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.
Hong Kong needs new formula for milk formula
Last week, the city's health chief was forced to apologise to 12 mainlanders who had been wrongly prosecuted under a new law restricting the parallel trade in infant milk formula. What they carried out of the city was actually rice-based baby cereal, which officials confirm is not their target.
The prosecution blunder has further fuelled cross-border tension and highlights the danger of rushing into practice rules and policies without careful consideration. The restriction on milk formula was clearly just a stop-gap measure in the face of public pressure to curb the trend. A better solution is needed for the longer term.
Local parents are understandably outraged as visitors carrying cartloads of tax-free milk powder across the border for reselling continues to strain local supply. Spurred by a flurry of emotion and criticism, the government rushed to impose a two-tin cap before putting the relevant law under scrutiny. The recent backlash shows it cannot be a long-lasting measure.
There is indeed a silver lining in the crisis. The problem arises from a lack of confidence in Chinese products, whose safety and quality are often seen as inferior to those available here. That mainland visitors come and empty our shelves shows growing demand and confidence in our market. Instead of restricting what can be taken out of the city, a better way is to ensure an adequate supply to meet the demand. With the right strategies, crises can turn into business.
A giant warehouse for mainland shoppers near the border stands out as an option. The location will help save them from running around town and ease the pressure on other districts. It also has the potential to develop into a one-stop shopping place for milk formula, medicine, household items and other popular goods before leaving the city.
The proposal certainly requires more thought before it can be put into practice. A prerequisite is an adequate supply of milk powder. Engaging the relevant parties to explore the idea further is a good start.