By Heber HUANG
HONG KONG – Chi Yunjia clicks the mouse to finish a deal for a gold necklace with her online customer and rises up from the books and beauty products piled on the desk. A PC is all she needs to make pocket money, nearly 6,000 yuan (HK$7,500) in six months. Having owned an online shop, Chi kept it as a platform for her cross border business after she became a postgraduate as a mainland student in Hong Kong.
Her four-square-meter bedroom can only contain a 1.2 meter-by-2-meter single bed and a half meter wide aisle, squeezing her writing desk right to the door. This is the place where she lives, studies, and runs her business. Profit of cross border trading mainly comes from currency exchange rate gap between Hong Kong dollars and yuan along with Hong Kong’s free trade zone
This trading boosts fast due to the tidy net profit causing by lower prices and higher quality of products, even though it is illegal. Many products in Hong Kong are 20 percent to 30 percent cheaper than in the mainland on average and tax free. The appreciation for yuan also makes the exchange rate beneficial for mainland customers. Naturally, shopping in Hong Kong becomes more appealing.
But entry to Hong Kong frequently is a problem for most mainlanders. The appearance of cross-border traders solves this problem. They buy, sell and deliver products or services for customers in neighboring countries or regions. On the biggest Chinese cyber marketplace, Taobao, more than 27,000 shops focus on Hong Kong-mainland cross-border trading, counting 18 percent of all across-border trading shops for all regions.
According to the South China Morning Post, more than 90 people were arrested for illegal cross-border trading in late January in Sheung Shui near the border with the mainland, a spot for distribution of goods by traders. Those traders elude tariffs when they cross the border and carry more than HK$5,000 in total assets per person – an illegal action.
There was reportedly HK$700,000 worth of items involved in the operation. In the report, Secretary Lai Tung-Kwok said that up to 60 percent of cross-border traders were local.
Like Chi, there are also an increasing number of mainland students caught up in the business. They take advantage of their student visa permitting multiple-entries across borders. They buy the cheaper goods in Hong Kong for customers and delivery them in Shenzhen.
An on-campus publication of the Chinese University of Hong Kong reported that a PhD student earned about HK$10,000 per month from his online shop, selling products from Hong Kong to mainland.
Unlike the traders in the organized illegal and highly-profitable cross-border trading chain, students in the business are mainly from mainland and they do it alone in a much smaller scale.
When Chi was admitted to the Chinese University of Hong Kong last June, she planned to start a part-time job so she could make pocket money and more importantly, experience life as a real grown-up.
“I saw the business when many friends asked me for buying cheap cosmetics as they knew I was going to Hong Kong,” she said. She said, there is an unwritten rule that cross-border trading on Taobao counts on a 0.90 exchange rate, 12.5 percent or so higher than the currency exchange rate.
Chi opened her cyber shop on Taobao in late September last year. She has promoted it mainly by word of mouth through family and friends and via Chinese social networking Websites, such as Renren and Weibo. She has decorated her shop by paying a professional cyber-shop designer and put pictures and price-tag links of some regular items like brand bags, shoes and popular cosmetics to attract buyers.
She has a working routine: on Mondays and Tuesdays she collects shopping lists from potential customers online; on Wednesdays she goes between malls to compare prices of products; on Thursdays she confirms the deal with customers if the ultimate prices are satisfying; on Fridays she buys and then delivers products in Shenzhen via express companies.
“Before I went home during Chinese New Year, I had earned net profits of nearly 6,000 yuan. (HK$7,500),” she said, adding that the largest deal she got is buying gold for a middle-aged woman, which brought her more than 1,000 yuan.
Chi remembers her first time to carry digital products other than cosmetics or designer bags from Hong Kong to Shenzhen, a week and a half after Apple launched its new iPad Mini.
Legally, mainland residents carrying one item or items valued no more than 5,000 yuan (HK$6,250) can pay no tax to the exclusion of 20 certain items including laptops, tablet computers, mobile phones and electronic appliances. Delivery companies in Hong Kong are forbidden sending such items without tax payments.
It is difficult for customs staff to calculate everyone departing Hong Kong. The operation loophole creates and nurtures this illegal trading.
Chi was afraid of being caught when she did it first time because expensive digital products as iPads were strictly checked. Customs officials have the right to detain and cancel visas once an illegal trader has been caught. “But that was the cost if you want more profits,” Chi said.
It should’ve gone well that day. She remembers she got rid of the packaging box and carried the iPad and charger inside a sling bag as told by experienced traders in case of being suspected of smuggling. She wore a pony-tail and a pair of spectacles with plastic frame in particular as a typical student would do. “Those customs staff had sensitive noses,” she said “They can sniff anything unusual.”
She recalls that she kept expressionless as she went through the passage in Luo Hu crossing while she was stopped at the Chinese customs desk. A blue-uniformed customs official asked in proper Mandarin to search her bag. “I was like ants running in a heated stove,” she said. “I hope my hands didn’t tremble when I handed my bag over.”
Even though there was no packaging, it looked suspiciously brand new to the customs official, Chi said. She remembers of begging for impunity, saying, “I’m a student and I just want to add screen protector to my mini in Shenzhen. Please let me go. I won’t do it again.” Nevertheless, the customs agent refused to accept any excuses. After 10 minutes of begging, his supervisor came, warned her and let her go after confirming her identity as a student.
According to the customs regulations, a 10 percent tax needs to be imposed on cell phones and pads which belong to the 20 items. Chi should have paid around HK$260 of tax for the iPad mini she bought.
A Chinese graduate, Zhang was sentenced to 5 months in prison and fined for up to 20,000 yuan on April 24 for cross-border trading with a forged business permit for multiple times. Chi has never thought she would be taken to the court one day even if she knows what she is doing is illegal. On contrary, Chi comes up with different ways to minimize the risk of being caught.
She tried many ways to avoid security check. Do not use suitcase and pick up the rush hours is the first rule. Sometimes, she asks classmates to share the items if there are too many for one to carry. Carry an iPad and its package separately in two bags is the third tips. For laptops and pads, she changes the wallpaper or sets password protection to rule out the customs staff’s suspicion. “It is all about luck,” she says, “no matter how many efforts are put in preparation.”
There are some tough parts of this juicy business. Dealing with different customers is the first one. Chi once met a customer who wanted her pay for the delivery of a facial scrub valued around 80 Yuan (HK$100). It was way below the line she set for a deal, which is 200 Yuan (HK$253).
A round traffic fare of HK$52 to Shenzhen is not included in the payment, which almost quadruples the fare for an average trip within the city by metro.
Besides, she must travel around Hong Kong whole day to compare products’ prices and sometimes was told to cancel the deal by customers at last. But she carries it on as she said “It’s hard but real business.”
Other reason for cross-trading
Not all students are in the business for money. Pressure from family and friends makes some students feel forced into this. Liu Wenyi, a graduate from CUHK has been a cross-border trader for years but unlike Chi, he gets no monetary benefit.
Liu comes out of the MTR station with a friendly and shy smile. He speaks fluent Cantonese but he is from central mainland China. The slim-cut green T-shirt matched with washed straight vintage jeans and a pair of brown sneakers makes him no different from others passing by. He is going to Shenzhen to deliver powdered milk cans.
Liu is an accountant in a local gas firm now. In his spare time, he carries all kinds of goods from Hong Kong to mainland as he used to do at school. However, he does it without benefits. “I cannot take service money from my friends,” he says, “just a favor.”
He recalls that since the news that he was studying in Hong Kong spread, many relatives and friends he’d lost in touch with for many years started to contact him. He says they asked me to purchase things for them. “I cannot refuse,” he said, “it’s all about social relationships.”
Liu headed to the residence hall of Chinese University of Hong Kong to meet his former roommate who is a postgraduate now. It is not easy to deliver powdered milk cans because they are heavy, and now it is even harder due to new policy – a two-can baby formula milk powder limit imposed by the Hong Kong government on anyone who leaves Hong Kong started on Mar. 1. An extra hand can help split the amount, Liu says as he goes to get his friend.
Triggered by severe milk scandal exposed in 2008, surge of mainlanders rush to buy imported milk powders, especially for infants from Hong Kong, causing milk shortage for locals, which contributed to the discontent among Hong Kong residents and the birth of milk powder limits.
Liu feels pressured by the new rule provided up to a HK$2-million fine and seven-year imprisonment. He has to carry formula cans out of the city now and then. Asking for a favor from friends is necessary.
Liu grabs two cans out of the suitcase and gives them to his friend as they arrive at LuoWu. He says the relatives always pay more than the price as a supplement but it cannot pay off the time wasted on it.
Zhu Jiayi, also a mainland student in Hong Kong, has the same concern as Liu. Zhu has to carry goods back to Shenzhen from time to time, while what disturbs him most is going back home.
Zhu comes from Chengdu, Sichuan Province in the southwestern part of China, about 2-hour flight to Hong Kong. Every holiday, it’s not only a chance to get reunion with family, but also a great opportunity to “import” goods to hometown. Zhu remembers last Chinese Lunar New Year when he carried 10 iPhone5s home. Zhu says, “Despite that most of my baggage is things not belonging to me, I can make use of this opportunity to make some money.”
Zhu admits it’s very risky to take that step while he has confidence of eluding the customs. He says that customs checks in airports are not as strict as those in Shenzhen, especially the airports are not in the border cities. Many passengers will not go through the scanning machine in Chengdu’s airport even though they are carrying bulky baggage, he said.
“One is for me, three for my friends and the rest for sale,” Zhu refers to the 10 iPhone5s he took home, “If I have to carry so many things home, I can also make some money this way.”
Chi closed down her online shop and Weibo account two months ago due to low earnings and tight studying schedules. However, she never truly leaves the business. Like Liu and Zhu, Chi sometimes has to buy and carry goods back to mainland for her friends free of charge. “You are always in the cross-border trading,” Chi said, “unless you are not in Hong Kong.”
Edited by Lusha HUANG