salaries. These automatically add to the burden of commercial costs on the retail industry.

At the same time, Europe, US and other Asian countries are actively encouraging tourists from the mainland with policies specifically catering for them. Hong Kong is losing its leading edge as a shopping paradise to other countries.

Therefore, rather than review the IVS and look at ways to reduce the number of visitors, it is far more important to preserve the prosperity of Hong Kong's retail industry.

The author is vice-president of the Chinese Manufacturers' Association of Hong Kong.

(HK Edition 06/19/2014 page9)