Made in China No More
China, known for its counterfeit luxury goods, is now cracking down on other countries’ luxury goods.
A Chinese policeman walks across a pile of fake medicines seized in Beijing in 2013. Photo by STR/AFP/Getty Images
This post originally appeared in Caixin.
BEIJING—Overseas shopping by Chinese consumers through the Internet, which analysts say generated more than 100 billion yuan ($16 billion) in sales in 2014, has been booming in a regulatory gray zone. Those days may be over.
The State Council, China’s Cabinet, on April 9 ordered China Customs and other government agencies to crack down on imports of counterfeit goods and products that violate intellectual property rights sold through online outlets. Customs officers were expected to respond by stepping up inspections of parcels shipped to China from abroad. And they’re not only focusing on parcel content but also making sure that all taxes and import tariffs have been paid.
The tightening effort could have a significant impact on imports of luxury goods and drugs, which an increasing number of Chinese consumers have been buying through the Internet or by means of intermediates who work through websites to buy goods overseas and deliver them to Chinese customers. Some experts say these imports have hurt sales of domestically manufactured consumer products. Others say the importers can sell at bargain prices because they skirt tax regulations.
The e-commerce data provider 100EC.cn said Chinese consumers bought 76.7 billion yuan worth of goods through overseas-based online retailers in 2013, up 58 percent from the previous year. Purchases exceeded 100 billion yuan in 2014 and could reach 200 billion yuan this year.
A recent report by management consulting firm Bain & Co. said that 70 percent of the luxury products bought by Chinese consumers in 2014 had been purchased during trips abroad or through overseas-based online retailers. Foreign-made generic drugs also have been popular.
The trend drew special attention early this year when a prosecutor in the central province of Hunan charged leukemia patient Lu Yong with “disrupting credit card management” by buying low-cost generic drugs via online orders from India for himself and other patients. After a public uproar, though, the case was dropped.
Lawyers such as Wang Bingjie, an associate at Zhejiang Brighteous Law Firm in Hangzhou, said government officials behind the latest campaign are primarily interested in catching tax evaders. In addition, he said, they’re responding to complaints from shoppers who’ve received damaged or counterfeit products purchased through online services.
Wang said the order mainly targets individual buyers and companies, not e-commerce platforms such as JD.com and Tmall.com, which officials say for years have complied with China’s e-commerce regulations.
The most common shopping channels for Chinese consumers who want to buy overseas products are Chinese e-commerce websites that already enjoy good relations with the government. These include JD.com, Alibaba Group’s Tmall and Taobao websites, and the Walmart affiliate Yhd.com, each of which has non-Chinese vendors offering goods to Chinese clients through its platform.
Flip-floppers include vendors who sell fake, overseas-branded goods that are actually made in China.
Another option chosen by some Chinese consumers is to arrange for friends or relatives living overseas to shop for them and ship goods to the mainland. Yet another consumer option—the one that’s drawn special attention from government officials concerned about tax evasion—are small businesses run by individuals or companies that function as shopping intermediates. These businesses buy from overseas vendors on behalf of Chinese customers, handle the shipping and import processes, and then deliver the goods.
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