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.

ECONOMY

Parallel traders shrug off 15-day border crackdown

They look like ordinary tourists, but in reality they're tax-avoiding traders making good margins

PUBLISHED : Friday, 30 May, 2014, 3:57am
UPDATED : Friday, 30 May, 2014, 9:18am
 

For years, the cross-border checkpoint between Sheung Shui and Shenzhen's Luohu has been chaotic as thousands of "parallel traders" pass back and forth laden with goods.

Now the authorities are fighting back with a 15-day campaign that started on Tuesday to crack down on the illegal trade.

The traders say the move is futile - they vastly outnumber officials and demand is high on the mainland for everything they can bring across the border.

Watch: Illegal marketplace vendors sell goods openly in Shenzhen's Lo Wu Checkpoint

According to Shenzhen customs, more than 20,000 parallel traders - who buy and sell goods outside the channels of authorised agents and distributors - cross the border between Shenzhen and Hong Kong every day. On Tuesday alone, the authorities disrupted 229 illegal attempted trades and detained three parallel traders at the Luohu checkpoint, seizing food, shampoo and milk powder, the Yangcheng Evening News reported.

Six teams of urban management officers, about 300 in total, would patrol the Luohu checkpoints during the crackdown, the authorities said. But the traders were unfazed.

"There are similar campaigns from time to time. The raids in September 2012 were much bigger but only lasted a few weeks and our business was back to normal soon afterwards," said Liang Lu, a veteran parallel trader. "They dispatch hundreds of chengguan [urban management officers]. But there are thousands of parallel traders."

Liang added: "Many of us kept working on Tuesday and yesterday. But we will keep a low profile in the coming couple of weeks.

"But I won't quit the trade. I can only do parallel trading at night because I have an office day job. But I can earn 200 yuan a night. I come over about 20 days a month. Trading part time gives me at least 4,000 yuan (HK$5,000) a month. Full time traders can earn more than 10,000 yuan [per month] easily."

Traders have even turned public spaces around the Luohu checkpoint and subway station into a crowded open-air marketplace. Some even try to recruit frequent commuters to ferry goods across the border.

Every day between 4pm and 10pm, dozens of parallel traders sit by the flower beds of the square, with big suitcases open in front of them full of daily necessities they buy in Hong Kong for sale over the border: toothpaste, chocolate, shampoo, body lotion and cigarettes.

Believe me. It's a bargain to shop here ... You can find most daily necessities
Liang Lu, veteran parallel trader

These illegal traders used to sell their goods to shops across Guangdong or elsewhere on the mainland that sold such Hong Kong products. Now many have started selling the goods themselves in public spaces around the checkpoint.

When urban management officers approach, they close their cases and pretend to be tourists returning from Hong Kong. They resume trading the instant the officers are out of sight.

Some keep trading in front of the officers, who often turn a blind eye, especially at night.

With no need to pay taxes, duties or rent, they made a good profit despite sometimes being fined and having their goods seized, traders said. "My husband goes to Hong Kong twice a day to buy goods. And I sell the goods here between 4pm and 9pm," said a woman in her 30s. "Business is quite good. I often have no time even to go to the toilet."

Traders typically mark up their goods 10-20 per cent higher than pharmacies in Hong Kong, but customers can always bargain. "I can make up to 10,000 yuan per month in peak times. Many others earn more," the woman said.

"Believe me. It's a bargain to shop here. You don't need to spend hours passing through the checkpoint. You can find most daily necessities here.

"You can even give me your shopping list. I'll shop for you, and give you a receipt. You just need to pay me between 10 and 50 yuan per item depending on how difficult they are to carry."

The booming open market attracts many customers, including office workers and housewives, as well as many rail commuters travelling between Shenzhen and Guangzhou.

On Tuesday night, Li Wei, 27, and a few friends arrived early for their train to Guangzhou, and spent more than 600 yuan on facial masks, shampoo, medicine, cookies, insect repellent and infant milk formula.

"I was planning to go shopping in Hong Kong next weekend. Now I have already bought most of what I wanted," Li said. "I'll delay the trip to Hong Kong."

The public spaces around the Luohu checkpoint and subway station also attract hundreds of dealers asking travellers for Hong Kong products popular on the mainland such as infant milk formula, cigarettes and Yakult, a popular dairy drink.

At night, Hong Kong residents can be seen arriving at the public square of the Luohu checkpoint with two cans of milk formula, the trade of which is tightly regulated at the border. The Hongkongers look experienced and only wait a few seconds before dealers approach them.

Hong Kong resident David Wong said it was so easy to make about HK$60 carrying two cans of milk formula and a pack of cigarettes to sell at the square.

"It just takes a few seconds. Why not make the trade?" Wong said.

An urban management officer stood a few metres away as Wong bargained with the buyers. The officer took no action, saying they were overstretched.

"More and more ordinary people are trading now. It's impossible to curb," the officer said.

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