China launches a new law for cross-border e-commerce

28/11/2018

As the State Council decided to expand the list of products that can be imported via online purchases, China is going to take a giant leap towards cross-border e-commerce

 

Thanks to cross-border e-commerce in China, Chinese products entered directly into foreign homes. What was only found in the Dragon or vice versa is now available to anyone changing the way we perceive commerce and purchasing.

Cross-border e-commerce is becoming every day more important worldwide, especially in the PRC where it reached 60 million people in 2017. The Chinese market abroad has thus changed drastically in the last decade. While in the past years it was very difficult to trade with the Middle Kingdom, in recent years, thanks to the advent of the Internet, we witness a continuous and accelerated growth of online trade.

This B2C and B2B commerce then met a significant turn in 2013 when more than 5,000 cross-border relationships were activated when e-commerce platforms raised combining the offer of hundreds of sellers with the request of as many buyers. One of the most decisive elements was the change in legislation that facilitated the flow of trade and made it even less expensive.

In addition, Chinese products’ characteristics improved compared to the past increasing customers’ confidence abroad. The country’s products are now purchased not only because they are very convenient, but also because the quality is great.

 

new law for cross-border e-commerce - yangshan harbor - cifnews

©123rf. Yangshan harbor is one of the busiest and largest in the world by volume of containers that are sorted every day.

 

Nowadays, individual sellers represent about 90% of the cross-border e-commerce market thanks to the increase in the use of large e-commerce platforms, change not only due to the rising confidence in Chinese products but also to improving shipping logistics and the change of regulations in the PRC about foreign buying and selling.

A fear of an immediate collapse has risen when in 2016 the Chinese government implemented the imposition of taxes and duties on cross-border trade. However, e-commerce has not given signs of slowing down, indeed.

 

According to a study released by marketing and consulting agency Westwin, 67% of Chinese e-commerce consumers had a cross-border purchasing experience last year, 34% more from the year before.

 

The study revealed that Chinese ordered more than once per month from overseas while the rising demand for foreign items led the country to import $ 220.3 billion of products abroad in 2017, driving up the transaction volume on cross-border platforms to a total of over $ 58.7 billion.

With cross-border e-commerce taking an increasingly bigger share of the total import and export market, it is of no surprise that the government decided to further improve its own regulations.

Since April 2016, the Chinese government published a new tax on transnational commerce, which includes customs duties, a value-added tax, and a consumption tax. Subsequently, 11 Chinese ministries and commissions released the “List of Imported Commodities for Retail in cross-border e-commerce”. Moreover, the government decided that only the commodities listed in these Positive Lists could be imported to China through e-commerce.

Nevertheless, recently Beijing seems to release an import expansion list into its cross-border e-commerce retail. According to the State Council executive meeting on November 21, the government is working on including over 1,300 tax items in order to cover more Chinese consumer’s demands.

The meeting decided to start by adding 63 new tax items with a single transaction limit that will be increased from $ 288 to $ 721, and the annual transaction limit will be increased from $ 2877 per person per year to $ 3740. These items will include electronic products, small household appliances, food, and health products.

In addition, after two expansions of the policy’s extent in 2016 and 2017, it will be expanded further from 15 cities to 22 cities.

 

According to Cao Lei, head of China’s E-Commerce Research Center, “With lifted limits on tax items, import cross-border e-commerce will see much space to develop”.

 

Thanks to the regulations that will take effect from January 2019, the entire industry is expected to operate on a more standardized approach by helping China to improve its International trade balance as the domestic consumers’ demand for foreign consumer goods continues to rise.

 

new law for cross-border e-commerce - xi'an - cifnews

©123rf. Shaanxi, Xian. Second-tier such as Xian, Jinan or Nanjing will drive PRC consumptions in the future.

 

This Chinese opening to the world provides new business opportunities worldwide, and it will also help companies from the Middle Kingdom to integrate into the global market so that Cao also predicted that “cross-border import e-commerce might develop not only in the high-end markets but also in middle ones” referring to second and third-tier markets.

In fact, the second and third-tier cities will be the pillars of tomorrow’s Chinese economy. The Belt and Road Initiative, as well as the Made in China 2025 plan, develop along secondary cities highlighting how China is becoming a fruitful business partner even outside first-tier cities.

Liu Peng, general manager of Tmall Global, is positive about the State Council’s announcement as a clear signal for stable policies. “In the past four years, Tmall Global has introduced 19,000 overseas brands into China from 75 countries covering 3,900 types of products, and over 80% of them entered China for the first time,” added Liu.

Chinese consumers are big fans of cross-border e-commerce. Thanks to the diffusion of the internet and the opening of the market, they are now able to buy quality products at competitive prices directly from their homes. The favorite e-commerce portals are Tmall and JD but new forms of “social commerce” such as Little Red Book and Vipshop are gaining success.

Last year 53% of consumers spent more than $ 1,400 and 15% of them spent double over the past 12 months. Although Chinese cross-border consumers are mostly men, women and those with kids show a greater frequency of purchase and spending than others do. They are young, around 30 years old, and lives mostly in big cities such as Shanghai, Beijing, and Hangzhou but growth is present in smaller cities too, especially in the Guangdong province.

 

new law for cross-border e-commerce - smatphone purchase - cifnews

©123rf. In China, buying something from the comfort of your home with a click is now normal. Everything is paid through WeChat Pay or Alipay.

 

Cities like Hangzhou have been crucial for the development of the transnational trade. In fact, since 2015 the State Council approved the establishment of free trade areas for e-commerce in cities such as Hangzhou and other 13 areas, thus ensuring an impressive growth in cross-border sales.

 

With this move, the country continues to promote openness to the external business world, along with the transformation and improvement of foreign trade policies.

 

Customs clearance and logistics are key issues in these reforms. With the aim of creating a standard and shared approach to global markets, Beijing invests on business innovation and industry upgrades.

Nowadays, many foreign brands choose cross-border e-commerce to sell in China not only because it is the easiest and cheapest way to market with this country but also because it offers many fruitful opportunities.

According to statistics, the transnational trade in China is expected to grow 43% in 2018. It is estimated that Chinese who purchase foreign products, will spend about $ 109 billion. In particular, the Chinese Minister of Commerce forecasts an annual growth of 30% of the electronic market across the border, a market that is expected to double by 2020.

Therefore, the creation of free trade areas as well as customs clearance and the improvement of logistics with the construction of warehouses will be key operations that will follow the last Council of State’s meeting.

The goal is to further simplify the cross-border sales process in order to increase the import of foreign competitive products on the one hand and to establish an effective global marketing network on the other.

 

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