26 October 2016
The abolition of the multiple-entry permit has failed to curb cross-border parallel goods trade in Sheung Shui. Photo: HKEJ
The abolition of the multiple-entry permit has failed to curb cross-border parallel goods trade in Sheung Shui. Photo: HKEJ

Why cross-border parallel goods trade is as rampant as ever

One year ago, Shenzhen abolished the multiple-entry permit for its citizens and replaced it with a one-trip-per-week permit at Hong Kong’s request to halt the increasingly rampant cross-border parallel goods trade that was causing a lot of nuisance to Sheung Shui residents at that time.

Unfortunately, a year has passed, but the cross-border parallel goods trade remains as rampant as before, despite the fact that the number of Shenzhen visitors has dropped 35 percent since the new policy was adopted.

Here is why: the one-trip-per-week limit only applies to Shenzhen citizens while people with Hong Kong ID cards can still travel back and forth across the border freely on a daily or even an hourly basis.

As long as there is a huge demand in the mainland for daily commodities imported from Hong Kong, ranging from baby formula, shampoos, instant noodles, non-prescription drugs to even toilet paper, cross-border parallel goods trade would remain as lucrative as ever, and there is simply no shortage of people who are willing to take part in it.

As a result, mainland parallel goods traders who used to be seen stuffing their goods into large suitcases in every street corner in Sheung Shui are now replaced by Hong Kong people, mostly new immigrants, the unemployed, social welfare recipients and ethnic minorities, who are making roughly a couple of hundred dollars per day in commission carrying these goods to Shenzhen in multiple trips.

In short, the abolition of the multiple-entry permits simply reduced the number of mainland parallel goods traders, but they were quickly replaced by their Hong Kong counterparts.

As a result, the volume of the cross-border parallel goods trade remains largely the same as before, and Sheung Shui residents have hardly seen any change to the disruption to their daily lives.

To tackle the issue head-on, perhaps the government should study the feasibility of imposing a land departure and arrival tax on every Hong Kong citizen who travels across the border daily, and who is neither living nor working in Shenzhen.

Only by increasing the cost for parallel goods traders to the point where they can no longer make a profit can the government truly root out cross-border parallel goods trade.

This article appeared in the Hong Kong Economic Journal on April 7.

Translation by Alan Lee

[Chinese version 中文版]

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