Author: Leemya Abdalla, Marketing Assistant, Red Lantern Digital Media
China’s eCommerce market is set to reach $1trn in 2020 according to AliResearch. However, despite this startling figure, regulations and policies may hinder a company’s willingness to tap into such a diverse market, or even negatively impact those that have already done so.
The Chinese government controls and monitors internet access, restricting information and content which it believes conflicts with its values.
This naturally has a restrictive effect on eCommerce activity, which foreign countries must consider when allocating a strategy for engaging with the Chinese market. Awareness and understanding of the impact (if any) of these regulations, depending on the nature of the company, is therefore vital in order to ensure correct compliance.
For example, the ‘import tax policies for retail of cross-border eCommerce’ (otherwise known as the ‘Notice’) places a limit on payments a vendor can receive on a tax-free basis. Vendors should take into consideration that they will have to pay a tax should they breach this limit.
Control over China’s cross-border eCommerce Comprehensive Test Zone is exercised to form a centralised operation under the watchful eye of the central government authorities. Everything from quality and safety standards to shipping and delivery systems are monitored. This has meant strict quality and safety regulations being imposed and loss of control of how a company’s products are distributed.
Aside from government regulations, landing on the right Chinese eCommerce platforms involves costs and requires both international and domestic logistics solutions.
For example, to be able to officially sell on JD.com, China's second largest eCommerce platform, a vendor would need to pay a deposit of $10,000 to JD and a maintenance fee of $1,000 annually. JD will assist the vendor with the design of the online store, provide recommendations for international logistics, and solutions for domestic logistics once the goods are in China. Costs and level of assistance will vary between different platforms.
Due to differences in business culture and the obvious language barrier, the Chinese market can seem daunting to newcomers. To effectively exploit the Chinese eCommerce phenomenon it is crucial to research as much as possible beforehand, particularly when it comes to all the necessary licensing and legal requirements for your chosen route to market.
For example, if you wish to set up a website with a Chinese domain, you must register for a state-issued ICP (Internet Content Provider) license.