Chinese Demand for Cross-Border E-Commerce Booms but Looming Tax Reforms are a Cloud on the Horizon

Key Points

Chinese shoppers’ appetite for imported products continues to grow apace. We review the current state of the cross-border e-commerce market, note the factors supporting demand and look at forthcoming tax changes that will impact cross-border sales.

• E-commerce imports into China more than doubled in 2017, according to the country’s customs authority, the General Administration of Customs.
• Consumer packaged goods (CPG) categories such as food, baby products and beauty products consistently top the rankings of what Chinese shoppers buy from international sellers online.
• The Chinese government has repeatedly delayed implementing tax changes that would make cross-border shopping less favorable to consumers. However, these changes, now slated for the end of 2018, could soften growth in cross-border e-commerce sales slightly in 2019.
• Despite this potential cloud on the horizon, we see sustained opportunities for Western retailers to cater to Chinese demand for trusted brands in certain CPG categories.
• We believe the underlying drivers of cross-border e-commerce remain solid. Chinese consumers will continue to seek out trusted brands and retailers as a guarantee of authenticity, particularly in CPG categories, and rising incomes mean that more and more Chinese consumers are being pulled into the catchment for cross-border e-commerce purchases each year.