25 January 2020

POLICY WATCH: Clearing the way for cross-border online trade

Chinese businesses are at the forefront of e-commerce, with the value of e-shopping and other online transactions within the country expanding by the day.

Now the central government aims to enable Chinese enterprises to do more of their business around the world by bringing down the barriers to cross-border e-commerce trade, already one of the fastest-growing external trade sectors for China.

The Ministry of Commerce announced that from this month, five selected cities — Shanghai, Chongqing, Hangzhou, Ningbo and Zhengzhou — will pilot new policies to encourage the flow of funds and products across borders. Local customs bureaus and other related government agencies will simplify their clearance procedures and step up processing of tax rebates, foreign exchange settlements and other services to support the test program.

The approach could eventually go nationwide, the ministry said, giving a big boost to the sector.

Under the new policy, government departments overseeing outbound e-commerce business have to deploy new methods of supervising customs and reporting data that make it easier for companies to report earnings. They must also encourage banks and other payment institutions to provide payment services and tax policies to cross-border e-commerce firms. In addition, a new financing system for e-commerce exports will be established to fund the sector’s development.

Growing overseas interest in China’s cheap but high-quality products suggests that cross-border online deals could become a growth engine for the nation’s e-commerce industry. But that expansion is being held back by a lack of support in logistics and money flow management.

To unblock that flow between mainland e-commerce firms and overseas buyers, the government has issued licenses to 17 third-party payment companies to conduct cross-border foreign currency settlements.

There are other major problems as well with customs clearance and foreign currency settlement. But once they’re cleared, Beijing’s cross-border online trade policies could be rolled out across the country.

Among the big winners will be online payment businesses, which now mostly deal in local transactions. Online payment platforms such as Alipay and Tenpay are expected to enjoy robust growth in these settlements as consumers opt to settle charges via local bank accounts rather than through credit cards such as Visa and MasterCard.

More than 5,000 platforms for cross-border online trade operate in China and more than 200,000 firms use those outlets to reach out to overseas markets. About 2 trillion yuan (US$323 billion) in cross-border trade was conducted last year, making up a quarter of the nation’s e-commerce total. 

If all goes well, the sector will grow and help the country make the shift from an export-oriented economy to one driven by domestic consumption. 

– Contact the reporter at [email protected] 


EJ Insight writer