Thursday, September 8, 2016

CHINA'S CROSS-BORDER E-COMMERCE ISSUES

China’s cross-border e-commerce trade facing uncertainties amid government regulation

PUBLISHED : Thursday, 08 September, 2016, 4:15pm
UPDATED : Thursday, 08 September, 2016, 10:29pm
One in five online Chinese shoppers made a purchase on cross-border e-commerce platforms last year, twice as many as in 2014, but tighter tax and customs regulations signal that the flourishing industry has reached an inflection point, a recent study said.
Dubbed Haitao in Chinese, the 120 billion yuan in cross-border online trade propelled by demand for global brands and facilitated by an explosion of online marketplaces in China is now plagued by policy uncertainties over tax, product safety and logistics issues, according to a report issued Thursday by consultancy Oliver Wyman.
The latest twist in the outlook of the burgeoning online business comes amid an exploding consumer sector in China, which a top government think tank estimates will generate sales topping 50 trillion yuan in the next five years from 30 trillion yuan in 2015.
ADVERTISEMENT
More than 40 per cent of the 50 trillion yuan would come from e-commerce, according to a separate report jointy released by the Chinese Academy of Social Sciences(CASS) and Hong Kong-based Fung Business Intelligence Centre.
“Chinese consumers are probably the most informed and digitalised in the world,” said Wai-Chan Chan, a partner with Oliver Wyman. “As Chinese consumers travel abroad, they are increasingly aware of offline prices around the world.”
The number of Chinese holidaymakers travelling overseas this year is expected to increase by 11.5 per cent to 133 million, according to the China Outbound Tourism Research Institute, which also forecasts the growth trajectory in the coming five to 10 years to remain steady.
The Oliver Wyman study said that Haitao, which comprises more than 3 per cent of total e-commerce transactions in China, had reached a “tipping point” where regulatory hurdles should drive the players to come up with a “Plan B”.
There has been a wave of shutdowns of department stores across China, which is still gaining momentum
Chinese Academy of Social Sciences
In April Beijing introduced a new tax regime for cross-border e commerce, making mainland online shoppers liable for 70 per cent of a slew of VAT taxes previously applied only to wholesalers.
In the same month, the State Council ordered the country’s customs and tax agencies, among others, to step up inspections of parcels shipped to China not only for content but also to ensure taxes and tariffs were properly paid.
Beijing also made it clear that the action was aimed at cracking down on counterfeit goods imports through internet channels.
“The future of the channel now seems unclear to many of the players…. These regulations cover a wide range of topics, including tax, product safety, manufacturing standards and logistics,”the Oliver Wyman report said. “Some of the newly announced regulations are not fully defined and are subject to further elaboration, leaving substantial room for speculation.”
While cross-border e-commerce faces regulatory roadblocks, the CASS report maintains that economic headwinds, Chinese consumers’ shift to online as well as overexpansion in commercial properties has spelt doom for the country’s brick-and-mortar department stores.
“There has been a wave of shutdowns of department stores across China, which is still gaining momentum,” the CASS study said, calling for the government to step in to prevent systemic risks posed by the collapses.