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.
Milk powder quota is wrong
Putting hard administrative restrictions on cross-border trade of milk powder is a policy which brings a very high cost to all parties. Businesses immediately lose customers and income.
Society pays for increased resources devoted to tightening border controls. The rail system becomes less convenient and more costly.
All these costs will eventually have to be paid for by taxpayers and consumers in Hong Kong.
The political reason for the restrictive government intervention is obvious. Some Hong Kong families with young children don't like the price hikes and supply shortages caused by frenzied purchases from across the border.
There are better ways to cater to the needs of these Hong Kong families without all the costs mentioned above, ways that are politically correct and economically wise.
I propose a set of specific recommendations.
First, let the buyers from across the border, or anyone from anywhere, buy as much milk powder as they want and bring it to wherever they wish, the arrangement that existed before the new restriction was imposed.
Second, have a special tax be charged on milk trading. To protect smaller businesses, the tax could start only if total revenue of milk powder sales of an individual seller reached a certain level.
Third, the revenue from this tax would be used for subsidies for families with young children, for example, aged 60 months or younger. The subsidy could be in the form of coupons for free or heavily discounted milk powder. By the way, subsidising children's education and nutrition is politically sound and a good social policy.
Fourth, anyone selling milk powder in Hong Kong should be required to have enough supplies in stock to honour these coupons. In case it is difficult to administer this requirement, the government could have a franchised supplier specifically for honouring milk powder coupons.
With these measures, everybody, including Hong Kong families with young children, would win. A huge additional benefit of these measures would be that Hong Kong's free-trade reputation would not be damaged.
Yet another extra huge benefit would be ensuring better relations with mainland citizens.
They deserve respect from the people of Hong Kong as the money they spend shows their continued trust in the city during good and bad times.
Wang Yijiang, Tuen Mun