The past several years have seen explosive growth in cross-border ecommerce in China. As consumer demand, technological capabilities and government policies have unfolded and matured, the trend has quickly become a major part of consumer and retailer expectations.
In this article, we’ll take you on a short history of cross-border ecommerce in China from its earliest prototypes to where it stands today.
For a more detailed explanation of CBEC in China, and how your business can benefit from it, check out our Ultimate Guide to CBEC in China.
Early 2000s: the rise of daigous
In the early 2000s, many Chinese citizens were studying, working, or traveling abroad. Some of them saw a business opportunity and started importing foreign goods to sell to their family and friends back in China.
These people became known as ‘daigous’ (代购), which roughly means ‘surrogate shopper’. Daigous have been around for ages, but in recent years they’ve become more prominent as the Chinese economy has grown and Western products have become more popular.
The daigous’ business model represents an early prototype of the CBEC model.
The problem with daigous
While this practice certainly helps get foreign brands into the hands of Chinese consumers, it brings with it a host of issues for both China and the countries where the products originate. Common concerns include:
- Daigous have been known to stockpile and hoard large quantities of important goods like baby formula, leading to shortages in their country of origin.
- The unregulated distribution of foreign goods into China can harm local businesses.
- Some daigous sell counterfeit products they claim were legitimately purchased abroad.
Because of these concerns, foreign countries like Australia and New Zealand have imposed restrictions on the unregulated export of consumer goods.
Meanwhile China has made it easier for brands to sell their products directly to Chinese consumers so that neither party has to rely on unauthorised daigous.
2007: Chinese ecommerce platforms spearhead CBEC
The first major shift away from daigous came in 2007, when the Chinese ecommerce platform Taobao (kind of like the Chinese version of eBay) launched Taobao Global as a way to allow foreign sellers to sell their Goods to Chinese customers.
However, this process was cumbersome, as the regulatory landscape around importation hadn’t caught up to the realities of modern ecommerce.
2014: Modern CBEC in China takes shape
China began implementing policy changes in 2014, as it sought to keep pace with social and economic developments.
Its first move was to address tax loss by stipulating that CBEC-imported commodities would be considered personal goods and therefore subject to personal postal articles tax.
This can be considered the moment when China officially recognised the CBEC model. However, it wasn’t until a few years later that CBEC became fully standardised.
2019: CBEC comes into its own
After a few years of addressing CBEC in a piecemeal fashion, China finally implemented a wide-ranging CBEC policy called the E-Commerce Law of the People’s Republic of China. It went into effect on 1 January 2019 and was designed to reduce logistics and labor costs, streamline customs declaration procedures, and shorten clearance time.
Here are some of the policy’s biggest measures:
- It established 46 additional cross-border e-commerce pilot zones on top of the 59 existing ones, giving companies more locations where they can enjoy favourable tax rates.
- It allows companies to move inventory out of free-trade zones without direct intervention from customs. This removed companies’ fears of inventory piling up, making them more willing to ship goods in bulk to Chinese warehouses.
- It directly regulates daigou activities, by making daigous register as ecommerce operators and subjecting them to taxation.
The scheme has undoubtedly been a success, as you can see by the sharp increase in numbers of Chinese consumers using CBEC between 2018 and 2019.
Number of cross-border import e-commerce users in China. Source: statista.com
Bottom line
Cross-border ecommerce in China has been extremely influential on the development of ecommerce in China, and extremely popular with Chinese online shoppers who have responded enthusiastically to this trend and have eagerly embraced their new ecommerce options.
Its unique approach will almost certainly continue to serve as an inspiration for international trade for years to come.