New import rules necessary 'but sector needs time, support to develop further'
Many cross-border e-commerce firms are reportedly facing inventory shortages after a new online import policy was implemented about one month ago.
"Our business has declined almost 70 percent since the new online import policy was implemented [on April 8]," Cai Lin, vice general manager of Henan Ying Lun Import and Export Trade Co, was quoted as saying by the 21st Century Business Herald on Thursday.
"Unfortunately, many types of goods can't be imported under the new policy. We have no choice but to sell our inventories," said Cai.
In order to facilitate the sound development of the cross-border e-commerce sector, the Ministry of Finance and other authorities jointly released a new tax policy for cross-border e-commerce retail imports.
Under that policy, overseas retail goods purchased online will be treated as imported goods, which will be subject to tariffs and tax. The new tax policy allows a maximum of 2,000 yuan ($307.86) for each cross-border transaction and an annual maximum of 20,000 yuan per individual. Goods that surpass the limits will be subject to the full tax rates for general trade.
"It's no surprise that many cross-border e-commerce operators are facing inventory shortages, as replenishments can't be completed in a timely way under the new policy," said Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting. "For instance, some cross-border e-commerce firms are having difficulty importing products that are not on the list of imported cross-border e-commerce retail goods."
On April 7, a list of 1,142 commodities traded online was jointly released by Chinese authorities including the Ministry of Finance. These are subject to the new tax policy on purchases of imported products through cross-border e-commerce platforms.
On April 15, a second list of 151 items including meat, fruit and edible oil was released by Chinese authorities.
"Compared with larger cross-border e-commerce platforms, small players face more difficulty, particularly for those running businesses excluded by the list," said Lu.
Bigger companies have more ways to adjust, Lu told the Global Times on Thursday.
Amazon China has the ability to adjust its prices based on the different tax rate, aiming to provide reasonable prices to consumers, according to a statement the company sent to the Global Times on Thursday.
Smaller companies have problems in adjusting, "but the new policy is necessary to meet the needs of industrial development and regulate the market further," Jing Linbo, director of the Chinese Evaluation Center for Humanities and Social Sciences at the Chinese Academy of Social Sciences, told the Global Times on Thursday.
Cross-border e-commerce amounted to an estimated 259 billion yuan in 2015, and the sector is growing at upward of 50 percent annually, according to a report by McKinsey & Co in February.
"The growth trend will continue," said Jing, but he also noted that it depends on whether related policies can help build a fair market and boost its sound development.
The rapid growth of the cross-border e-commerce business in recent years also bred blind expansion.
"Many enterprises focus on short-term advantages from tax differences for profits. The issuance of the [new policies] will dilute such advantages, and is set to reshuffle the industry," read a report issued by KPMG on March 14.
However, for a new emerging industry, it's logical that many enterprises hope the government will provide more support for their development, Wang Xianqing, director of the Institute of Economics with the Guangdong University of Business Studies, told the Global Times on Thursday.
"The country should be more tolerant for those new emerging industries and allow them more time to develop," said Wang, noting that the government could launch some pilot programs in certain areas first and extend them nationwide when the programs are mature.
