China milk powder demand leaves Hong Kong shelves bare

China food safety concerns and a strong currency are prompting a flood of Chinese parents to sweep supplies of milk powder from Hong Kong shop shelves, triggering citywide shortages and angering parents.

Two years after the melamine-tainted milk powder scandal hit mainland China and made nearly 300,000 children sick, problems have continued to undermine Chinese public confidence including the seizure of over 100 tonnes of tainted milk powder last year.

Such entrenched product safety concerns have fuelled rapid growth in whole milk powder imports to China, which nearly doubled to an estimated 340,000 tonnes in 2010, making China the world's largest market for such infant formula.

A lucrative and booming parallel market has emerged in southern China, with Hong Kong's high quality and regulated infant formula brands proving popular with Chinese parents streaming across the border to sweep up stocks, leaving shelves bare for popular brands.

Hong Kong, a former British colony, returned to Chinese rule in 1997.

As a parent, of course we hope our children are healthy so a little inconvenience is worthwhile, said Chinese mother Wang Lan, who was buying six tins of Holland-made Frisco milk powder in the Hong Kong border town of Sheung Shui that has become a hot spot.

Those who are able to come will often come across to buy now, Wang added.

Grey market traders have also piled into the trade, employing mules who are regularly seen on the streets of Sheung Shui, shuttling boxes of formula up north by train on trolleys where they're sold for a large mark-up profit.

The rise in China's currency, the yuan, against the U.S.-dollar-pegged Hong Kong dollar, has also made the city's products relatively cheap.

Even if we get one hundred boxes (of milk powder), I'm honestly telling you, within two or three days I can sell everything, said Alan Kwok, who runs a small dispensary in Sheung Shui.

There are a lot more people snatching milk powder from Hong Kong, Kwok added, saying sales had surged 40 percent this year.

The shortages have sparked a tide of complaints from Hong Kong parents, who've had to scour stores for increasingly scarce tins in recent weeks, forcing some, in extreme cases, to feed their babies bread or noodles instead.

Several hundred parents recently launched an online petition calling for explicit curbs including the implementation of a milk powder tax for those taking Hong Kong milk powder into China.

Some major brands, like Mead Johnson Nutrition , have now pledged emergency measures. Elaine Chow, an employee with the firm in Hong Kong, said it was setting up an ordering hotline for parents and would release an extra 420,000 tins of formula in the next two weeks to meet demand.

They (the milk powder brands) should have adequate experience to handle this emergency situation, Connie Lau, the head of Hong Kong's Consumer Council, told Reuters.