Wine, beer to benefit from China’s cross-border e-commerce push

Chinese consumers will soon be able to buy more imported beer and sparkling wine through e-commerce platforms, as China introduces an expanded list of tariff-free goods to boost cross-border imports.

Starting from 1 January, consumers in China will be allowed to spend up to RMB 26,000 (US$3,773) a year on an expanded list of imported goods that are exempted from the 14% import tariff, up from the previous RMB 20,000 cap.

The single transaction limit has also been raised from RMB 2,000 to RMB 5,000 (US$725) from goods ranging from baby formula to beer, sparkling wine, and wine, according to the list released by the Ministry of Finance in late November.

The new policy was introduced shortly after Chinese president Xi Jinping pledged to boost the country’s overall imports at the China International Import Expo (CIIE) in Shanghai, as the country looks to transform from an export-driven growth model to focus more on imports.

The list was first introduced in 2016 to boost cross-border trade, and the newly introduced list further included 63 product items that the government describes to enjoy “mass demand”.

Malt beer and sparkling wines are among the 63 new additions.

The products on the list would enjoy zero-tariff policy and faster customs clearance, according to the government.

For instance, through regular channels, imported wines will be levied close to 50% of taxes (excise tax, VAT and import tariff), but goods imported from outside of mainland China through e-commerce channels are only subject to 20.2% of taxes*, less than half the rate of regular taxes.

This is the latest policy announced by the government to stimulate imports and domestic consumption, following its earlier decision to drop VAT tax from 17% to 16%.

The country’s biggest e-commerce company, Alibaba, just announced its plan to bring in US$200 billion worth of imports into the country by 2023.

Cross-border e-commece, however, only accounts for a small portion of China’s overall retail sales market. According to customs data, the total value of cross-border e-commerce transactions amounted to RMB 56.59 billion (US$8.21 billion), while the country’s retail sales market is valued at RMB 36 trillion (US$5.22 trillion).

“The increase in the single transaction limit is meaningful for high-value products”, Citic Securities wrote in a research note following the announcement, however they “account only for a small part of cross-border e-commerce”.

20.2%= (16% VAT tax  + 10% excise tax)/ (1-10% excise tax) *0.7