In a free market, price hikes driven by soaring demand are supposedly a positive sign. But Hong Kong's recent shortage of baby milk formula, caused by soaring demand from mainland consumers, has become a serious political issue for the special administrative region's government and strained relations between Hong Kong and the mainland.
A regulation that took effect on March 1 imposes a two-can limit on baby formula taken by individuals from Hong Kong to the mainland. Violators face imprisonment and a fine. By Sunday, 45 smugglers - 26 from Hong Kong and 19 from the mainland - were caught by customs inspectors.
The baby formula limit further tests Hong Kong-mainland ties already strained by pregnant mainland women taking up medical resources and mainland property investors pushing up local real estate prices. It also puts Hong Kong, a free trade hub, in a dilemma as to whether its baby formula limit goes against free market principles.
Quite a number of mainlanders have denounced the ban as merely reflecting Hong Kong's ingratitude toward the mainland's support of its economy.
The export limit is a knee-jerk reaction by Hong Kong's government to alleviate the market's baby formula shortage complained about by local residents. Purchasing quotas have also been unveiled by supermarkets in other countries facing spending sprees from mainland consumers and traders.
But the severity of the penalty in Hong Kong - a maximum two-year jail term and HK$500,000 ($64,477) fine - is questionable. Obviously, baby formula has become an emotional and political issue that local authorities are trying to quell as soon as possible.
The limit is expected to ease the milk powder crunch at least temporarily, but the supply-demand curve can easily twist due to abnormal demand.
Baby formula manufactured by mainland producers is still suffering from consumer distrust following series of dairy product scandals.
Despite strengthened supervision of the dairy industry, one top mainland dairy brand was found as recently as last year mislabeling manufacturing dates of its products. The chief dairy industry association has vowed that the quality of mainland baby formula can rival that of imported products, but scandals easily shatter consumer confidence and suggest loopholes in supervision.
Unless the mainland dairy industry can comprehensively restore consumer confidence, Hong Kong, a region of 7 million, will face continuous challenges satisfying the demand of the mainland's 1.3 billion.
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