By Qin Jiming
(Photo retrieved from http://www.best-news.us/news-4083264-Hong-Kong-milk-powder-suppliers-limit-milk-order-involving-innocent-Government-response-to.html)
Starting from March 1, 2013, people leaving Hong Kong could only bring with them two cans, or 1.8kg, of powdered formula instead of as much as they wanted before (Customs and Exercise Department, 2013). The news has aroused strong discussion on the amendment of the regulation even before the ordinance’s effect from March 1, 2013. Some people for it consider it as a useful way to stop cross-border traders and ensure local babies’ consumption of infant formula, while people against it think it may violate the free trade policy of Hong Kong and make safe infant formula in mainland China even less accessible.
Before the amendment of the regulation, the shortage of infant formula was not rare because of parallel traders and mainland visitors’ large purchase. Local babies cannot get enough milk powder as they need and local mothers complained for this. After the ordinance’s taking effect, this phenomenon is greatly decreased, which proves it meets the expectation at least partially.
With a fine of up to HK$500,000 and imprisonment for up to 2 years, the cost for breaking the ordinance seems a little too high. Actually since it took effect in March 1, 2013, local mothers found it much easier to purchase infant formula of some famous brand compared to before. The shortage effectively ceased due to the new policy. Also the amendment did “greatly discourage parallel traders from making a big impact” (Ko, 2013) as expected by Dr Ko Wing-man, Secretary for Food and Health.
However each coin has two sides. While local infant formula supply is ensured, mainland parents’ need for infant formula was neglected to some extent. Since the milk powder scandle of mainland China in 2008, mainland parents’ trust for lacal brands is totally ruined and imported milk powder became very popular. Hong Kong, the nearest safe foreign milk powder market to mainland China and a free trade port to the world, sees large sales increase of infant formula purchased by mainland China in the last 5years. Since the milk powder traded by parallel traders accounts for a very large part of the whole market, the export limit accordingly has influence on mainland China’s imported milk powder market and pushes the price of imported milk powder incredibly high. To express disappointment, some mainland consumers of Hong Kong infant formula says their impression of Hong Kong drastically fall from “shopping paradise” to “shopping hell” (Lee & He, 2013).
The regulation, in an attempt to improve Hong Kong’s infant formula supply chain, faces further amendment when supply situation is changed. According to some milk retailers, the shortage only existed in some individual brands of milk powder instead of all the brands. The milk retailers also suffer large sales decrease since the limit took effect. National Day around the cornor, suppliers promise that there will be enough infant formula reserved for local babies and the supply will be enough (Zhang, 2013). In this background, Hong Kong will probably lift the limit and the decision may be made in October after examining whether adequate supply for local consumers can be ensured (Zhu, 2013). Tan Huizhou, Head of Hong Kong delegation to the National People’s Congress (NPC), also said the limit was just temporary policy.
To conclude, with the improvement of the milk powder supply chain, the regulation of export limit on infant formula will be further amended though it works well at present.
References
Customs and Exercise Department, the Government of the Hong Kong Special Administrative Region (2013). Import and Export (General) (Amendment) Regulation 2013 (with effect from 1 March 2013) – Quantity of Powdered Formula for Persons Departing from Hong Kong. Retrieved from http://www.customs.gov.hk/en/whats_new/API/index.html
Lee, C. & He, H. (2013, March 17). Milk-powder row symptom of a wider rift with mainland. South China Morning Post. Retrieved from http://www.scmp.com/news/hong-kong/article/1192467/milk-powder-row-symptom-wider-rift-mainland
Liu, J. & Pan, Y. (2013, March 21). “限奶”半月香港奶粉市场供应充足 内地网购价格暴涨. Guangzhou Daily. Retrieved from http://news.xinhuanet.com/fortune/2013-03/21/c_124485279.htm
Milk powder limit just temporary policy: Hong Kong delegation. Retrieved from http://english.sina.com/china/2013/0306/568866.html
Tsang, E., & Nip, A. (2013, February 2). Two-can limit on milk powder to stop cross-border traders. South China Morning Post. Retrieved from http://www.scmp.com/news/hong-kong/article/1141498/two-can-limit-milk-powder-stop-cross-border-traders?page=all
Zhu, J. (2013, July 15). HK to lift controls on baby formula: expert. China Daily. Retrieved from http://europe.chinadaily.com.cn/china/2013-07/15/content_16775275.htm
Zhang, W. (2013, September 28). 奶粉商「備戰」壓測納評估, Wen Wei Po. Retrieved from http://paper.wenweipo.com/2013/09/28/YO1309280017.htm
Thanks for your post. The pros and cons of the regulation are well-evaluated in this post. I agree that though the regulation seems effective, it is necessary to review the regulation amendment as it is not mature enough.
First, there are legal loopholes in the regulations. Special terms in the regulations are too vaguely defined. For example, “Powdered formula” was unclearly defined that people bringing along rice cereals were wrongly arrested.
Second, the regulation was a violation of “Big Market, Small Government”, one of the core economic policies in Hong Kong just as mentioned in the post. Also, the regulation has led to further China-Hong Kong antagonism. The policy is supposed to tackle smugglers, but it turned out to be conflict between Mainland and Hong Kong consumers.
I appreciate how responsive the government is to the needs of Hong Kong mothers. Yet, the regulation was amended too hurriedly that many loopholes were left unsettled before it launched. In my opinion, imposing export quota should be the last step of resolving the problem. It is more important for the retailers to perform corporate social responsibility by selling milk powder at reasonable price. A possible solution can be the government and the industry jointly set up a pricing mechanism to stabilize milk powder price.
Reference:
1. 理順對港供應 冀早撤限奶令.23-03 Sing Tao Daily. Retrieved from
http://news.sina.com.hk/news/20130323/-7-2925702/1.html
2, Import and Export (General)(Amendment) Regulation 2013 ( with effect from 1 March 2013 ) – Quantity of Powdered Formula for Persons Departing from Hong Kong. By Customs and Excise Department. Retrieved from
http://www.customs.gov.hk/en/whats_new/API/index.html
I appreciate that the solution that Jiming’s suggested, which is to improve the milk powder supply chain. The ultimate reason for the setup of this regulation is that the sudden increase in powdered formula’s demand pushes the price to an unreasonably high level. Therefore, improving the supply chain can certainly help and the export control on powdered formula can be loosened after that.
Instead of directly increasing the local supply, my suggestion is to strengthen the direct trading network between the Hong Kong merchandisers and mainland merchandisers. Under a direct trade network, Hong Kong merchandisers can quickly adjust their order and export of powdered formula according to the demand from mainland. So if the scale of licensed trading between local and the mainland merchandisers can be enlarged, the demand from mainland can be gradually satisfied without greatly affecting local market.
In response to Jodie’s comment, I think the definitions for this regulation is very clear in fact. In this regulation, the coverage of the term “powdered formula” actually means “mild powder and soya milk powder, for infants and children under 36 months”. Therefore, it may not be true that there are loopholes of false arrest that you mentioned.
Reference:
http://www.customs.gov.hk/en/trade_facilitation/prohibited_articles/exports/API/index.html
With no doubt, this is truly a debatable policy, and these days the government is even introducing quite a rare practice of pressure test on the milk powder supply, as a evaluation of the current market and the policy effectiveness.
From my own point of view, I see this has something to do further than simply a demand and supply problem. As you mentioned about the losing confidence on the milk powder in China, I think it is definitely important for the Chinese products, especially those under the necessities group, to rebrand their own reputation. In fact, all those milk powder manufacturers have entered the Chinese market as well, most of them are just merely different on the packaging as a way of localization. However, this edge quickly turns into a trap after those incidents on the harmful milk powder. Therefore, it is important to let consumers acknowledge that the contents of those milk powder are not distinct, and produced under the same safety standard as in Hong Kong.
The other factor would be about the price. It is obvious that Hong Kong dollars are now at an inferior position in the currency market due to its linked exchange rate system with the low interest environment in the US. That inevitably makes Hong Kong products being sold at a lower real price level compared with those in the PRC. No one would refuse on discounts with products of a greater confidence. I believe that this part made up a large proportion of reasons on why our milk powder is so hot in the market.
In parallel to increasing supply, I would suggest that product transparency and currency system are the other two things to pay attention to in tackling this problem.
Reference
黃金周前後推奶粉壓力測試, by Wen Wen Po. Retrieved from http://paper.wenweipo.com/2013/09/25/YO1309250015.htm
The regulation surely is not perfect and need further amendment. However, I do not think this is the right time to lift the limit. With the release of latest survey, the milk powder supply is still in shortage. Democratic Party conducted a test on 2/10-3/10 in New Territories. While milk powder manufacturers claimed that there is enough supply in the market. It is found out that Hong Kong mothers still cannot buy specific milk powder in certain retailing shops. From my point of view, the demand of Hong Kong mothers should be placed at the first priority. Unless the supply of milk powder is ensured to be sufficient enough to satisfy Hong Kong demand, the limit should not be lifted.
Actually from my point of view, Chinese Government should also bear responsibility for solving the problem. Instead of relying on the supply from Hong Kong, the Chinese Government should set up policy to ensure the quality of milk so as to regain the confidence of consumers.
References:
http://hk.news.yahoo.com/供應仍緊張-政黨反對撤限奶令-224456457.html
I agree with your idea that improving supply chain is a feasible way to relieve this problem. In fact, after the policy came out, many pharmacies encounter difficulties in selling excessive amount of milk powder. Actually, Pharmacy Association agree to remove the elimination, as long as it can satisfy the local demand.(RTHK, 2013). This also shows that elimination is not the best choice.
I pay special attention to the statement you mentioned that the shortage is not a common problem among all the brand of milk powder. I think it is a interesting point which seldom media talked about it before. What is the reason? Is it related to the brand awareness? I think if government can investigate this problem, it may make more effective solutions.
Frankly speaking, to solve this problem eventually, it is more relied on whether mainland China can rebuild the confidence of consumers to the domestic milk powder. For now, Hong Kong government should have more flexible measure to settle down this problem.
Reference:
RTHK.(24 Sept 2013). 藥房商會贊成撤限奶令惟要確保本地供應足夠. RTHK. Retrieved 4 Sept 2013, from: http://hk.news.yahoo.com/%E8%97%A5%E6%88%BF%E5%95%86%E6%9C%83%E8%B4%8A%E6%88%90%E6%92%A4%E9%99%90%E5%A5%B6%E4%BB%A4%E6%83%9F%E8%A6%81%E7%A2%BA%E4%BF%9D%E6%9C%AC%E5%9C%B0%E4%BE%9B%E6%87%89%E8%B6%B3%E5%A4%A0-051800806.html
Thank you for your posting Jiming. I agree with you that the milk powder supply chain should be improved and the export limit on infant formula in Hong Kong should be lifted. But I have some different reasons for those actions. Firstly I think that the export limit to some extent causeded the conflict between mainland customers and Hong Kong people. Many mainlanders think that Mainland China provides vegetables, meat and many other food for Hong Kong, why can not Hong Kong share some of the infant formula with mainland mothers. This conflict created a hostile atmosphere between mainland and Hong Kong. Secondly, the short of supply of infant formula was not only due to the mainland consumers’ purchase. It was reported that some Hong Kong retailers cornered milk powder on purpose in order to keep a high price. This also led to the shortage of some brands of infant formula.
Referrence:
http://news.ifeng.com/hongkong/detail_2011_05/10/6287030_0.shtml
http://finance.sina.com.cn/consume/20130206/031914514030.shtml
Thank you Jiming for raising this widely discussed issue. On the first day of the implement of milk powder export limitation, 10 people were arrested for bringing more than 2 cans or 1.8 kg milk powder leaving Hong Kong. Surprisingly, 8 of them were Hong Kong permanent residents and only 2 of them were mainland Chinese. Furthermore, according to the retailers’ statistics in April, the milk powder sale dropped off nearly 90%. Thus, it is obvious that to some extent this policy affect Hong Kong people more than mainland Chinese.
It is undeniable that eating qualified milk powder is vital for infants as well as their parents. A Chinese op-ed published on Xinhua raised the point that 99 percent of domestic milk powder is safe. A famous Chinese newsman Yongyuan Cui replied: “but the question is how can I know where the one percent is?” Therefore, from my personal perspective, in order to solve the problem from root, mainland government needs to strengthen the supervision of milk powder and infant formula industry. If the demand for import milk powder decreased due to the improvement of local milk powder brands, Hong Kong babies’ consumption can be ensured.
Links to read:
1. http://www.neontommy.com/news/2013/03/hong-kongs-new-milk-powder-restriction-inflaming-friction-between-mainland-and-hong-kon
2. http://www.scmp.com/comment/insight-opinion/article/1187717/milk-powder-restrictions-are-not-designed-humiliate-chinese
Enjoyed examining this, very good stuff, thankyou . While thou livest keep a good tongue in thy head. by William Shakespeare. eddeedadegce
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