Navigating thru China’s cross-border e-commerce: How Thai SMEs collaboration can win over Chinese hearts?
For Thai SMEs planning to tap into the Chinese market, cross-border e-commerce (CBEC) is becoming a prominent and interesting option to consider.
EIC views that to enhance success in CBEC in China, SMEs need to position themselves strategically, especially on the following criteria
- 1) select products appropriate for CBEC platform
- 2) plan online-offline strategy – online via Chinese platform and offline in strategic locations with high Chinese tourist density in Thailand and
- 3) leverage online medium, for example, social media as tools to communicate with Chinese consumers and to create product familiarity.
- SMEs with limited financial ability should strategically collaborate to list stores and products on China’s online platforms. Collaboration between complementary products or in the form of a multi-brand store will help boost online presence. Other synergistic benefits are, for example, shared cost savings.
- To facilitate operations in China, SMEs could also hire experienced e-commerce professionals such as online merchant middlemen on Chinese platforms or companies that provide online business operation services.
China’s CBEC market is poised for continued strong growth, especially from China’s CBEC platform
According to AliResearch, China’s cross-border e-commerce import value reached CNY 900 billion in 2015. It is expected that by 2020, China’s CBEC import value will reach CNY 3 trillion, representing a compound average annual growth rate (CAGR) of 30%, a growth rate highest among all types of trade.
The stunning growth of imports via CBEC is expected to increase CBEC import value portion from 3% of total trade value (imports and exports via online and offline channels) in 2015 to as high as 9% in 2020 (Figure 1). Note that imports are mostly delivered from 2 distinct types of CBEC platform.
The first and most prominent CBEC platforms are Chinese-based with sponsorship by the Chinese government. These platforms aim to help foreign entrepreneurs connect with local Chinese consumers. Meanwhile, the second type is foreign owned, though with trivial usage. These platforms aim to provide Chinese consumers with more alternatives by offering products from foreign entrepreneurs.
Figure 1: China’s import and export value
Unit: CNY Trillion
Remarks: Traditional import and exports are ones that are not via CBEC platforms
Source: EIC analysis based on data from The Ministry of Commerce, General Administration of Customs, iRearch, Analysys.cn, AliResearch
China’s extraordinary growth in retail CBEC, especially imports, was fueled by relaxed government policy and improved payment services. In 2016, the Chinese government issued a very important piece of policy, the Cross Border E-Commerce Import (CERI), which provides preferential tax for cross-border e-commerce products.
Currently, there are three types of taxes that apply to general imports – import duties and consumption tax that varies depending on product category, and value added tax (VAT) of 17%. Under the new policy, eligible CBEC products will enjoy import duties exemption with consumption tax and VAT collected at 70% of the standard rate, but with a set quota. Individual buyers are allowed a limit of CNY 5,000 per single transaction with a combined quota of CNY 26,000 per year.
CBEC imports exceeding the quota will be taxed in a similar manner as general imports. In January 2019, the Chinese government further relaxed CBEC regulation with these notable changes
1) extending the list of goods eligible for preferential tax,
2) raising the single transaction quota from CNY 2,000 to CNY 5,000 and the annual quota from CNY 20,000 to CNY 26,000 Yuan,
3) expanding the new policy to 22 different cities from existing 15 to reach more citizens. Improved technological advanced in payment services that allowed safe and secured transactions from players such as Alipay or WeChat Pay also played a significant role in boosting CBEC growth. These new and…
Author: Pattharapon Yuttharsaknukul
About the author
EIC or Economic Intelligence Center, a unit of Siam Commercial Bank Public Company Limited, is established to provide business executives with valuable insights for effective decision making.