Martin Li

    martin.mouse@163.com

    SUZY JIANG, mother of a 9-month-old boy in Shenzhen, visits Tuen Mun in Hong Kong every two weeks for the same purpose: to buy baby formula.

    It’s long been popular among local parents to buy foreign baby formulas in Hong Kong, where formula is cheaper than on the mainland and strongly believed by mainland parents to be of better quality. The popularity has gained increasing momentum since the mainland’s notorious milk scandals.

    Jiang sometimes makes the trip with her husband, but when alone she can only bring back two standard tins of formula each time because of the cap Hong Kong implemented March 1. The cap limits the amount of baby formula that outbound travelers can take across the border to 1.8 kilograms, equivalent to two standard tins of formula, every 24 hours. Offenders can be subject to fines of up to HK$500,000 (US$64,452) and jail terms of up to two years.

    However, parents like Jiang might soon be able to pay less frequent visits to Hong Kong. Ko Wing-man, Hong Kong’s food and health secretary, said last week that the government will review the border cap and conduct a “pressure test” in October. If the test generates a good result, the cap could be lifted.

    Hong Kong is evaluating whether the local formula supply chain has improved since the cap was implemented. Local supplies will be tested during the National Day holiday in October, which usually sees a sharp increase in the number of formula buyers, according to Chinese-language media reports.

    The cap was initiated to stem the trend of parallel trading, in which cross-border sellers were accused of crowding Hong Kong shops and buying formula in bulk. They crossed the border between Hong Kong and Shenzhen frequently and sold formula to mainland buyers to profit from the price disparity.

    Hong Kong formula suppliers reportedly have been asked by the government to improve their ability to replenish supplies from outside Hong Kong and to distribute and deliver goods.

    Pros and cons

    The cap has drawn positive and negative feedback since its start.

    “The cap has increased our opportunities to buy baby formula at reasonable prices,” said the mother, Jiang. “At the beginning of this year, when the cap was not in place, we could hardly buy popular baby formula brands such as Mead Johnson and Nutradefense in Hong Kong shops like Watsons and Mannings. We had no choice but to pay more at pharmacies there.”

    It quickly became easier for people to buy popular baby formula brands after the cap took effect. Some shops even started offering discounts. Pharmacies are now selling at “normal” prices, according to Jiang.

    Jiang said the change indicates that the cap has effectively slowed the business of parallel traders, who also have been blamed for causing congestion at checkpoints between Shenzhen and Hong Kong.

    “Hong Kong’s short supply of baby formula before the cap, which some Hong Kong people blamed on mainland parents, should be blamed on shops and dealers in Hong Kong, who sold large amounts of baby formula to parallel traders. When the cap dealt a blow to parallel traders, the market supply returned to normal,” she said.

    While parents like Jiang recognize the positive effect of the cap, sellers in Hong Kong have been complaining that it’s hurt their sales.

    Supermarkets, shops and pharmacies in Hong Kong now offer sufficient supplies of popular formulas, including popular brands like MeadJohnson, Wyeth and Abbott.

    Lau Oi-kwok, council chairman of the Hong Kong General Chamber of Pharmacies, said earlier this month that the number of mainland buyers had declined since March, which led to the current supply.

    However, Lau said, the government will cancel the cap only if supplies remain stable during the October holiday.

    Some Hong Kong sellers have complained that during the heavy demand before the cap, they ordered large amounts of formula from suppliers and are now struggling with excessive stock.

    Lau said in May that formula sales had decreased by about 20 percent since March. The drop in buyers has also affected sales of other daily articles, as increasing numbers of Shenzhen shoppers are buying items such as seasonings, shampoo and bath supplies when in Hong Kong, as well.

    Where to go?

    “If Hong Kong intends to lift its cap, there must be two reasons: The cap has drawn complaints from ordinary people and tarnished Hong Kong’s international image as a free and open market,” said Song Liang, a dairy industry analyst with the Beijing-based Distribution Productivity Promotion Center of China Commerce.

    “Hong Kong might establish a package of temporary control measures for the local formula market,” Song added. “When local purchases exceed a prediction, these temporary control measures, like the existing cap, probably would be enforced. However, Hong Kong would not legislate on it.”

    Song added that the quality of domestic formula must be improved to win back consumers’ confidence and put an end to panic-buying from overseas.

Hong Kong is evaluating whether the local formula supply chain has improved since the cap was implemented March 1. Supplies will be tested during the National Day holiday in October, which usually sees a sharp increase in the number of formula buyers.