New E-commerce Regulations for 2019 in China

Starting the new year with new regulations

By means of making the world a global village with an ease to do business, e-commerce trading has gained ground. China is one of the countries that has embraced e-commerce. It is of no surprise that the Chinese government has implemented a new regulation on cross-border e-commerce.

Due to the huge potentials provided by cross border e-commerce. The implementation of these new regulations commenced on January 1, 2019. The new regulations’ objectives include setting the records straight by weakening China’s position as producer of fake products, restraining unlawful e-commerce trade and cutting down on the high number of tax evasions through registration with the State’s Bureau.

Coming at an important moment, China’s new e-commerce regulation will bolster the booming e-commerce sector. The e-commerce sales in China are expected to hit a new high of 33.6 percent of all retail sales in 2019 as compared to the 23.8 percent retail sales in 2017. As the country’s e-commerce market grows at an overwhelming rate, so does the need for stricter market regulation. A new law was passed on August 31, 2018. The new law set to improve the regulation of China’s booming e-commerce market. The highlight of the laws includes the recognition of operators in e-commerce business. Likewise, it includes the strengthening IP protection and regulating unfair competition. Shared liability for platforms and the reinforcement of consumer rights are also highlighted in the new law.

Key Regulations by the New Law

One of the requirements of the new law is the clarification of the types of businesses that will fall under its jurisdiction. The e-commerce law applies chiefly to three users.

1. Platform Operators: this category include people that provide online space through software applications or website for businesses and facilitate digital transaction.

2. Third parties users that sell goods and provide services on digital platforms.

3. Online sellers that use their own channels or social media accounts. The inclusion of social media owes to the increasing success of businesses under this category in recent years.

This new law also established that e-commerce platforms strengthened IP rights and in stated cases of violation, the platforms must reply immediately. Anyone or platform found wanting will face serious sanction and charges. All e-commerce sites were mandated to register with the State Administration for Industry and Commerce to obtain a business license.

Besides the strengthening of IP rights, the new law also control unfair competition. The law clearly mandated fair competition for all e-commerce platforms and users. Platform operatives were prohibited from imposing unreasonable restrictions and fees on consumers.

Moreover, the law provided for shared responsibility for platforms jointly responsible for the sale of fake goods. In the revised law, only individual merchants were responsible if caught selling fake products. The shared liability for platforms could be a fine of up to US$30 million.

Furthermore, the new regulation made provision for consumers’ rights in e-commerce domain. The law will help consumers to enjoy stronger protection on e-commerce platforms. The new regulation also focused consumers’ protection against fake products.

New E-commerce Regulations and Daigou Merchants

Chinese Daigou’s are known to be the no. 1 channel of commerce that allows a person outside China to purchase commodities for a person living in mainland China. It is a cross border channel of commerce. The term “Daigou” originated in 2005 and it was first used to refer to overseas travelers and students who brought back home foreign goods for their families. The “Sanlu Poisonous Milk Powder” of 2008 led to a sharp drop in the trust of Chinese consumers towards Chinese brands.

Therefore, there began a rise in demand for the famous milk powder (mainly Dutch brands) and Daigou merchants became popular.

Yet, it was not only the Chinese milk that became affected, there began an increase in demand for foreign products since there was less trust for Chinese products. To regain this trust and put a check on Daigou merchants, the new set of regulation were created.

It is important to also note that huge tax revenue has been lost since the Daigou merchants evaded tax. With the new regulations, the Chinese government has obligated Daigou merchants to register and pay taxes with the State Industry and Commerce Bureau from the 1st of January 2019.

In addition, Daigou merchants are now to obtain licenses and formally register as businesses else they will be made to pay fines for illegal business and tax evasion. Therefore, the new regulations put a check on the activities of Daigou merchants.

As a results , these are the following implications for operators and consumers on Chinese e-commerce platforms are :

  • The new regulation will reduce the difficulty of access to cross-border E-commerce.
  • New range of cities were included in the new law thereby expanded the cross border e-commerce zones from 15 to 22 cities.
  • There has also been an increase in the merchandise category and quota for goods. The items in high demand are listed as importable goods and this will raise the transaction limit of such goods. It will in turn lead to more revenue from e-commerce platforms

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