Cross-border e-commerce set to surge #Oriental Outlook#-Sino-US


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Cross-border e-commerce set to surge #Oriental Outlook#
The National Development and Reform Commission, China’s top economic planner, has recently made public a report that the nation will continue to place equal emphasis on "bringing in and going global."
 
The move will usher in another round of encouraging policies for the country’s foreign shopping, especially for the cross-border e-commerce that has brought foreign products from toothpaste to luxury boat to Chinese consumers.
 
During the Spring Festival holiday, Chinese consumers have again enjoyed a wide range of exotic, authentic and high-quality overseas products and quick delivery services brought by the cross-border e-commerce players.
 
Since the cross-border e-commerce emerged as a new industry in the country about a decade ago, the players have done a lot to promote the shopping mode while the country encouraged and also expected to put it under regulations.
 
In the seventh issue of 2018, the Oriental Outlook magazine under the Xinhua News Agency ran a cover story on the country’s e-commerce development, the role of policies in the industry and the players’ efforts to explore the market for future.
 
Below is an excerpt of the article.
 
Gifts for the Spring Festival, such as French red wine, air blower from Japan, health products from Australia, and cherries from the US were sent to homes of Chinese buyers directly through the online shopping platforms.
 
Cindy, an overseas buyer for the Shanghai-based ymatou.com, an online platform dedicated to selling imported products to Chinese shoppers, said that “the cross-border e-commerce development in recent years has been driven by the rapidly increasing demand for imported goods from Chinese consumers.”
 
Like Cindy, Ymatou has more than 60,000 overseas buyers in more than 83 countries such as the US, Britain, Germany, Japan and Australia, offering more than 800,000 products a day.
 
It is only a tip of the iceberg. There are more goods imported to meet Chinese daily demand through the leading online platforms such as Tmall International and JD.com. 
 
Beijing-based Internet consultancy Analysys estimated that in 2018, the market scale of the imported retail goods through cross-border e-commerce will reach 421.67 billion yuan. It was only 55.9 billion yuan in 2014, according to the market research company iResearch.
 
“Following the upgrade of consumption, the change of demand is not only reflected in the scale, but also in the diversified and high-quality items,” said Li Pengbo, a partner of the Shenzhen-based Tomtop Technology Co Ltd.
 
Any new industry would not be mature in a short time, and the process would be under government’s strict supervision and an adjustment in policies and regulations to address the problems.
 
China issued some encouraging policies to boost the new industry’s development, attracting lots of companies to the business in 2014, but in 2016, regulations were issued to curb the problems such as small amount of goods for tax evasion. 
 
The regulations of 2016 also dampened the industry development, and new interim regulations were issued which have been extended twice.
 
President Xi Jinping, stressed at a meeting of the Central Leading Group for Financial and Economic Affairs in July that the country should stabilize the export market and expand imports to improve the balance of payments in the current account. 
 
Xi said the country should lower some tariffs of consumer goods to encourage the imports of special and advantageous products. 
 
In the report to the 19th CPC National Congress, Xi said that China would take the open economy to a higher level, pushing for a new pattern of all-round opening up.
 
Cross-border e-commerce, as a new model and new form of trade to boost imports, is again attracting more attention.
 
Industry insiders believe that the cross-border e-commerce industry would have another round of quick development, and the future international trade would be characterized by small scale and personalized retail. 
 
Another common view is that standardized regulations are needed for the cross-border e-commerce and there is a period for adaptation and adjustment between policy and market.
 
The country’s cross-border e-commerce is in a process in where along with the development, there is adjustment. And no one doubted that in a long period, the industry will see a rise while China further grows imports.
 
Huge demand
 
According to the data from the China E-Commerce Research Center, customs officers handled 16.19 million deals from cross-border e-commerce industry on November 11 shopping festival in 2017.
 
The actual volume of cross-border imports would be larger because some of the products through overseas direct mail were not reported or calculated, said Cao Lei, director of the center.
 
Different calculation methods also led to differences in statistics from each research organization, said Chen Tao, an analyst from Analysys, but he said no matter which method is used, the figures all showed the huge increase of imports.
 
Data from Analysys on cross-border e-commerce imports in retail showed that in the first three quarters in 2017, the market was 255.17 billion yuan, about 22 percent increase from the same period in 2016.
 
Li Pengbo said that in the past decade, Chinese people used to ask overseas students, flight attendants and friends to help buy and bring back overseas products, but later they logged onto the foreign websites to buy products and now they use domestic shopping sites to buy overseas products easily.
 
There are more channels for Chinese shoppers to buy overseas products, and greater convenience has raised the number of Chinese buying overseas products, Li said.
 
Chinese in third or fourth-tier cities have also started to buy overseas products through e-commerce, and they have a variety of products ranging from toothbrush, shampoo, clothes, bags and cosmetics to boats, Li said.
 
A buyer from southwest China’s Guizhou province spent 17 million yuan on an Aston Martin powerboat, becoming the most extravagant spender on Alibaba's Tmall platform during the November 11 shopping festival last year.
 
According to a survey of amazon.com, about 80 percent of buyers purchase overseas products because of high quality, but besides that, more Chinese are paying attention to the various products offered on e-commerce platforms.
 
By the end of 2017, there were more than 10 million types of products on amazon.com, and the number of international brands increased from more than 80,000 in the middle of 2016 to 210,000.
 
Liu Peng, general manager of Tmall International, a cross-border e-commerce platform under Alibaba, said his company has provided more than 3,700 types of products of 14,500 brands from 63 countries and regions. Some 80 percent of the products were sold in China for the first time.
 
Services
 
Market researcher eMarketer estimates that by 2020, a quarter of the Chinese population (about 290 million), or more than half of China's digital buyers, will purchase cross-border products, either directly through foreign-based websites or through third parties, which will bring huge dividends for China’s players.
 
But in Zeng Bibo’s view, the cross-border e-commerce industry was not mature enough to grasp the golden opportunity, not because of the variety of products, but services.
 
“While purchasing overseas products, buyers pay more attention to services - or the logistics, and the long delivery time is still a problem,” he said.
 
Liu Peng also supported the view that “cross-border e-commerce platforms should not be only a shelf, but also meet the personalized and diverse demands while providing more timely and better after-sales services.”
 
In July 2017, Tmall International started to ask the overseas sellers to provide buyers standard and complete information of the logistics and customs clearance, and the sellers should also set places in China for returning goods.
 
Amazon provided its Prime members free delivery services when their single order exceeded 200 yuan. The products could reach buyers in five to nine days in 82 cities.
 
Ymatou set up its own international logistics company to secure its overseas deliveries to reach buyers in five days. 
 
The platforms also strictly managed their supply chains to avoid fake goods. For example, Tmall International invited shoppers to its platform and also checked samples of the products to be sold and being sold on shelves.
 
Role of policies
 
Since 2009, China has been the largest exporter and second-largest importer, and foreign trade has been an important factor behind the country’s economic growth and social development.
 
President Xi Jinping said in the report to the 19th CPC National Congress that “we will expand foreign trade, develop new models and new forms of trade, and turn China into a trader of quality.”
 
Cross-border e-commerce, as one new model and new form of trade to boost imports, has attracted more and more attention.
 
The country’s policies have played a big role in facilitating the development of the cross-border e-commerce industry, and also some policies curbed its development at a time.
 
Any new industry cannot become mature in a short time, and the process need to be under the government’s strict supervision, and the policies need to be adjusted according to the situation. 
 
China has gradually formed a systematic all-round supervision mechanism on cross-border e-commerce through establishing pilot areas of cross-border e-commerce, creating good policy environment for the industry.
 
As early as July 2014, the General Administration of Customs issued regulations stipulating that overseas goods purchased through e-commerce platforms would be considered as personal items for collecting mail tax, and enjoy 50 yuan tax exemption.
 
The low threshold and tax policies have spurred investors to invest in the cross-border e-commerce import market, which created an explosive growth in the market.
 
However, problems started to emerge during the industry development: the low mail tax caused a loss of tax income; the imports caused unfair competition to the goods in ordinary trade; and some players even split their orders into small amounts, which raised the cost of supervision.
 
On March 24, 2016, the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation jointly issued policies to curb the problems by asking players to get their goods processed as items of ordinary trade, such as registration, sourcing and listing and getting permits.
 
Because of the new policies, the industry crashed to the ground. Some goods ordered before could not be sold in China, and some could only be stored for getting permits.
 
The government later issued interim policies to suspend the policies in 2016, and the term of the interim policies has been extended twice. 
 
Domestic e-commerce players have started their preparations for the policies in 2016, such as setting up overseas logistics companies and owning storehouses overseas. 
 
“Now on the basis of tracing down the delivery process, we have promoted the trace to the source in quality through block chain technology,” Liu Peng said. 
 
He said his company expected the government could make clear of the definition of cross-border retails, sticking to special attributes of “personal items” and “not entering the market” for the goods, to separate the supervision on the retailed cross-border e-commerce goods and order goods in trade.
 
“The interim policies would last by the end of 2018, and after that the supervision was not clear, which would influence companies’ market layout for 2019,” Liu said.
 
On December 1, 2017, the government used the temporary tariff rate to lower some consumer goods tariff, relating to more than 187 types of goods, and the rate from 17.3 percent to 7.7 percent.
 
Zhang Li, head of the Institute of Credit and E-commerce under the Ministry of Commerce, said that the country would still offer preferential policies because China considered the industry to be the new engine of economic growth.
 
Further, Zhang said that the industry has facilitated overseas spending to return home, upgrading services, boosting the industrial upgrade, assisting the supply side reform, changing global labor structure and leading new world trade rules.

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