BEIJING: The Chinese government will keep in place through the end of 2017 a provision that gives preferential customs treatment to goods purchased online, likely out of a desire to leverage the growing popularity of online shopping and shore up domestic consumption.
The concession, which was to expire in May 2017, exempts items bought online and shipped from abroad from some cumbersome customs clearance processes, such as verification of the goods’ origin and authenticity. Food, cosmetics and other items that could affect people’s health can be sold without proving that they meet China’s quality standards. This has been perceived as unfair to importers, whose goods are subjected to regular customs screening.
To address this, Beijing in April decided to end the special treatment. But the decision led to chaos as deliveries were delayed due to longer customs lead times. In response, the government implemented a one-year extension as a transition period, with plans to reinstate standard processing next May.
The latest extension through the end of next year is based on smooth growth of cross-border e-commerce under the current system, says a Commerce Ministry source. But in reality, the move seems to be driven by concern about weak domestic consumption growth, a retail industry insider noted.
Manufacturing-driven economic growth has leveled off in China, so the government wants to promote a shift toward a more consumption-driven economy. But in October, China’s retail market grew only 10% on the year, markedly slow for China. Online shopping is still growing at a pace of around 25%, although that figure is significantly lower than the nearly 40% seen last year.
The cross-border e-commerce market is seen expanding 33% this year to 1.2 trillion yuan ($174 billion), according to China’s iResearch.
Japanese products are especially popular thanks to their reputation for quality and other reasons, encouraging many Japanese companies to get into the business. The extension of the preferential procedures provides major cost benefits to businesses that sell products bought from Japan on e-commerce sites.
On the other hand, it hurts brick-and-mortar enterprises such as drugstores and department stores, especially if they import products via conventional channels.
These businesses are already struggling to compete with online pricing and lineups, in addition to enduring high rents for store spaces amid rising real estate prices.
