Recent protests against parallel traders spun out of control, giving Leung Chun-ying an excuse to crack down on protesters to divert attention from his inability to deal with the rampant cross-border trade.
In contrast, mainland officials were much more candid on the matter.
Lv Xinhua, spokesman for the National Committee of the Chinese People’s Political Consultative Conference, said the Individual Visit Scheme needs to be reviewed.
And Shenzhen party secretary Wang Rong admitted there has been corruption among the city’s customs officials.
As we all know, parallel trading is just a euphemism for smuggling.
While it is just a minor offence in Hong Kong, it constitutes a felony in the mainland, and those convicted can be sentenced to life in prison.
In recent years, shops selling gray goods smuggled from Hong Kong have popped up everywhere in the mainland. Several thousands of these shops are estimated to be in Guangdong province alone.
At the end of 2013, Shenzhen authorities seized over 2 million yuan (US$320,000) worth of gray goods smuggled from Hong Kong in four of these shops, or an average of about HK$600,000 (US$77,300) in goods per store.
Suppose there are about 10,000 shops across the mainland that specialize in gray goods. The total value of evaded tax might amount to HK$16 billion a year.
There are four groups of major beneficiaries from these smuggling activities — smuggling syndicates, retailers, customers and corrupt customs officials.
Assuming the benefits are shared equally among them, corrupt customs officials in the mainland pocket about HK$4 billion a year in bribes from the smuggling across the Shenzhen border.
So far, 23 high-ranking officials in the Shenzhen Customs Department have been suspended from duty, and a further 800 officers have come under investigation.
No wonder Wang said corrupt practices exist at every major customs and border checkpoints in Shenzhen.
The central authorities would reportedly have tightened up last year on the multiple-entry permits issued to Shenzhen residents if it had not been for the fierce opposition from the city’s government.
In a previous article, I estimated that it would cost the Hong Kong government HK$139 billion to provide extra infrastructural facilities and upgrade our public space to accommodate visitors from the mainland, so as to meet the requirements under the city’s planning standards and guidelines.
So, even taking into account the contribution to gross domestic product from mainland tourists, Hong Kong still stands to gain by limiting their number.
In fact what concerns the people of Hong Kong most is the deterioration of our community environment owing to the influx of millions of visitors from the mainland.
And the choices our administration faces are simple: either spend HK$139 billion to improve our urban facilities or reduce the number of mainland visitors by 20 percent, or about 10 million — which might lead to a reduction of HK$40 billion, or 0.02 percent of our GDP, but would also ease social tensions and alleviate public discontent.
For the majority of our public, the choice is easy to make.
The influx of visitors from the mainland not only costs lots of taxpayers’ money to upgrade our hardware but also leads to considerable social costs that cannot easily be measured in monetary terms.
For example, the vast number of visitors from the mainland has already imposed a heavy burden on our roads and public transport system, not to mention the extra pollution that our population has to suffer.
And thousands of small retail stores and groceries that used to provide the local population with affordable food products and goods have been put out of business by soaring rents.
Does it make sense to spend heavily to accommodate an overwhelming number of mainland tourists and shoulder all sorts of social costs, only to see corrupt mainland officials walking away with billions in bribes?
To the average Hong Kong citizen on the receiving end of the government’s problematic policy, the Leung Chun-ying administration is to blame.
This article first appeared in the Hong Kong Economic Journal on Mar 17.
Translation by Alan Lee
[Chinese version 中文版]
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