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Parallel trading in Hong Kong refers to the phenomenon of mainland parallel traders taking advantage of multiple entry visa policy to import goods from Hong Kong to Mainland China. Causing shortage of household goods in the Northern District of Hong Kong, crowding neighbourhood, intensifying Hong Kong-Mainland conflict and leading to several uprisings occurred during 2012-2013.

History

Parallel Trade in Hong Kong can be traced back to the latter period of Qing Dynasty. From then till 1920s-30s, about 3,000 parallel traders were active around the Lo Wu Control Point. Mainly carrying western medicine and opium to Mainland China; rice and other produce to Hong Kong. ^[1]

Situation

Since 2012, the problem of parallel trading in Hong Kong became more serious. 95 % of multi-entrance travelers were mainland parallel traders.^[2]Traders mainly gather in Sheung Shui Station Exit C and the platform as trading centres to pass on goods to buyers in the mainland. 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. ^[3]

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 Mainland, parallel traders earn ‘transporting charges’ by claiming themselves as travellers and their products are for self-use, saving the cost of tax. ^[4]

Station staffs 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. ^[5]

Causes

There were several reasons behind the parallel trading in Hong Kong. Firstly,as RMB is appreciating against the Hong Kong dollar, Mainland consumers can use less RMB to buy Hong Kong dollar-denominated commodities. Secondly, the multiple entry visa policy allows visa holders crossing the HK mainland border many times with one application, so that they can export goods from Hong Kong frequently. As Hong Kong's electronics products and daily necessities have better quality than those in mainland China, there is a great demand for Hong Kong goods. Parallel traders therefore buy in goods and push up the prices of in order to earn interest in mainland.

Effects

Milk Powder Shortage

Despite the increasing importation of milk powder from foreign countries, milk powder shortage intensified greatly due to the intense parallel trading activity in Hong Kong. According to Neo Democrats, during January 2013, parallel traders hired elderlies and housewives, by giving them $20-$50 per can of milk formula, lining up in front of stores at night^[6]to purchase large amount of milk powders and transfer it traders. Furthermore, there were also traders who hired women with children to help them carry milk formulas to avoid being inspected. Described by a staff in Mannings, although the store limited every customer could only purchase four cans of milk formula at once, shopkeeper who wanted to meet sales target often sells more than 4 cans to mainlanders. Furthermore, there were stores that only sold formulas to mainlanders, causing serious shortage of milk formula for local consumers. Powdered milk for babies looks set to be listed as a "reserved commodity" - just like rice. ^[7]

Inflation

Parallel trade activities have redistributed supplies on a lot of goods between Hong Kong and the mainland. It jack up prices of the goods, for example, milk powder prices increased by 0.4 – 12% from 2009 to 2011. ^[8] Apart from milk powder, prices of daily necessities in New Territories also rises a lot. Due to the appreciation of Renminbi against Hong Kong dollar, branded goods sold in HK which are denominated in HKD gave rise to big discounts for mainlanders who settle bills in RMB. Also, there is an increase in demand for land to open pharmacies, cosmetics and jewelry shops to support parallel trade in the New Territories. Rent in the New Territories rose by two times to $200,000 per month. ^[9]Small shops are forced to closed down and residents have fewer choices. Regional prices rise and increase residents’ cost of living.

Social Disturbance

Northern 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 elderlies, negatively affecting daily life of citizens in the community. According to a survey done by 「新起點」in 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. ^[10]

Intensification of Hong Kong-Mainland conflict

Parallel trading problem marked the penetration of Hong Kong-Mainland conflict from cultural aspect to livelihood aspect. ^[11]As parallel traders carried large quantities of products, treating Sheung Shui MTR Station as a transaction center 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 portrayed Mainlanders as locust were created to express the discontent of Hong Kong people .The conflict between the two regions was intensified.

Citizens' Response

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. ^[12]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.^[13]Besides, Hong Kong citizens started the “Recover Sheung Shui” campaign in September 2012. It was a social movement expressing people’s discontent toward parallel trades in Sheung Shui. Residents in Northern District gathered outside Sheung Shui Station and protested with slogans and banners. They argued with parallel traders or even fought with each other. Some even bounded outside chained pharmacies to expressed their discontent as these shops stoke up milk powder for sale to mainlanders at higher prices.^[14]

Government's Response

Responding to the parallel trading activities, The Hong Kong Immigration Department and the Police had jointly mounted anti parallel trading and employment operations on September 19, 2012 and January 22, 2013, codenamed Windsand (風沙行動) ^[15]and Realpower (力鋒行動) ^[16]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’. ^[17]

The Import and Export (General)(Amendment) Regulation 2013 ^[18]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.’ ^[19]