CAN CHINESE E-COMMERCE KEEP UP WITH POLICY CHANGES?
China’s cross-border e-commerce model helps connect overseas merchants directly to Chinese consumers, playing a major role in the country’s e-commerce boom.
Recent changes to cross-border e-commerce regulation sparked fears of curtailed growth, with several merchants having to suspend operations as a result.
E-tailers should expect further regulatory changes, using flexible delivery and customs handling services to change quickly when the need arises.
New trade policies and regulations are helping open up China’s lucrative e-commerce market to the rest of the world. However, recent policy adjustments have raised concerns about how easily e-commerce merchants can expect to begin or continue selling in China. Here’s a brief overview of how cross-border e-commerce changed in 2016, and what e-tailers might expect in the future.
What is cross-border e-commerce?
Cross border e-commerce in China has traditionally been a local phenomenon: local consumers could only order directly from global e-commerce sites, requiring them to navigate potentially costly and complex import regulations on their own. More recently, however, the Chinese government has embraced a model known as cross-border e-commerce (跨境電商) to encourage greater trade and compliance.
Through this model, overseas merchants can connect directly with consumers through local Chinese marketplaces like Tmall and JD.com, specialised platforms like Kaola.com (which solely deals in Australian imports), and certain global merchants like Amazon. These platforms then work with warehouses and customs authorities in mainland China to get goods dispatched and cleared ahead of time, further reducing the compliance burdens previously faced by merchants. Local consumers, for their part, enjoy reduced delivery times of as little as five days – down from weeks or even months.
E-tailers should prepare for even more changes on the horizon during this fine-tuning process
How have tariffs and duties changed?
Since 2012, a wide range of cross-border e-commerce goods have benefited from reduced taxes – as much as 30% less than the tax rates on general imports. In 2016, however, the Chinese government made further changes to its cross-border e-commerce regulations, such as reintroducing VAT and consumption tax to orders; and removing its waiver of taxes below RMB50 for overseas exporters. Individual Chinese consumers, for their part, can only import up to RMB20,000 worth of e-commerce goods per year.
The government also introduced a “positive list” that clearly defines what products can be imported under cross-border e-commerce models. Some experts fear that this list may eventually be used to restrict certain goods from being bought online in China.
How will this affect e-tailers?
The changes seem aimed at reducing tax avoidance by more unscrupulous e-commerce merchants, as well as levelling the playing field between local e-commerce and “brick and mortar” stores. Despite the Chinese government’s good intentions, however, the new regulations have already caused some businesses, particularly smaller e-tailers, to halt their operations in China. Chinese regulators have sought to quickly minimize further disruption, suspending core elements of the new policy for a year as part of a review process – only months after they were first introduced.
“The rapid suspension of the new cross-border policies suggests that the Chinese government is still trying to fine-tune its regulation,” says Zhi Zheng, Managing Director, DHL eCommerce Greater China. “It’s encouraging to see the government respond directly to merchants’ concerns, rather than simply persisting with the initial approach despite the warning signs. However, that means e-tailers should prepare for even more changes on the horizon during this fine-tuning process.”
“Dedicated customs units, either in-house or operated by logistics providers, can help e-tailers stay agile enough to adjust their regulatory and compliance procedures when shifts in policy do occur,” adds Zheng. “Maintaining flexible warehousing and last-mile options in both mainland China and surrounding territories like Hong Kong can reduce the risks of overcommitting.”
In Shenzhen, China’s largest manufacturing city, DHL eCommerce recently launched a new e-commerce distribution centre in Shenzhen that can handle up to 18 million shipments a year, allowing merchants to directly deliver products out of China. DHL built the facility in direct response to e-commerce growth of up to 30% per annum in the last few years, giving exporters faster and more flexible access to new markets.
Ultimately, when establishing e-tailing operations with their logistics providers, businesses should value agility as much as other factors like reach or cost, to continually adapt to policy changes and stay ahead of the game.