Shenzhen Warns Hong Kong Traders

Last week Hong Kong Police and Customs officials arrested a large number of parallel traders at the border with Shenzhen in China. This long-planned raid targeted frequent visitors from the Mainland who visit Hong Kong regularly to shop. Here they can access reliable food products, discounted red wine and high-end delicacies like seafood. (See my earlier post.)

Yesterday another raid netted 15 parallel traders in Hong Kong from the Mainland.

Hours earlier authorities in Shenzhen warned that day traders from Hong Kong also risked arrest. This escalation of “tit for tat” arrests imperils the free flow of people and goods across one of the world’s busiest land border crossings. Foot traffic from Shenzhen to Hong Kong at the four land border crossings accounts for 90% of all immigration from China to Hong Kong.

Crowds at Lo Wu Border Crossing

The principal crossing is at Lo Wu on the Hong Kong side, as this is the end of the MTR East rail line. (There are three other crossings for vehicles and pedestrians, and two for ferries.) The photo above accurately shows the density of crowds on a busy day, such as Sunday evening. Hong Kong gives new meaning to the term “mass of humanity.”

Until the 1950s this area was unprotected and people were free to travel from Hong Kong and China. According to Wikpedia, “in 1952, in an effort to combat illegal immigration and smuggling, the Hong Kong Government established theĀ Frontier Closed Area, which included the Lo Wu area.”

Travel to a Frontier Closed Area by vehicle requires a special permit, as I learned firsthand by accident. We were trying to walk across the Lo Wu border and asked a friend to drop us at the station. A police escort returned us from the area to another train station where we could take an MTR to the border crossing.

For Hong Kong, the goal is to decrease the number of shoppers who bulk buy essentials and foodstuffs in border towns. It’s easy to spot a trader as they board the MTR for the border with wheelie carts stacked to capacity with product. One woman I saw had more than a dozen flat-pack cases of Yakult easily numbering one to two thousand containers of the beverage.

On the Shenzhen side of the border sits Luohu Commercial City – a mega shopping mall of discount sellers. If it is ‘Made in China’ it is for sale at Luohu. From pirated DVDs to rip-off Ralph Lauren shirts this mega-mall has something for everyone. In the immediate area are more merchants selling everything from massages to fresh produce.

In Hong Kong it’s cheaper to buy some things. In Shenzhen it’s cheaper to buy others. Chinese on both sides of the border arbitrage the price differentials and travel to save money. If cabbage is cheaper in China and baby formula is less expensive in Hong Kong then why not?

For independent buyers this ebb and flow is part of the rhythm of Hong Kong life. For larger traders who bulk buy it causes problems for nearby residents. What if you need diapers and a cross-border trader just emptied the warehouse stocks?

Shenzhen and Hong Kong Customs Officers and Police will continue the trade war, targeting frequent travelers and bulk buyers. It will only cause serious trouble if average consumers get caught up in the net.

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