SCMP Issues & Implications: April 25, 2008

Some business people are arguing that the latest visa clarification letter from China’s Foreign Ministry is still confusing. Some business people are demanding further explanations regarding visa requirements after the Hong Kong Association of Travel Agents was unable to explain why the Ministry’s advice contradicted information in a letter issued on April 17 saying that only nationals from 33 countries, including Malaysia, the Philippines, Indonesia, India, Sri Lanka, Nepal, Saudi Arabia, South Africa, Nigeria and Turkey could no longer apply for visas to visit the mainland in Hong Kong unless they have valid Hong Kong Identity Cards.

Implications:

Now, it seems as if the Chinese visa restrictions will apply to nationals from all foreign countries.

Thai rice recently hit US$1000/tonne amid concerns that supply shortages could soon adversely affect the US. Merchants & wholesalers are increasingly turning to mainland rice, which is 20% cheaper, warning that further price hikes were still possible because of higher transport costs and the weak US dollar, to which the Hong Kong dollar is pegged. Some analysts have attributed skyrocketing food prices to panic buying by consumers rather than scarcity. Hong Kong imports about 90% of its rice (or about 300000 tons per year) from Thailand, considering a better quality product. US warehouse retail chain Sam’s Club, a subsidiary of retail giant, Wal-Mart, said that it was limiting sales of 9 kilogram bags of rice to 4 per customer in an effort to prevent hoarding.

Implications:

From an economic standpoint, the economy isn’t so bad. In many cases, it’s often the consumer acting irrationally that causes prices to go up. In this Thai rice case, consumers fear that fragrant Thai rice is/will be in short supply. This causes them to hoard which leads to supply shortages. Supply shortages in turn cause the price of the commodity in question to be “bid up”. Price increases are challenging the notion that the economy is strong because wages/salaries are going up because even though wages are indeed increasing, these wage increases are being offset by massive price hikes of basic commodities