Accessing China’s Cross Border E-Commerce via Hong Kong

During the initial phase of the Greater Bay Area’s development, Pearl River Delta cities will coordinate with Hong Kong and Macao to implement financial and social policies to seed the development of a world class megacity and global technology hub. Hong Kong, Macao and Shenzhen will serve as a business, residence and travel platform, showcasing coordination between the Special Administrative Regions and Guangdong’s technology hub. With its market-oriented business environment and free flow of people, goods and capital, Hong Kong is set to play an important role in developing the mainland’s emerging Cross Border E-Commerce (CBEC) sector.

 

Hong Kong’s advantage stems from its development as an international center for finance, transport, trade, asset and risk management as well as aviation and logistics. The region’s longstanding function as a global offshore RMB business hub sets up further advantages in nurturing emerging industries, providing professional services, developing innovation and serving as a jurisdiction for international legal agreements and arbitration, particularly for the Asia- Pacific region.

 

In 2017, the Mainland authorities enacted the Framework Agreement on Deepening Guangdong-Hong Kong-Macao Co-operation in the Development of the Bay Area, which sets out plans to develop market integration, industrial networking, infrastructure connectivity and co-operative platforms to establish the city as a global technology innovation hub. By leveraging this status and deepening the advantages of its services sector, Hong Kong will play an important part in developing China’s Cross Border E-Commerce industry, creating a wealth of new international business opportunities.

 

Most major CBEC platforms choose Hong Kong as a corporate branding and capital management center, with a mind towards establishing relationships with international brands via Hong Kong company setup. Hong Kong’s status as a duty-free port with a longstanding depth of multinational retail brand presence makes the region a natural choice for CBEC platforms.

 

In addition to connecting merchandisers with international companies as a licensing and branding nexus, Hong Kong also serves as a logistics hub for Cross Border E-Commerce, with platforms opting not only to manage capital in the region but also take advantage of PRC government subsidies for overseas warehouses in order to benefit from the depth of services in the logistics sector and benefit from Hong Kong International Airport’s airfreight hub to optimize export shipments between China and Southeast Asia, South America and Russia. These geographical and infrastructure advantages position Hong Kong enterprises to make use of the region’s unique edge in delivering imports.

 

Hong Kong’s warehouses not only benefit international shipments, but also bring unique advantages to fulfilling orders by direct purchase import to China. Any products subject to duties in the mainland need to be stored in bonded warehouses there, while in Hong Kong, items can be stored without restriction and packaged and processed for road shipments when orders are placed, without the need for filing reports with the customs office every time cargo leaves the bonded area. The direct purchase import model relies on Hong Kong’s unique status since logistics providers in mainland cities can only operate under the bonded import model, where an overseas supplier ships to bonded warehouses before retail purchases are made by customers.

 

Government authorities in China, in addition to subsidizing overseas warehouses, are also supporting CBEC development with new legislation. There are now more flexible tax free purchase limits for luxury products (up to 5,000 RMB in single transactions) while import VAT/consumer tax is set at 70% of the usual rate. Meanwhile, websites are required to offer substantial protections for consumer rights and Intellectual Property/copyrights. Additionally, there are tariff cuts on over 1500 items and measures against unfair competition in the sector.

 

In 2018, CBEC retail imports were valued at RMB 78.58 billion, an increase of 39.8% from 2017. Hong Kong will continue to play an important role in China’s CBEC development, by nurturing innovation, accelerating development and expanding collaboration. Hong Kong enterprises can take advantage of new opportunities in the growing CBEC sector by building communications channels, pooling resources and setting up joint enterprises as CBEC develops alongside the Greater Bay Area.

 

Should you require any advice or assistance with setting up a company in Hong Kong and China and accessing the P.R.C market, our advisory services have you covered. As the mainland’s consumer economy grows, the possibilities for new businesses are almost limitless. Hong Kong continues to enjoy unique advantages in accessing the mainland, and with over 50 years of local, regional and worldwide experience, we are proud to support new ventures. Our tax services can also help clarify any uncertainties regarding the cross border tax regime.

 

CBEC at a glance

 

  • A rapidly developing sector that delivers personalized purchases and imported products popular with mainland China customers

 

  • Most popular product categories: cosmetics, food, clothing

 

  • Cutoff for tax free purchases: 5,000 RMB for single transactions, 26,000 RMB yearly

 

  • Import VAT set at 30% less than usual rate

 

  • Platforms are responsible for consumer protections and anti-counterfeit measures

 

  • 2 modes of shipping- bonded import (Mainland warehouses) and direct purchase import (Overseas warehouses)

 

  • 37 cities eligible for cross border tax rebates

 

  • Government subsidies for overseas warehouses

 

  • Food product and supplement enterprises are required to register with CFDA

 

 

 

References:

http://hong-kong-economy-research.hktdc.com/business-news/article/HK-Economy-Guangdong-Hong-Kong-Macau-Bay-Area/Guangdong-Hong-Kong-Macao-Greater-Bay-Area/bayarea/en/1/1X000000/1X0AE3L6.htm

http://hong-kong-economy-research.hktdc.com/business-news/article/Hot-Topics/Cross-Border-E-Commerce-Site-Optimises-Supply-Chain-to-Sharpen-Competitive-Edge/rp/en/1/1X486E8M/1X0AHSL3.htm

 

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