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.
Opportunities in parallel trade
A backlash against Hong Kong's restrictions on infant milk formula is, unsurprisingly, escalating as more mainlanders have been fined for carrying in excess of what is allowed out of our city. Although officials maintain that the two-tin cap, aimed at easing the shortage of supply for residents, applies equally to locals and visitors, it does little to dilute the perception that the measure is targeting mainlanders. Influential state media and politicians and even some Hong Kong lawyers slammed the government for overreacting to the cross-border parallel trading that has long existed. Some went further, to question whether the restriction is constitutional and in line with international trading rules.
It is not difficult to see why officials are under pressure to put a time limit just days after enforcing the cap. It was prompted by an outcry against an influx of mainland visitors snapping up the baby product and other household goods. Arguably, the government is not to blame for putting local mothers first. But the move understandably raises concerns over the city's reputation as a free-trade economy; and further strains the tense relations with the mainland.
The circumstances that gave rise to the curb are indeed regrettable. Following the scandal a few years ago over melamine-tainted milk on the mainland, authorities and suppliers with foresight should have geared up to rising demand spurred by mistrust of mainland brands across the border. Parallel traders' abuses of tourist visas and slack enforcement by customs officials have worsened the situation. The government's rush to enforce the ban ahead of lawmakers' scrutiny of the law further reinforces the impression that the move has not been well thought-out.
Hong Kong prides itself on being a free port where visitors and goods can move in and out without undue restrictions. Any step that may tarnish the city's image is to be treated with great care. The cap is, after all, an exceptional measure to stem the re-export of what limited supplies. It makes sense to lift it when the situation improves. Lawmakers must work with the government to come up with arrangements that strike a proper balance. This is not just about conflict and tensions over cross-border integration. The scramble for products on our shelves underlines growing demand and confidence in our retail business. Authorities on both sides should work closer to tap the business opportunities that arise.