China Major E-Commerce Update

Philippe Snel

Since 2004, Philippe is permanently established in Shanghai and has assisted numerous foreign investors to establish, develop and operate their businesses in China. Philippe mainly advises in the fields of corporate law, compliance and technology transfer.

Another set of cross-border e-commerce pilot zones emerges.

  • E-commerce, especially cross-border e-commerce, is a booming sector in China, with some estimates placing total transactions at between USD 250-350 billion per year. The pandemic has only added further demand for online commerce, with travel limited and physical stores are becoming somewhat less popular.
  • This month, following its previous actions over the past few years to expand its e-commerce sector, China’s State Council approved another set of 27 Cross-Border E-Commerce (“CBEC”) zones, bringing the total number of CBEC zones to more than 100.

1. What are the CBEC pilot zones?

CBEC zones can be seen as ‘experimental’ trade zones in which China is piloting multiple ways of addressing its accelerating response to the rapid boom in demand for online cross-border sale of goods They are primarily aimed at facilitating the operations and logistics of small and medium-sized businesses.

2. Where are the new CBEC zones?

For the first few years of these programs, major cities like Shanghai were the targets. Now that the first model CBEC programs have matured, less well-known cities are entering the fray. The 27 new zones are located in smaller, less central regions, including Erdos in Inner Mongollia, autonomous regions such as Honghe Hani and Yi Prefecture, Shangrao in Jiangxi, Yangzhou in Jiangsu, and many others. With this latest expansion, it is even more clear that China aims to use CBEC zones to stimulate smaller local economies.

3. Benefits of CBEC pilot zones

The CBEC zones provide solutions for various aspects related to cross-border trade, including creating overall referable technical standards, administrative streamlining, and frameworks for digitalizing businesses that are becoming almost plug-and-play when it comes to operational setup.

CBEC zones generally offer various tax incentives, including reduction or exemption from value added tax (“VAT”) and/or some consumer taxes on retail goods. Also, instead of submitting various application documents, the exporting enterprises registered in CBEC zones can enjoy VAT exemption as long as they are registered in the CBEC zones and register the corresponding purchase information such as seller’s name, taxpayer identification number, and name, quantity, unit price, and total price of goods.

Moreover, CBEC zones provide for simplified customs clearance on both imports and exports. This has been shown to drastically reduce import/export costs, as well as fulfillment time – goods are cheaper and can be moved through bonded warehouses quickly, often in under a week.

At DaWo, our team has extensive experience dealing with various aspects of cross-border e-commerce, from general best practices and contracting, to cybersecurity and data compliance, to intellectual property concerns. Feel free to reach out if you have any questions about opportunities to be found in these new CBEC Zones.

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