Hong Kong has a dilemma: retailers depend on mainland Chinese shoppers for sales, but resentment among local residents has prompted Beijing to tighten the flow of visitors, which could hit the economy.
Mainlanders represent 84.2 percent of all visitors to Hong Kong, according to the latest Hong Kong Tourism Board (HKTB) data, and account for nearly a third of total retail sales.
But shortages caused by a steady stream of shoppers from Shenzhen, just across the border, to buy daily necessities in tax-free Hong Kong were the target of increasingly violent local protests over the past couple of months.
In response, China has limited the number of visits that Shenzhen residents can make to once a week.
That has Hong Kong's retailers worried.
"The impact of the new policy will not surface in the short run, but will have increasingly dramatic long-term effects," Hong Kong-based cosmetics retail chain operator Sa Sa International's spokesperson told CNBC by e-mail.
Retailers will take the biggest hit from the new restrictions because unlike overnight visitors, day trippers only have one purpose in Hong Kong: shopping.
Retail spending could fall by 2.5 percent to 3.7 percent, while gross domestic product (GDP) may contract by 0.5 to 1.0 percent, Capital Economics' China economist Chang Liu said in a note on Thursday.