Boosting foreign trade has become a top priority for the Chinese government in 2016. Exporters trying to sell to the lucrative Chinese market, with or without a physical presence in the country, will inevitably have heard of its booming cross-border e-commerce industry. It is predicted that trade via cross-border e-commerce will exceed RMB 6.5 trillion in 2016, accounting for 20 percent of total trade volume.

New cross-border e-commerce zones

On January 15, the State Council decided to set up a new batch of cross-border e-commerce zones in 12 Chinese cities: Shanghai, Guangzhou, Tianjin, Chongqing, Hefei, Zhengzhou, Chengdu, Dalian, Ningbo, Qingdao, Shenzhen and Suzhou. These zones are designated exclusively for the development of cross-border e-commerce industry, featuring preferential tax policies and streamlined customs clearance procedures. Each of these zones has an online e-commerce platform operated by state-backed or licensed companies, where Chinese customers can view and purchase foreign goods.

Methods for Selling to Chinese consumers

Which methods can foreign merchants operating businesses with/in the zones use to sell directly to Chinese consumers?

1. Direct Shipping Model

Foreign manufacturers maintain warehouses in their home countries and send goods to customers after they have made orders online. Under this model, it becomes easier for the manufacturers to oversee the storage process and provide customers with a variety of products.

2. Bonded Warehouse Model

Investors may set up a warehouse within their respective E-commerce zone. Goods will then be transported and stored temporarily within the warehouse under the Customs supervision before they are delivered to domestic customers.

Questions? Contact any member of our Global Tax Services Practice.