China eases cross-border entry for Australian retailers
Recent news that China’s Ministry of Commerce has delayed tough new-cross border e-commerce laws indefinitely is a huge win for Australian retailers selling goods or planning to sell goods into China.
The laws introduced in April last year have provided a great deal of uncertainty since they were announced and this latest decision by policy makers will ease the entry process for both Australian brands and retailers.
This decision means that goods coming into China via cross-border e-commerce would be classified as “personal”, rather than “trade”, implying that future taxation and import clearance policies would be different. There’s a big chance that obtaining import permits, registration and filing could potentially be less complex, or removed.
The reason behind this is that personal cross-border shopping generally involves low volume, small orders and a wide variety of products, unlike bulk trade business. If Customs treats all cross-border imports in the same manner as traditional imports, the complex procedures will be an intimidating entry barrier for Australian retailers.
This would be a step back to the chaotic ‘Daigou’ era in recent years that Chinese policy makers are trying to stamp out, whereby overseas shopping agents purchase luxury commodities for customers. This form of commerce introduced potential loss of tax revenue from imports, transportation and sales, as well as a lack of quality inspection and negative impacts to traditional import and distribution networks.
As a result of the Ministry of Commerce’s latest decision, it’s highly likely that the ‘Positive List’ issued by the Chinese government to regulate the products that can be imported into China via cross border e-commerce, could change to ‘Negative List’ to allow the entry for a greater variety of products. Naturally, this would involve reasonable inspections on quality and credentials.
This is a positive step forward for Australian retailers. The markets responded swiftly to the Ministry of Commerce’s decision, with a positive boost to the share prices of a number of major Australian health and food retailers currently engaged in cross-border e-commerce with China.
Cross-border e-commerce market only going to get bigger
China’s e-commerce market has exploded since a government regulation was introduced to allow cross-border e-commerce for the first time in 2014.
Growth has been fuelled by the country’s burgeoning middle class unleashing greater purchasing power. It’s also been facilitated by improved international payments and logistics, as well as regulation approval on cross-border imports.
According to the Ministry of Commerce, China’s cross-border e-commerce market reached 6.5 trillion yuan (US$1.02 trillion) in 2016, accounting for 20 per cent of China’s foreign trade. It’s anticipated that it will continue to grow annually at over 30 per cen in the next few years.
By 2020, a quarter of China’s population, amounting to more than half of all digital buyers, will be shopping either directly on foreign-based sites or through third parties.
This presents a massive opportunity for Australian retailers to target China’s expanding middle class, who are increasingly seeking out quality, affordable, premium, Western-made products, as well as assurance of authenticity.
Sylvia Wei is Azoya’s deputy managing director for Australia.