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Parallel trading

The influx of parallel traders who buy their stock tax-free in Hong Kong to resell it in mainland China at a profit is causing growing unrest. Residents of Sheung Shui, a town close to China's border, say the increase in parallel importers has pushed up retail prices and causes a general nuisance. Importers argue that their trade benefits the Hong Kong economy.

CommentInsight & Opinion

Over-the-top crackdown on parallel traders is beneath Hong Kong

Mike Rowse says problems could be solved without targeting mainlanders

PUBLISHED : Monday, 01 October, 2012, 12:00am
UPDATED : Monday, 01 October, 2012, 3:06pm

Am I the only person in Hong Kong who feels uncomfortable about the recent crackdown on parallel-goods traders? What is it about their activities that we as a community apparently find so offensive?

As I understand it, they are buying goods in Hong Kong, transporting them to another place, and selling them for a profit. This is called "trading" and it is how our city has made a living for itself for decades. Indeed, we are famous around the world for our trading expertise.

Note, they are buying the goods, not stealing them. And they are not even getting a healthy wholesale discount, just paying the over-the-counter price like you and I.

Now I'll grant you there have been some problems arising at the practical level, for example carrying large quantities of goods on MTR trains to the border and blocking station entrances and the carriages themselves, thus inconveniencing local residents. Surely this can be addressed, first by the MTR Corporation enforcing its regulations about the quantity and size of goods individual passengers can carry. (By the way, when we start this enforcement exercise, can we also extend it to Admiralty and Causeway Bay stations?)

It should be pretty easy to find a small fleet of goods vehicles to run a shuttle service from Sheung Shui and other places to the border crossings.

A long wait at immigration and customs? Make those with large quantities of goods use a separate queue.

Then there is the reported issue of the bulk sales pushing up prices, so local residents are being forced to pay extra for baby milk powder, shampoo and other necessities.

Surely it is not beyond Secretary for Commerce and Economic Development Greg So Kam-leung to sort this one out if it is in fact true. Two supermarket chains control over 80 per cent of the market, so he can just call in their bosses and tell them to fix it. Given the numbers involved, they could hold the meeting in the back of his official car.

What remain are the so-called immigration offences of mainlanders breaching the terms of their two-way permits by undertaking employment. Already, scores of ordinary men and women have been arrested; some have been taken before the courts and jailed. All mainlanders, you will notice; no Hong Kong residents among them.

Really? Have we stooped to this level? Could someone tell me the difference in principle between mobile phones bought in Yuen Long and Gucci handbags bought in Central? But how many times have our diligent law enforcement officers raided the Landmark or Pacific Place and carted off screaming tai-tais?

And, inevitably, the countermeasures have begun. Just as a mainlander acting as a courier may have a slightly questionable status on this side of the border, so his Hong Kong counterpart may be on thin ice on the other side of the Shenzhen River.

Sure enough, Hong Kong resident couriers are now being warned that they could be jailed for the act. Did no one in authority anticipate this? What did we expect the mayor of Shenzhen to do? How many millions is it all costing?

Unless the situation is smoothed out quickly, a great deal of ill will is going to be generated and it will poison the atmosphere in other areas where the two cities need to work together. A brief burst of popularity will have been bought at a price we will all be paying for years to come.

Just when you may have thought things couldn't possibly get any sillier, word reaches us from Beijing that our government has raised the issue with the central government.

The Politburo meeting must have been be a corker. The agenda will have included the Sino-Japanese relationship vis-à-vis the Diaoyu Islands, the situation in Syria, implications for China of the US presidential election - and toothpaste purchases in Hong Kong. Let us hope this last item does not get mixed up in consideration of the next stage of our democratic development.

Someone, somewhere, needs to demonstrate a sense of proportion.

Mike Rowse is the search director of Stanton Chase International and an adjunct professor at the Chinese University of Hong Kong. mike@rowse.com.hk


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This article is now closed to comments

Parallel trading is not trading, it's called tax evasion and is borderline smuggling. Since when does an adjunct professor do the CUHK approve of tax evasion and smuggling?
Mr. Rowse, I suppose, is one of those expats who live comfortably & not worrying about the price of goods being pushed up by these "trading" activities. He can afford expensive formula for his kids & other consumer products. Have you ever thought about those not so rich parents who have to struggle for a tin of formula for their babies? Have you ever thought of old people who have to travel to another far away area to buy their food? Come on, Mr Rowse, not everyone in Hong Kong is as lucky as you are, having more than enough money to spend.
love these articles that pretend MASSIVE hong kong can just accomodate anyone or anything
sure china, come buy all our apartments
our goods, sure come take them all
hospital beds, come on down
sometimes I think these humans that claim to be journalist have lost the "logic" cells in their brains
Mike Rowse has obviously not subscribed to the new on-line version of the SCMP.
He is repeating what 'captam' and others have been posting in this 'Comments' section during the past two or three weeks.
Time to get up to date Mr. Rowse! Some parts of your letter are almost plagiarism.
No one seems to disagree that parallel trading is a form of trading but for any of us living along the West and East Rail lines, this crackdown is very much welcomed. The price of this crackdown, as Mr. Rowse mentions, for me is about a 10-20% discount. Already I can see local shops with stock. Try being unable to buy essentials like toilet paper, diapers and most importantly baby formula. Then you will understand. I only wish that this had started sooner.
What may be proof of violation of "condition of stay" which in itself is arbitrary and poorly-defined.
Law needs to be passed, including imposition of punitive taxation to make it unviable for such
"parallel trade". HK government cannot rely on customs on the other side to regulate.
Mike Rowse article is so far removed from the actual problem, I have no idea how it got even printed. Is SCMP now supporting breaches of condition of stay?
Yes, he is right, parallel trading is trading, but why should the governments on either side of the river support it by running shuttle services for goods? The practice is illegal on the mainland because the traders avoid paying import duties and it is illegal in HK, because the trader aren't allowed to work in any way on their two way permits.
Which is also where the difference lies between them and the Tai Tai's, the latter buy most of the goods for themselves instead of running back and forth a couple of times per day carrying new handbags for sale.
And Hong Kongers possibly being jailed for tax evasion on the mainland? Surprise, Surprise, the law has always been that way and everyone involved knew the risk before hand.
mrgoodkat, the Immigration Department's conditions of stay for a visit permit to Hong Kong:
A successful applicant entering the HKSAR as a visitor shall be subject to the following conditions of stay that:
1.he/she shall not take up any employment whether paid or unpaid;
2.he/she shall not establish or join in any business; and
3.he/she shall not become a student at a school, university or other educational institution.
I don't see anything in there about not being able to go shopping.
What he/she does with the goods later after leaving the territory is not Hong Kong's concern. If you insist on twisting the law to have it all your way, then please arrest all those suited diamond merchants who come to buy gems at the jewellery fairs.
And also arrest the 'tai tais' buying their Gucci handbags.............. why are so many of them buying more than one of the same type.
These are nuisance offences at worst......... obstructing footpaths, exceeding luggage limitations etc. on the MTR. This is misuse of the law to crack a nut with sledge-hammer
How would you be able to see that? You are clearly blinded by your love of the motherland.
Shopping is not illegal, because those coming to Hong Kong to shop are buying goods for personal consumption and or family or friends.
Parallel traders come to Hong Kong with the specific purpose of buying quantities of goods, multiple time on a regular basis for resale and to avoid paying import duties. Entering Hong Kong with the specific intent to acquire goods for export is definitely taking up employment.
In order to accomplish the same goal without taking up employment, a trader would need to send a purchase order to a company in Hong Kong, that company would then fill the purchase order and have the goods shipped to the mainland though normal shipping channels.
By entering HK and physically seeking out the goods, buying them, transporting them, and walking across the border with them, that person is "taking up employment."
i think its patriotic thing to do for these so called parallel traders!! u wanna guess where all those duty monies eventually end up? into corrupt officials pocket!!! so why pay them?



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