Parallel trading in Hong Kong

Parallel trading in Hong Kong refers to the phenomenon of China parallel traders taking advantage of multiple entry visa policy to import goods from Hong Kong to Mainland China, causing shortage of household goods in various locations starting in the North District and expanding to Tuen Mun, Yuen Long, Tai Po and Shatin. Problems relating to this include increased congestion from the millions of day traders, overloading of infrastructure and disruption of the everyday lives of residents in northern districts of Hong Kong.

Demand of significant volumes of daily necessities favoured by Shenzhen residents has progressively squeezed out those catering to local needs, and caused rent inflation and shortage of certain goods such as infant formula.

Parallel traders outside a pharmacy shop in Hong Kong.

Situation

Visitors from mainland China have risen from 2.3 million in 1997, to nearly 41 million in 2012 and 53 million in 2013.[1] Since 2012, the problem of parallel trading in Hong Kong became more serious. Media reported that 95% of multi-entrance travellers were China parallel traders.[2] The Shenzhen customs department reported in 2015 that of 33,000 arrests made for trafficking parallel goods across the border since 2010, 80 percent were Hong Kong residents.[3] Zhang Xiaoming, Director of the CGLO in Hong Kong, was satisfied overall with the implementation of the Individual Visit Scheme, and said the problem of parallel trading should not be exaggerated for political reasons. Zhang asserted that 60 percent of parallel traders were Hong Kong residents, and Shenzhen residents on multiple-entry permits accounted for the remainder.[4]

Through multi-entrancing within a day, separating goods into small boxes, exchanging goods in and out between the gates of the MTR station exporting goods to China, parallel traders earn 'transporting charges' by claiming themselves as travellers and their products are for self-use, saving the cost of tax.[5] Traders mainly gather in Sheung Shui Station Exit C and the platform as trading centres to pass on goods to buyers in China. They linger thus causing serious blockage and crowding in the station. Targeting the problem, MTR hired hundreds of staff, erected barriers and gates in attempt to control the situation.[6]

Station staff claimed that traders behaved negatively towards them. Although the MTR and the police had enhanced the enforcement of law, traders persisted. Some of the traders break down washing machines into pieces in an attempt to pass the inspection of the staff and policemen. Some of them even force to breakthrough the blockage of MTR staff and police.

Causes

There were several reasons behind the parallel trading in Hong Kong. First, the strength of the Renminbi against the Hong Kong dollar and the absence of taxes and duties in Hong Kong make goods and everyday commodities more attractive to China consumers. Secondly, the multiple entry visa policy allows visa holders crossing the Hong Kong-China border many times with one application, so that they can export goods from Hong Kong frequently. Due to the prevalence of counterfeiting in China, Hong Kong-sourced products and daily necessities are preferred for their perceived quality and demand for Hong Kong goods is insatiable. Parallel traders who profit by buying goods locally and reselling them in the China push up the local prices.[7]

Effects

Milk powder shortage

Notice of restriction of powdered formula allowance at the Guangzhou-Kowloon Through Train departure concourse of Hung Hom Station in 2013.

Despite the increasing importation of infant formula (powdered formula) from foreign countries, the milk powder shortage intensified greatly due to the intense parallel trading activity in Hong Kong. According to the Neo Democrats, during January 2013, parallel traders hired elderly persons and housewives, giving them $20–$50 per can of milk formula, to line up in front of stores at night to purchase many tins of milk powder and then transfer it to traders.[8] Furthermore, ringleader traders hired women with children and the elderly to help them to transport the milk powder across the border to avoid being inspected.

According to a staff member in a chain pharmacy, although the store limited each customer to purchasing no more than four cans of milk formula at once, shopkeepers who wanted to meet sales targets often sold more than four cans to mainlanders. Also, there were stores that only sold formula to mainlanders, causing a serious shortage of milk formula for local consumers.[9]

Inflation

Parallel trade activities have redistributed supplies of a lot of goods between Hong Kong and the mainland, increasing prices of the goods, for example, milk powder prices increased by 0.4 – 12% from 2009 to 2011.[10] Apart from milk powder, prices of daily necessities in the New Territories also increased. Due to the appreciation of Renminbi against Hong Kong dollar, branded goods sold in Hong Kong which are denominated in Hong Kong dollars gave rise to big discounts for mainlanders who settle bills in Renminbi. Also, the Hong Kong government does not levy any custom tariff on both imports and exports of most products. Therefore, Hong Kong goods are cheaper compared to those in China.[11][12] Moreover, competition for shop space to open pharmacies, cosmetics and jewellery shops to support parallel trade in the New Territories has driven rent in the New Territories up by two to three times from 2010 to 2012.[13][14] Small shops catering to local needs are forced to close down and residents have fewer choices. Regional prices rise and increase residents' cost of living.

Social disturbance

North District of Hong Kong is the hub for parallel trading activities. Crowding of smugglers together with the large amount of commodities and garbage blocked pedestrians, causing environmental problems and endangering the safety of children and the elderly, negatively affecting daily life of citizens in the community. According to a survey done by New Start (新起點) on 27 January 2013, among the 500 Northern District citizens interviewed, 100% of them were discontented with the Government on the issuance of multiple-entry permit. 57% and 72% of the interviewees believe the government was ignoring public grievance and were planning on moving away from gathering areas of parallel traders respectively.[15]

Intensification of Hong Kong-Mainland conflict

Parallel trading problem marked the penetration of Hong Kong–Mainland conflict from cultural aspect to livelihood aspect.[16] As parallel traders carried large quantities of products, treating Sheung Shui MTR Station as a transaction centre that disturbed the livelihood of residence nearby, discontent among Hong Kong citizens towards Mainland parallel traders surged. Furthermore, since parallel trading worsened inflation and caused serious milk powder shortage problems, Hong Kong citizens regard Mainlanders as resources marauder. Videos and songs portraying Mainlanders as locust were created to express the discontent of Hong Kong people. The conflict between the two regions was intensified.

Citizens' response

"Reclaim Sheung Shui" protest in 2012.

Netizens formed 'North District Parallel Imports Concern Group' on Facebook to monitor the government on solving the problem of parallel trading and advocate law enforcements against the parallel trading problem.[17] When government officers claim the problem has been relieved, members of the group upload photos to social network, contradicting the claim made by governmental officials. Besides, Hong Kong citizens started the "Reclaim Sheung Shui" campaign in September 2012 to expressing their discontent toward parallel trades in Sheung Shui. About 100 Northern District residents gathered outside Sheung Shui Station and protested with slogans and banners.[18] Protesters argued with parallel traders or even fought with those supporting the traffickers.[19] Some even bounded outside chained pharmacies to express their discontent as these shops stoke up milk powder for sale to mainlanders at higher prices.

On 1 February 2015, an arsonist targeted a warehouse that was used by suppliers to parallel traders in Sheung Shui.[20] Since 8 February, the northern territories of Hong Kong have experienced demonstrations most weekend that descended into violence due to clashes between localist groups and police and/or pro-establishment groups. An authorised rally of 400 people that took place in Tuen Mun on 8 February ended with the invasion of two shopping malls which were closed off by police for several hours; Police used pepper spray and batons inside the mall against protesters, and arrested 13 people.[21] At another authorised rally attended by about 200 people on 15 February in Shatin culminated also in mall invasions and six people were arrested.[22][23] A small protest march on 22 February organised by Population Policy Concern Group and North District Parallel Imports Concern Group and attended by a dozen people headed for the office of New Territories legislator Michael Tien that was inside the Discovery Park shopping mall in Tsuen Wan.[24]

At a rally in Yuen Long on 1 March, many shops along the protest route drew their shutters in anticipation of disturbances. Localist groups Civic Passion and Hong Kong Indigenous clashed with anti-protest groups such as Voice of Loving Hong Kong, and 38 arrests were made by the police.[25][26] Wildcat demonstrations occurred on 8 March successively in Sheung Shui, Tuen Mun and Tsim Sha Tsui.[27] Approximately 20 people met up in Sheung Shui at 2 pm; the numbers of protesters increased to 100 when rallied moved on to Tuen Mun in the late afternoon.[28] The protesters then adjourned to Tsim Sha Tsui at around 9 pm. A total of six individuals were arrested that day.[29][27]

Government's response

Parallel traders inspected by Hong Kong police in Sheung Shui.

Responding to the parallel trading activities, The Hong Kong Immigration Department and the Police had jointly mounted anti parallel trading and employment operations on 19 September 2012 and 22 January 2013, codenamed Windsand (風沙行動)[30] and Realpower (力鋒行動)[31] respectively.

Hong Kong had taken action against parallel trading activities together with Shenzhen. From September to November 2012, the Hong Kong Immigration Department, the Customs and Excise Department and the Police Force had arrested 406 people in total, within which 60 had been convicted. At the same time, the Shenzhen Customs had arrested more than 4500 parallel traders, persons for receiving goods and 'Observatories'.[32]

The Import and Export (General)(Amendment) Regulation 2013[33] prohibits the unlicensed export of powdered formula, including milk and soya milk powder for infants and children under 36 months. The Regulation 'does not apply to powdered formula that is exported in the accompanied personal baggage of a person aged 16 or above leaving Hong Kong if the person did not leave Hong Kong in the last 24 hours and the formula does not exceed 1.8 kg in total net weight.'[34]

See also

References

  1. ↑ http://www.bbc.com/news/business-28093730
  2. ↑ "趕絕 水客禁「一日多行」". Oriental Daily.
  3. ↑ Lau, Kenneth (February 18, 2015). "Parallel trade-linked units shut down". The Standard.
  4. ↑ http://www.ejinsight.com/20150309-mainlanders-angry-at-lack-of-welcome-in-hk/
  5. ↑ "清朝已有水客 帶西藥香煙". Oriental Daily.
  6. ↑ "改閘機　加圍欄　禁逗留月台
    港鐵三招打擊水貨客 – 蘋果日報 – 要聞港聞 – 20090302"    . Apple Daily (in Chinese).
  7. ↑ Ma, Mary (10 February 2015). "Parallel lines of concern need fixing". The Standard
  8. ↑ HK Limits Milk Powder Purchases
  9. ↑ "Hong Kong considering making milk formula 'reserved commodity' to prevent parallel trading". Shanghaiist.
  10. ↑ "Price Increase of Infant Formula Milk Higher Than Food Price Inflation Rate". Consumer Council. CHOICE. 15 March 2011.
  11. ↑ "Mainlanders flock to HK for cheaper medicines". ecns.cn.
  12. ↑ "Foreign milk powder still pricey". ecns.cn.
  13. ↑ "鏗鏘集 :下一站.上水". RTHK.
  14. ↑ "石湖墟藥房刺激 舖租升兩倍" (in Chinese). Yahoo!. 24 September 2013.
  15. ↑ "水客纏擾 上水七成居民想搬". Oriental Daily.
  16. ↑ "大陸水貨客及雙非孕婦問題 激化中港矛盾". 美國之音.
  17. ↑ "Sheung Shui parallel-traders protest descends into chaos". South China Morning Post.
  18. ↑ Luk, Eddie (September 21, 2012). "Seeing red (white and blue)". The Standard
  19. ↑ "近百名人到上水示威不滿內地水貨客". Yahoo!News by NOW TV News, 15 September 2012.
  20. ↑ "Sheung Shui arson arrests". The Standard, 3 February 2015
  21. ↑ Luo, Qi (9 February 2015). "Tuen Mun parallel protesters pepper sprayed". The Standard
  22. ↑ Luo, Qi (16 February 2015). "Sha Tin protesters pepper sprayed". The Standard
  23. ↑ "Fresh protests against parallel traders, this time in Sha Tin". EJ Insight.
  24. ↑ Siu, Jasmine (23 February 2015). "Lawmaker faces protests on entry permits". The Standard
  25. ↑ Eddie Luk and Hilary Wong (2 March 2015). "Stores pull down the shutters". The Standard
  26. ↑ Eddie Luk (3 March 2015). "Police action defended". The Standard
  27. 1 2 "Hong Kong Protests Against Day Trippers as China Eyes Action". Bloomberg L.P.
  28. ↑ Wong, Hilary; Cheng, Kevin (9 March 2015). "Targeting mainlanders ... young and old". The Standard
  29. ↑ "Six arrested in protests against mainland parallel traders". EJ Insight.
  30. ↑ "Six arrested during anti-illegal employment operation "Windsand"". Government of Hong Kong.
  31. ↑ "警方「力鋒行動」上水拘23名水貨客". Apple Daily (in Chinese).
  32. ↑ 水貨客大舉出擊 逼爆上水羅湖橋
  33. ↑ "Food and Health Bureau : Import and Export (General)(Amendment) Regulation 2013". Government of Hong Kong.
  34. ↑ "Hong Kong Customs and Excise Department – Import and Export (General)(Amendment) Regulation 2013 ( with effect from 1 March 2013 ) – Quantity of Powdered Formula for Persons Departing from Hong Kong". Government of Hong Kong. 3 June 2010.
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