China seemingly backtracks on tougher e-commerce rules providing a boost to supplement and food firms

The surprise move was announced on the eve of Chinese Premier Li Keqiang's arrival to Australia. ©iStock

China’s Commerce Ministry appears to have halted plans for more stringent cross border e-commerce rules, meaning many goods will still be regarded as personal trade, rather than for commercial distribution. 

Therefore, overseas firms may be able to continue to bypass complex local registration requirements to sell goods into China via the free trade zone model. Reports from China suggest this will remain the case indefinitely.

Personal trade is tax free up to RMB20,000, while items deemed for commercial distribution are subject to a raft of other charges.

Media sources claim intervention from Chinese online retail giants Alibaba and JD.com had persuaded the Chinese government to keep the cross-border e-commerce model essentially intact.

And some of the biggest benefactors will be Australian and New Zealand supplement and infant formula firms, many of which had seen sales slump in the wake of regulatory uncertainty.

Companies such as Blackmores and Swisse were hit hard as sales to daigou traders - who had been buying vitamins and infant formula in Australia and selling them on via e-commerce to China – started to slow.

It also led many firms to concentrate of direct sales within China. Blackmores reported in its recent full-year results that this had increased by more than 90% to $64m.

The u-turn will also benefit food firms which export to China, notably from South Korea, Japan and Europe.

The surprise move was announced on the eve of Chinese Premier Li Keqiang's arrival to Australia.

China's vice minister for foreign affairs, Zheng Zeguang, said the country was "committed to a greater level playing field and promoting the sound development of retail imports in cross-border e-commerce.

"Australian friends are very keen about this field and so are the Chinese business community. We are willing to expand cooperation with Australian companies in cross-border e-commerce," he said.

Remain in force

Officials also said the number of pilot free trade zones, which can house cross-border e-commerce operations, would be increased from 10 to 15.

Jeff Crowther, executive director of the US-China Health Products Association, said he expected the free trade zone model to remain in force.

“The government has extended this until the end of this year and it seems that they might extend again based on discussions I’ve had with people involved in the cross border management side of things.”

However, he said the regulatory uncertainty had already led some members to consider alternative strategies.

“Some of our members have simply moved to warehousing in Hong Kong or are shipping direct from Country of Origin to Chinese consumers. This way, if the government in fact stops most supplements using the Free Trade Zones, they’ll be ahead of the game by using Hong Kong or shipping direct from their facility in their home country,” he added.

Shares of Australian supplement and food firms soared on the back of the news, but many businesses will be waiting for greater detail and clarity from Beijing.

Indeed, Blackmores boss Christine Holgate didn’t seem to be getting too carried away, telling the press in Australia she expected regulations in China "to continue to evolve".

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