Jake's View | Taxing question of why China exports goods via Hong Kong

HK was busiest office of Panama Papers law firm

SCMP headline, April 8

Here is a teaser for you. Why should people in China want to export goods abroad by first shipping them to Hong Kong and then shipping them on unchanged as re-exports to their final destination? Why not go direct?

Elsewhere this sort of thing is occasionally done because of anomalies of trade treaties, but this is not the case here. Nor does it happen because we have the only worthwhile sea port around. We don’t.

The reason lies in the precise definition of the word “unchanged”. The goods are unchanged, but the accompanying paperwork is not. Along the way an extra margin of about 19 per cent is added to the prices of these goods.