Is China's domestic consumption susceptible to leakage to increased tourism spending?

Its consumption is bigger than HK's, notably.

Barclays has noted that unlike Hong Kong, where it had argued in an analysis previously that the possible leakage of wealth effect may help explain the market’s divergent views between retail (negative) and residential/stocks (positive), it believes this is unlikely to be the case in China.

According to a research note from Barclays, considering that China’s retail sales of US$4.3tn are 67 times larger than Hong Kong’s (US$63.6bn), China’s domestic consumption is much bigger.

Therefore, Barclays noted, it is less likely to be affected by leakage to increased tourism spending.

Here's more from Barclays:

A rising tide is supposed to lift all boats but some have risen more than others.

Year-to-date, although the Hong Kong property stocks under our coverage have not done poorly, their 10.3% average gain (vs HSI +18.0%) pales in comparison to their Chinese peers.

We believe some of the divergence can be attributed to the headwinds facing Hong Kong retail, but for some China-centric Hong Kong property companies like HLP, Kerry and NWD that have 30-50% of their GAV tied to China, we believe there is scope for them to catch up to their China peers.

China property stocks are up 20%, Chinese retailers are up 31%: Despite the uncertain outlook of the Chinese residential market and the ongoing anti-corruption measures, the Chinese developers and Chinese retailers under our coverage have risen by 20% and 31% on average year-to-date (vs HSCEI +21.2%).

If their respective stock price rebounds suggest a more benign (or less bad) outlook for both China housing and retail, we believe there should be scope for the China-centric Hong Kong property to catch up on the back of their performance.