August 22, 2025
HONG KONG – A HK$53 million (S$8.7 million) contract to supply drinking water from mainland China to government offices in Hong Kong is at the centre of the latest scandal to rock the Asian financial hub.
The government said late on Aug 20 that it had terminated all contracts associated with Xin Ding Xin Trade (XDX), after concluding that the firm could not fulfil the three-year deal to supply mainland-bottled water to Hong Kong’s public offices.
The authorities have arrested the married couple behind the Hong Kong-registered firm on suspicion that they gave officials false information to win the water contract.
The police’s preliminary probe also found the couple are linked to a separate fraud case in 2022, local media reported.
On Aug 21, the city’s procurement chief Carlson Chan apologised for lapses on the government’s part that caused it to overlook the fraudulent deal.
But the incident – still unfolding as investigations continue – has cast a spotlight on the integrity of the government’s procurement system.
It has also brought to the fore a latent mistrust of mainland-origin food and drinks that still exists within some sectors of Hong Kong society, even as Hong Kongers have grown increasingly open to shopping and dining on the cheap in mainland China in recent years.
The latest scandal started in June when the government, for the first time, awarded its offices’ drinking water-supply contracts to mainland suppliers.
XDX won the HK$52.9 million deal to supply water – which it said would be bottled on the mainland by the Guangzhou branch of Chinese manufacturer Robust Guangdong Drinking Water – to government offices on Hong Kong Island and the city’s outlying islands.
Another Hong Kong firm, Professional Trade International, would supply water from a mainland manufacturer from Dongguan, Dongwa Drinking Water, to offices in the New Territories, while AS Watson Group – owned by Hong Kong tycoon Li Ka-shing’s CK Hutchison Holdings – would provide its locally distilled water to offices in Kowloon.
The result of an open tender, the three three-year deals totalling HK$166 million were expected to save the government more than HK$16 million annually. Previously, it had a HK$143 million two-year agreement with AS Watson and Swire Coca-Cola to provide their locally produced water.
The government has been under tremendous pressure to cut costs, as Hong Kong expects to incur a fourth straight year of deficit in the current fiscal year
XDX was separately also awarded another approximately HK$11 million worth of contracts to supply chemicals and data entry services to two other government departments.
As the new water contracts took effect in late June, local media reported that the water produced by Robust had violated mainland safety standards six times between 2014 and 2017, and that water produced by Dongwa was in 2023 found to contain excessive levels of bacteria.
The water contract awarded to Professional Trade, which sources its water from Dongwa, is still valid for now, as the water currently meets safety standards.
However, the public chatter generated from the scepticism over the quality of the mainland-sourced water provided to the government offices sparked XDX’s unravelling.
Doubts over the water were further fuelled by worries among Hong Kongers who have, according to research studies over the past decades, long perceived mainland brands as being cheap and of inferior quality.
Civil servants started expressing concerns about the water in their offices. Some ordered their own bottled water or brought their own from home. They also bombarded the Federation of Civil Service Unions with requests querying the water quality and rationale for the contract change, local media cited federation chief Leung Chau-ting as saying.
The 170,000-strong civil service represents about 5 per cent of Hong Kong’s workforce.
It got bad enough that Chief Executive John Lee felt compelled to assure public officers that the water they were given was safe to drink and that the procurement process was sound.
“The government attaches great importance to the safety of our drinking water,” Mr Lee said on Aug 3. “This is reflected in the strict requirements of our bidding and tendering process.”
But his words were called into question barely a fortnight later when XDX was found to have sourced its water from a different supplier in Dongguan rather than Guangzhou’s Robust, as it had claimed.
That is tantamount to fraud as it contradicts the information it gave the government in its tender.
This came to light after Robust, learning of reports questioning its safety standards, clarified that it had no existing business dealings with XDX.
On Aug 16, the government said it would terminate the water deal with XDX and that the police were investigating the matter. It later cancelled all contracts it had with XDX.
On Aug 17, the authorities arrested XDX director Lui Tsz-chung and his shareholder wife Chan Pik-lam on suspicion of fraud, and set up a task force to review the government’s procurement processes within three months.
Hong Kong’s AS Watson will temporarily supply water to the affected offices.
“The whole incident is problematic; there are inadequacies (in the procurement process),” treasury chief Christopher Hui admitted on Aug 19.
He revealed that XDX was the lowest bidder among the contenders, but insisted that price was not the sole deciding factor in awarding the water contracts.
The South China Morning Post, however, cited an unnamed source as saying that the tender had listed price as its sole criterion, contrary to previous tenders, which also considered firms’ governance, supply chain stability and other factors.
The scandal raises questions about whether the government does the due diligence to vet bidders at its tenders for their background and product quality, lawmaker Doreen Kong said.
Ms Kong, a solicitor by profession, told The Straits Times, however, that the main issue remained centred on whether officials had complied with procurement procedures.
“It doesn’t matter whether the products came from mainland China. Right now, we are still waiting for the government to clarify some basic information,” she said.
She called for answers from the government “as soon as possible” rather than to wait for its review to conclude in three months.
“Even big institutions make mistakes,” she said. “The key is admitting errors and addressing them… Timeliness is very important.”
Hong Kong police, late on Aug 20, said their investigations found that the Dongguan manufacturer used by XDX held the necessary licences to produce bottled water in mainland China. But samples of its water seized from the Hong Kong government offices would be tested to assess if they met safety standards, they added.
In a wry commentary posted on Facebook and widely shared among Hong Kongers, social commentator Fung Hei-kin remarked: “When the news first broke of Xin Ding Xin’s winning bid, we initially thought the water was from an old mainland brand we were unfamiliar with; as it turns out, it is in fact a counterfeit.”
“One can hardly fathom the trauma inflicted on Hong Kong’s civil servants who have had to drink not just a mainland-branded product – but a bogus one, at that,” he added.