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Government Blessing Sees China's Cross-Border E-commerce Bloom

Buoyed by a raft of supportive government policies, enhanced warehousing/logistics facilities and ever-soaring consumer demand, cross-border e-commerce is now big business for a growing legion of mainland exporters and importers.

Photo: Cross-Bordeaux e-commerce: Imported red wines.
Cross-Bordeaux e-commerce: Imported red wines.
Photo: Cross-Bordeaux e-commerce: Imported red wines.
Cross-Bordeaux e-commerce: Imported red wines.

With the Chinese government having strenuously backed the growth of cross-border e-commerce business in recent years, it was no surprise that about 300 companies attended this year's Guangzhou International Cross-Border E-Commerce and Goods Expo. With 2017 marking the second year of the show, many of the leading domestic and international players in the cross-border sector, including vip.com, Guangdong Guangxin Holdings Group, eBay and DHgate, were represented across the event's 20,000 sq m of floor space.

Buoyed by the continuing incentives offered by China's central government, many exhibitors were understandably optimistic about the future of the sector in general and, in particular, about the likely popularity of a number of emerging categories, several of which are seen as having the potential to match the mother-and-baby sector in terms of ongoing demand.

It was also noted that many mainland consumers are becoming less price-sensitive when it comes to so-called haitao goods – items ordered via overseas e-commerce platforms – and are, instead, more concerned with product quality. In another change, a number of the emerging economies in Southeast Asia and Latin America are now becoming increasingly popular sources of foreign goods among many mainland online shoppers.

Overall, it is such developments that have seen the value of the sector soar. In 2016, the total value of cross-border e-commerce conducted to and from the mainland stood at RMB6.7 trillion (US$1 trillion), a 24% year-on-year increase. This broke down into RMB5.5 trillion in export transactions and RMB1.2 trillion in import transactions.

Maturing Sector

Among the most high-profile exhibitors at this year's event was Guotong Logistics City, a Guangdong-based specialist in trading, logistics and e-commerce. According to Li Jiahua, a Senior Executive with the company, the cross-border e-commerce business has been transformed in recent years. In particular, he said, thanks to government support more pilot cities were now engaging in cross-border e-commerce, while customs-clearance procedures had also been streamlined, encouraging more overseas companies to enter the mainland market.

Photo: In demand: Overseas cosmetics.
In demand: Overseas cosmetics.
Photo: In demand: Overseas cosmetics.
In demand: Overseas cosmetics.

In the past, many overseas businesses had relied on trading partners in Hong Kong when looking to enter the mainland market. Now, according to Li, the growth in cross-border e-commerce, together with greater transparency with regard to mainland trading practices, has resulted in many foreign companies feeling increasingly confident about trading in China in their own right.

Li cited the mother-and-baby products' category as a prime example of the way the cross-border sector is evolving. Typically, he said, mainland consumers based in the Pearl River Delta region had found it easy to buy such items in person in Hong Kong or Macau, although the quantities they could practically purchase were, of necessity, quite limited.

For consumers in other parts of China, it was often more practical to call on the services of daigou, overseas agents who shop on their behalf before posting the requested items back to China at a considerable mark-up. With the cross-border e-commerce sector maturing, however, there is no longer a substantial discount to be had by either buying in person or using overseas proxies. In fact, purchasing certain haitao goods through official channels may even turn out to be cheaper.

In the case of the mother-and-baby product range supplied by Guotong, this has achieved a lasting popularity with consumers thanks to both its demonstrable provenance and the quality of the company's after-sales service. In light of such developments, Li believes that Hong Kong, in particular, could be in danger of losing much of its appeal as a mainland shopping destination.

Live and Fresh Produce

This year, the range of commodities on show at the expo had expanded considerably. Indeed, everything from Thai latex foam pillows to essential Indian oils, by way of German refrigerators, Vietnamese prawns, Boston lobsters, Australian fish and Irish pork chops, were all on display.

Photo: Pillow talk: Discussing the luxury of latex.
Pillow talk: Discussing the luxury of latex.
Photo: Pillow talk: Discussing the luxury of latex.
Pillow talk: Discussing the luxury of latex.
Photo: Featured facilities: Overseas warehouses.
Featured facilities: Overseas warehouses.
Photo: Featured facilities: Overseas warehouses.
Featured facilities: Overseas warehouses.

The pillows came courtesy of Thailianwang (tlwshop.com), a Bangkok-based online marketing company that had bought a wide range of Thai products to the show. Acknowledging that the pillows had proven to be the company's star performer, Sales Manager Yang Chunhui said: "Chinese consumers now attach considerable importance to quality and have become far more health-conscious. As a result, they clearly love our Thai latex foam pillows, all of which are anti-bacterial, anti-mite, static-free, breathable and do not bend out of shape easily".

As well as supplying a pre-defined range of products, a number of exhibitors also offered to source bespoke products in line with the preferences of individual consumers. In the case of Khannajo-based Shiva Exports India, in addition to the wide range of daily commodities it had on offer – nasal sprays, eyelash enhancing serums, red oils, herbal hangover cures, herbal liver detox tablets, essential oils and assorted fragrances – it also offers to source any other such products a consumer might request.

In addition to the growing demand for such customised services, the other clear trend at this year's event was an increased consumer appetite for imported live and fresh produce. According to Li, while mother-and-baby products remain Guotong's core offering, it has now diversified into this rapidly expanding new sector.

Photo: Cleaning up: Shiva’s imported Indian soaps.
Cleaning up: Shiva's imported Indian soaps.
Photo: Cleaning up: Shiva’s imported Indian soaps.
Cleaning up: Shiva's imported Indian soaps.
Photo: Chilling out and in: Cold-chain logistics.
Chilling out and in: Cold-chain logistics.
Photo: Chilling out and in: Cold-chain logistics.
Chilling out and in: Cold-chain logistics.

In May this year, the company established a dedicated cold-chain division in order to directly supply mainland consumers with imported live and fresh produce. To this end, Guotong commissioned 1,000 specially made ultra-low-temperature refrigerated containers, each capable of carrying up to 30 tons of food.

The company has also now added a chain of bonded and non-bonded sea water aquatic farms into its mix, as well as establishing a -60°C cold chain in order to facilitate its sales of imported fruit, aquatic products and meat. Commenting on these developments, Li said: "It's a sign of just how much faith we have in the future of the cross-border fresh fruit and vegetables sector."

Overseas Warehousing

While exporters from many of the countries that have taken a lead in the cross-border e-commerce sector, most notably the US, Japan, the UK and Germany, have long had overseas warehousing facilities, the major players in emerging markets, such as China, India and Russia, have now started to follow suit. One such operator is Lu Tong Logistics. Originally established in Zhejiang, the company now has offices across the mainland, as well as a warehouse in Zabaikalsk, a Russian town close to the Chinese border.

Photo: New Zealand nutrition: Molasses.
New Zealand nutrition: Molasses.
Photo: New Zealand nutrition: Molasses.
New Zealand nutrition: Molasses.

According to Yang Mei, the company's Sales Representative at the expo, its Zabaikalsk warehousing facility is twinned with a similar resource in Manzhouli, an Inner Mongolia-based mainland city set just 20km from the Sino-Russian border. This is said to give the company something of a competitive edge with regard to logistics and fulfillment in the far east and central Russian regions, areas where the e-commerce spend is now said to exceed that of Moscow or St Petersburg. Such arrangements are said to have also benefitted many other Chinese cross-border e-commerce exporters, allowing them to cut delivery times, reduce logistics costs and improve the overall customer experience.

According to Yang, e-commerce exports are now proving to be hugely popular on both sides of the China-Russia border. On the mainland, for instance, Russia-sourced confectionery and cakes are now very much in demand, while Russian consumers have developed a particular appetite for China-originated electronics items, with the Mi Robot Vacuum a notable bestseller.

Exhibitor Round-up

As the sole mainland agent for a range of New Zealand honey products, Shenzhen-based Shang Chun Pin was showcasing a veritable array of such items, including royal jelly, propolis, manuka honey, forest honey and several honey-derived skincare products.

Hong Kong-based Long Chen Intercontinental Trading, meanwhile, had on offer a generous selection of imported health foods, including the latest nutritional innovations from Switzerland, Italy, Brazil, Germany, the US and Norway. Wide-ranging in their application, the products included anti-aging creams, cardio-cerebrovascular supplies and a number of infant-oriented treatments.

A fellow Hong Kong company, Euro Ultimate Resources, however was taking a decidedly less healthy approach to the cross-border e-commerce sector. This year, the business, a relative newcomer to the sector, was promoting its range of more than 1,400 different varieties of European chocolate products, including key brands from Belgium, France, Germany and Switzerland.

Photo: Building bridges: The Australian-Chinese Free Trade Association.
Building bridges: The Australian-Chinese Free Trade Association.
Photo: Building bridges: The Australian-Chinese Free Trade Association.
Building bridges: The Australian-Chinese Free Trade Association.

The 2017 Guangzhou International Cross-Border E-Commerce and Goods Expo took place from 21-23 July at the Poly World Trade Expo Center. The event was co-hosted by the Guangdong Committee of the China Council for the Promotion of International Trade, the Guangzhou Cross-border E-commerce Industry Association and the Hong Kong Guangdong Exhibition Group.

Xing Bin, Special Correspondent, Guangzhou

Content provided by Picture: HKTDC Research
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