China increases regulation of online imports

Chinese authorities have increased restrictions on food and other products imported through online sales, in an effort to entice consumers back to the domestic market.

As the China Post reports, last week he Ministry of Finance published a list of more than 1,100 imported items that will be subject to a new 11.9 per cent value-added tax. The products listed included food, baby formula, home appliances, cosmetics, clothing, shoes and so forth.

E-commerce is currently booming in China, driven by an expanding middle class that is increasingly unsatisfied with the quality of local products and willing to spend more for products from Countries like Australia with more of a “clean, green” image.

In Australia’s case this has particularly been evident in the demand for infant formula and health supplements.

As the SMH reports, apart from the tax, Chinese authorities will also impose tighter regulation over what products may be imported through e-commerce warehouses in pilot free trade zones. These enjoy lower tax rates and looser customs requirements.

It is not yet clear what goods will be involved in these new restrictions and there is a fear that this may have a larger impact than the tax hike. Higher logistics costs could be passed onto consumers.

So far e-commerce companies have mostly not passed on the tax hike to consumers.

One such company Alibaba Group Holding, for example said, “…many overseas brands and retailers on our platform don’t have plans to raise prices in the short term so that consumers can gradually adapt to the change.”

The change does not affect the grey market of so-called “daigou”, Australian-based Chinese making money by personally sending products to China. However, according to the SMH, in recent times these have been subjected to more spot-checks by China’s postal and quarantine inspection services.

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