China CBEC H1 Import Data Reveals Reduced Growth

According to statistics released by China E-commerce Research Institutes, CBEC transactions in the first half of 2016 reached 2.6 trillion RMB representing an increase of 30% compared with last year. However the total value of CBEC imports accounted for 512.5 billion RMB or 19.6% of total CBEC transaction value, up 7.4% from the previous year.

Take home:

In the first half of 2016 the value of CBEC imports was 512.5 billion RMB representing an increase of 7.4%.

The relative slowing of CBEC growth is due to new CBEC policies implemented since April 8 2016. China introduced a new import tax on CBEC commodities (see CL news). Under the new scheme the majority of commodities e.g. foods are subject to higher taxes. In addition a positive list stipulating the goods permitted to be traded through CBEC namely the “List of CBEC Retail Imported Goods” was published which placed considerable restrictions on the variety of goods which can be traded through CBEC. As a result many commodities are no longer permitted to be traded through CBEC.

The most unexpected and negative change for CBEC companies is that their products must be registered with Chinese authorities, e.g. cosmetics imported to China for the first time (both general trade and CBEC) are subject to registration with CFDA prior to CBEC retail or trade activities. Further requirements include mandatory compliance with Chinese cosmetic labeling regulations. Although a grace period was implemented to allow companies time to adjust to the new rules, this will end on May 11th 2017 (see CL news). Many companies are now reassessing their China market plans and many have already withdrawn from the market while others are busy readjusting their product portfolios to comply with China’s new CBEC policies.

An official stated that although the growth of China CBEC has slowed relative to previous years, the new data still points towards healthy and above all sustainable and regulated growth. The honeymoon period for CBEC is over but with ongoing integration and development of logistics, cashless payment, traceability, recall, returns and the digitization of China’s supply chains it remains a viable market entry option and offers a furtive glimpse of the future of China’s retail environment.