Beijing: A further tightening of regulations imposed by Chinese authorities on foreign goods purchased over the internet has reinforced fears the policy honeymoon which has richly benefited the likes of Bellamy's Organic infant formula and Blackmores vitamins has ended.
Late Thursday, China's finance ministry signalled tougher requirements in determining which goods are allowed to be imported through cross-border e-commerce warehouses in pilot free trade zones across 12 cities, which were afforded preferential tax and customs treatment.
Chinese importers of popular Australian food, dairy and healthcare brands are worried about the lack of clarity in the new regulations, but believe the changes will likely result in significantly higher logistics costs being passed on to Chinese consumers, potentially denting demand.
"A lot of the Australian brands [are] going to have problems," said Natalie Zhu, founder of Ajyaguru which operates a cross-border warehouse in Shanghai, while stressing many of the new regulatory changes had yet to be explained fully. "I personally think there will be some products, especially healthcare products, that are going to be affected."
The policy confusion comes as the largest trade mission to leave Australian shores arrives in China on Monday. Of the 1000-strong delegation, some 300 have signed up for the programme's food and beverage business stream, looking to benefit from the explosion of Chinese demand for Australian brands. Delegates in the stream will tour a cross-bonded ware house in Hangzhou and visit e-commerce giants Alibaba and Netease.
It also follows an announcement two weeks earlier that a new 11.9 per cent value-added tax will be levied on foreign goods purchased via the internet. The tax came into force on Friday.
Richard Jun Zhang, president of Rex Group, said the relatively modest tax hike was unlikely to deter Chinese consumers who have already acquired a taste for the quality and safety of overseas milk powder and healthcare brands – particularly due to widespread distrust in domestic labels.
"Everyone knows Blackmores and Australian milk products, just a [11.9] per cent increase, it's not much effect," he said.
More concerning, he said, was the potential for a tougher approvals processes through Chinese customs and quarantine at the cross-border bonded warehouses.
China's finance ministry published an "approved list" dictating which goods will be allowed to pass through the cross-border warehouses in future.
Ms Zhu said goods unable to move through the privileged warehouses would have to be sent through direct shipping, at two to three times the bonded warehouse cost of between 10 and 15 yuan per kilo ($2 to $3), which can add up significantly for heavier shipments like milk powder.
The preferential policies at the cross-border warehouses were trialled to help Chinese consumers get more affordable access to overseas products. The value of China's cross-border e-commerce is estimated to reach 6.5 trillion yuan ($1.3 trillion), or 20 per cent of foreign trade.
The changes, however, signal China's attempts to draw consumption back to a domestic market as a means to arrest slowing economic growth.
The new regulations are separate to a thriving grey market trade of infant formula, vitamins and other Australian goods in demand from China. The vendors, who mainly advertise and sell their goods through social media platform WeChat, frequently post their goods undeclared as personal effects.
But the so-called daigou, mainly from Australia's Chinese community, have reported more frequent spot-checks by China's postal and quarantine inspection services.