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.
Crackdown on milk formula traders in the public interest
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Hong Kong is a free port. Any interference in the market that risks that reputation is not to be undertaken lightly. But the government can count on public support for intervention to stem the re-export of imported infant milk formula to the mainland by parallel traders, which has seriously depleted local supplies and contributed to growing resentment of mainland tourists and shoppers. The border-inspection measures announced last night can be implemented this month and should guarantee adequate supplies for local mothers and children. The government, perhaps wisely, did not take up the radical, precedent-setting idea of adding infant formula to rice - a basic staple - as a reserved commodity subject to controls to ensure supply.
Nonetheless, the measures adopted are exceptional. Cross-border travellers are to be limited to two cans of baby formula for personal use - a fraction of current bulk purchases. This could take effect as early as this month. From Monday, the Mass Transit Rail Authority will limit the amount of personal luggage on the East Rail Line to Lo Wu to 23kg, the standard allowance for an international economy class air passenger.
These moves are to be welcomed. Local mothers are heavily dependent on infant formula, with only an estimated 15 per cent of babies still being breast-fed at four to six months.
That said, the circumstances that gave rise to the government's intervention are regrettable. Parallel traders have long made quick money by reselling tax-free Hong Kong goods on the mainland's grey market. But this is not illegal in Hong Kong. Indeed at least half the traders are said to be Hongkongers. Two factors set it apart now in respect of infant formula. One is the demand for imports created by mistrust of mainland products after a tragic melamine contamination scandal. The other is the abuse of individual multiple entry permits, often by people in the employ of syndicates, to shuttle bulk purchases across the border several times a day, creating shortages and forcing up prices. We trust the joint effort with the mainland will look at limiting crossings and enforcing customs duty laws to remove some of the profit incentive.
The new regime involves a lot of extra bureaucracy and red tape when much has been done to streamline border control. The government must monitor it carefully to see that it achieves the desired result, fine-tune it where possible and maintain it for no longer than necessary.