06 February 2017

Case Study: China’s new ecommerce trade zones to welcome Hong Kong companies

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South China Morning Post Tech News Team

Hong Kong’s smaller companies have a good opportunity to enter the mainland Chinese market thanks to a recent push by Beijing to promote cross-border ecommerce as part of a pilot project in selected cities.

 

Twelve cities will participate in establishing cross-border ecommerce zones designed to support the development of foreign trade under special tax and customs concessions. China’s State Council, or cabinet, has approved the plan, with the project to official kickoff on January 15, 2017.

“This is a good opportunity,” said Qu Jian, vice president of China Development Institute, a policy research institute based in Shenzhen.

He said the project attractive way for Hong Kong companies to enter the mainland market. He added that it would help companies to engage and build brand awareness in the mainland during a period when cross-border tourist visits to Hong Kong have been tapering off, noting that Hong Kong companies have advantages in retailing, wholesaling and international trade.

The pilot projects will be located in Tianjin, Shanghai, Chongqing municipalities, Zhengzhou, Shenzhen, Guangzhou, and Hangzhou.

Hangzhou has been designated as the nation’s first cross-border e-commerce demonstration area. The city is also home to the Alibaba Group Holding, the owner of the South China Morning Post.

Shenzhen and Guangzhou were given the official go-ahead in May 16.

The zones will feature preferential tax policies and streamlined customs clearance procedures, according to Dezan Shira & Associates, a pan-Asia professional services firm, providing legal, tax and operational advisory to international corporate investors.

Each designated zone will feature an online e-commerce platform operated by state-backed or licensed companies, which will enable Chinese consumers to view and purchase foreign goods online.

Goods sold via these trading platforms in these special areas are subject to a “parcel tax”, which is lower than normal duties, which typically include import tariffs, value-added taxes and consumption taxes, according to Dezan Shira & Associates.

Guangzhou’s ecommerce zone will be geared towards "Internet + foreign trade", which will help guide foreign trade enterprises. The goal is to build Guangahou’s zone into a pioneer for cross-border ecommerce innovation and development. Within three to five years, Guangzhou should develop into a national central city for ecommerce, according to a report by Hong Kong Trade Development Council.

Shenzhen is also pushing forward its plan. By 2020, the city aims to become a cross-border ecommerce trading centre, a financial services centre and a logistics hub servicing the Asia-Pacific region.  The city will see US$100 billion in annual ecommerce transactions by 2020, and average annual growth of 30 per cent, according to the HKTDC.

The plan is foster a network of cross-border ecommerce and management systems that comply with international standards and norms within three years.

Billy Wong, head of HKTDC’s Greater China Research Team, said the pilot plans allow Hong Kong companies to have a simplified channel to go into mainland market. He believes Hong Kong companies will welcome the move.

Hong Kong and foreign enterprises will be prompted to lower cost and increase efficiency within the pilot zones, and foreign trade will shift towards “quality imports and quality exports” and develop at a higher level, said Wong.

Qu said Shenzhen is on track to emerge as the ecommerce centre of southern China. He credited an efficient cross-border ecommerce customs clearance supervision network, and a new-services model with efficient logistics and financing systems as important in attracting companies to the zone.

A combination of tax incentives and a growing number online trading platforms are part of the attraction for Hong Kong investors, Qu said.

He noted that China’s e-commerce sector is still at an early stage of development and that the growth potential is huge.

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