The future is bright for British retailers in China

Author
Jonny Smith
Market Specialist - China | Department for International Trade (DIT)
3rd June 2016

As wages have increased in China, shoppers are demanding a higher quality of life through the products they buy and are increasingly turning their attention to imported merchandise.  

The UK is well placed to take advantage of this with its many mid-high end brands and a national reputation for quality. Shoppers eager for quality-assured genuine products have found the answer through online retail platforms like T-Mall and JD; a mere few swipes of a screen can secure their desired products. 

From the point of view of small and medium sized enterprises in the UK, E-commerce is an attractive way to test the Chinese market with relatively low risk. Up until recently, cross-border transactions were taxed at a favourable rate compared to items bought in stores. 

New Taxes Controversy

However, in April, China announced a complicated set of tax reforms aimed at closing the loopholes that made low-cost imported products sold through cross-border E-commerce channels much cheaper than products in traditional stores. Soon after the announcement of the new taxes, China Britain Business Council (CBBC) released an article detailing the changes to the Chinese law that will affect UK businesses, which you can read more about on the CBBC site. 

Since then, the government has bowed to pressure from E-commerce platforms that feared a large drop in sales postponing the implementation of the new system by one year in order to give retailers time to adjust. It is not currently known whether the system will be revised within the next year. 

This delay is especially good news for companies selling products that would not have been included in the ‘Positive List’ of products allowed to be sold through cross-border E-commerce channels, which includes many Food & Drink companies in the South West. We expect more clarity on the situation of Food & Drink imports when new guidelines on implementation of the Food Safety Law are released later this year.

The Future Is Still Bright

It would be a mistake to interpret the tax changes as simply a protectionist measure designed to keep foreign brands out of the market. It represents an attempt to better regulate the sector and improve consumer safety. It will also benefit any foreign retailers with a presence in China or selling through traditional retail channels (offline or online).

The fact the government is introducing more regulation to the sector, setting up cross-border zones, and creating new cross-border platforms should, in the long-term, lead to more opportunities for UK retailers. With an online population of around 700 million and online sales set to account for 20% of retail sales by 2018 (Source: Emarketer), China presents a significant opportunity for UK vendors in certain categories offering products appealing to the Chinese consumer.

Consumers in China are more willing than ever to pay a premium for products perceived as being high quality or unique. Apart from tax and regulatory barriers, a more significant challenge is how UK companies can better understand the needs of the Chinese consumer and promote products effectively in a fiercely competitive market. CBBC will be following developments closely and will look to keep UK companies updates on any new changes and also what they mean for their business in China.


For more information on how to get your company involved in e-commerce in China, download our E-Commerce Guide and China Business Handbook. You might also find opportunities for your business in our latest list of Export Opportunities. Create an account on the CBBC website to get Export Opportunities delivered to your inbox. 

If you are interested in further exploring the opportunities that exist for your business in China, contact your local CBBC China Business Adviser to discuss further: Antoaneta Becker

 

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