A Guide to China s Import

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2 A Guide to China s Import Actively expanding import is one of the China s important measures of further Opening Up at the present stage, the Party Central Committee and the State Council both attach great importance to the import expansion. In April this year, General Secretary Xi Jinping announced at the opening ceremony of the annual conference in Boao, Asia that China will take the initiative to expand import, promote the balance of current account and balance of payments, and strive to increase the import of featured and advantageous products on which people's demands are concentrated. In this year's Government Work Report, premier Li Keqiang also stressed the importance of actively expanding import, reducing import tariffs on automobiles and some consumer goods, and promoting industrial upgrading and balanced trade development. Since the beginning of this year, China has autonomously lowered its own tariff rates for many times. From May 1st, China has eliminated import tariff for 28 items of medicine; since July 1st, China has reduced the import tariff on automobiles within a quite a range, including the import tariff on automobiles and parts. The import tariff on consumer goods was also reduced in a wide range, with an average decline of 23%. On September 30th, Tariff Commission of the State Council issued another notice to reduce the import tariff of 1585 items from November 1st. With a series of policy-oriented support continuously releasing the signal of II

3 China's expansion of imports and the accelerating pace of China's consumption upgrading, the continuously open Chinese market is bringing China opportunities to enterprises of all countries and regions in the world. In May 2017, Chinese President Xi Jinping announced on Belt and Road Forum for International Cooperation that "China will host the China International Import Expo from 2018". China International Import Expo is the first state-level expo themed on import. It is a major move taken by the Chinese government to firmly support trade liberalization and economic globalization, to open its market to the world and to expand import. The increasingly open Chinese market will provide great opportunities for global brands, facilitate the entry of quality goods, services and technologies into the Chinese consumer market, and meet the growing needs of Chinese consumers for a better life. The holding of the China International Import Expo is conducive to strengthening economic exchanges and trade cooperation among countries, promoting global trade and world economic growth, and realizing the development of an open world economy. China International Import Expo is not only an open international cooperation platform for China to show its achievements in national development and international trade to other countries, but also an international public product provided by China to discuss major issues of international trade and world economy and improve III

4 global economic governance. A Guide to China s import aims to offer information about the overview of China's macro economy and import situation, the import customs policy, the import management measures, the cross-border e- commerce import policy, the information of important import exhibitions in 2019 and the query channels for import policy to the politicians, business people, as well as the exhibitors and professional buyers, in the hope of shaping China International Import Expo into a world-class exposition. IV

5 CONTENTS I. Overview of China's Macro Economy Gross Domestic Product Consumer Price Index Unemployment Rate Industrial Structure Retail of Consumer Goods Fixed-Asset Investment International Trade... 8 II. Overview of China's Import Overview of the Import of Goods Total Import Volume of Goods Import of Agricultural Products Import of Clothing Products Import of Automobile Import of High-tech Products Import of Electronic and Mechanical Products Overview of the Import of Service Overview of the Port Total Number of Ports Major Ports III. China's Import Customs Policy The Policy of Imposing Import Tariffs Standards for Import Tariffs Procedures for Imposing Import Tariffs Import Commodity Classification System Customs Value of Imported Goods Origin of Imported Goods Import Goods Inspection Policy Entry Commodity Inspection Entry Animal and Plant Quarantine Frontier Health Supervision Quality Certification of Imported Commodities Customs Clearance Facilitation Reform Policy Predetermination Policy Classified Customs Clearance Policy Paperless Customs Clearance Single Window Policy IV. China s Import Management Measures Regulations on Import V

6 4.1.1 Goods Prohibited from Import Goods Restricted from Import Goods Subject to Free Import Import Standards and Regulations High-end Intelligent Equipment Consumer Electronics & Appliances Automobile Apparel, Accessories & Consumer Goods Food & Agricultural Products Medical Equipment & Medical Care Products V. Cross-border E-commerce Import Policy Customs Supervision Policy for Import Clearance Process for Bonded Import Clearance Process for Direct Mail Import Import Tax Policy Import Policy for Comprehensive Pilot Zones Administrative Measures for Imported Goods VI. Important Import Exhibitions Exhibitions for Goods Trade High-end Intelligent Equipment Consumer Electronics & Appliances Automobile Apparel, Accessories & Consumer Goods Food & Agricultural Products Medical Equipment & Medical Care Products Exhibitions for Service Trade Tourism Emerging Technologies Culture & Education Creative Design Service Outsourcing VIII. Development Status of Imported Goods in E-commerce Platform New bond : Overall analysis of China s imported goods and e-commerce platform consumption Consumption structure: Overall analysis of imported goods categories of e-commerce platforms Mutual benefit and win-win: Imported brands promote the transformation and upgrading of Chinese brands IX (I). Analysis of Consumer Portraits and Consumption Behaviors of Imported Brands 92 The overall consumption characteristics of imported brands under the e-commerce VI

7 platform Development Status of Imported Brands in the E-commerce Field More consumers have increasingly chosen to buy goods of imported brands A continual rise in the awareness of imported brands Imported brands win market trust with high quality and high technology Imported brands propel Chinese brands to develop in the high-end, green and intelligent markets Imported brands have a long way to go (II). Consumer portraits, attitudes, and behaviors of imported brands Young and middle-aged male white-collar workers are the mainstay of imported brand consumption Consumers in the provinces, municipalities, and autonomous regions in East China, Northeast China, and North China have become the mainstay of imported brand consumption Lower-tier cities pay more attention to imported brands Brands from developed countries and regions are more popular with Chinese consumers Quality of imported brands has been more easily recognized by consumers Consumers of imported brands have higher loyalty Consumers concerns about imported brands have changed Conclusion X. The Overall Consumption Characteristics of Representative Goods (I) Regional contribution of import brand consumption growth ) Smart devices ) Food and agricultural products ) Daily consumer goods ) Apparel ) Medical devices, medicine, and health care products Consumer loyalty of foreign brands in China After-sales performance of foreign brands Reputation of foreign brands ) Food and agricultural products ) Consumer electronics and home appliances ). Daily consumer goods Apparel ). Medical devices and health care products Conclusions XI. E-commerce Platforms Promote the Market Expansion of Imported Goods ) The trust effect e-commerce platforms have on foreign brands help increase sales ) Internet-based community patterns help the word-of-mouth of imported products ) Perfecting the platform entry mechanism and strict control over the quality of imported goods ). Import facilitation driven by self-run logistics & warehousing Chain VII

8 3). The e-commerce platform actively introduces high-quality featured commodities and promotes the consumption upgrade VIII

9 Where is the Opportunity to Enter the Chinese Market? Overview of China s Macro Economy Overview of China s Import How can I Enter the Chinese Market? General Import Policy Cross-border E-commerce Import Policy Customs Policy Management Measures Custom Policy Management Measures What are the Import Management Measures for EXPO Goods? High-end Intelligent Equipment Consumer Electronics & Appliances Automobile Apparel, Accessories & Consumer Goods Food & Agricultural Products Medical Equipment & Medical Care Products Any other Important Import Exhibitions? Exhibitions for Goods Trade Exhibitions for Service Trade IX

10 I. High-end Intelligent Equipment Contents by Exhibition Area 1. Import Customs Policy Import Management Measures Cross-border E-commerce Policy Important Import Exhibitions Import Policy Query Channels...64 II. Consumer Electronics & Appliances 1. Import Customs Policy Import Management Measures Cross-border E-commerce Policy Important Import Exhibitions Import Policy Query Channels...64 III. Automobile 1. Import Customs Policy Import Management Measures Cross-border E-commerce Policy Important Import Exhibitions Import Policy Query Channels...64 IV. Apparel, Accessories & Consumer Goods 1. Import Customs Policy Import Management Measures Cross-border E-commerce Policy Important Import Exhibitions Import Policy Query Channels...64 V. Food & Agricultural Products 1. Import Customs Policy Import Management Measures Cross-border E-commerce Policy Important Import Exhibitions Import Policy Query Channels...64 VI. Medical Equipment & Medical Care Products 1. Import Customs Policy Import Management Measures Cross-border E-commerce Policy Important Import Exhibitions Import Policy Query Channels...64 VII. Important Import Exhibitions of Service Trade 57 X

11 I. Overview of China's Macro Economy In recent years, China's macro economy has generally maintained steady growth. Price growth has been within the target of regulation, the employment situation has continued to maintain steady growth, and the per capita consumer spending has been growing at a faster pace. 1.1 Gross Domestic Product Gross domestic product reached trillion yuan in 2017, up 6.9 percent from Gross domestic product totaled 41.9 trillion yuan in the second quarter of 2018, up 6.8 percent year-on-year GDP(per hundred million yuan) GNP(year-on-year growth in percent) Figure 1-1: China's GDP Growth Source: National Bureau of Statistics 1

12 1.2 Consumer Price Index CPI increased by 2.10% year-on-year in July 2018, of which urban CPI and rural CPI increased by 2.08 percentage points and 2 percentage points respectively CPI(year-on-year growth) CPI of urban residents(year-on-year growth) CPI of rural residents(year-on-year growth) Figure 1-2: Changes in CPI (year-on-year growth per month) Source: National Bureau of Statistics 1.3 Unemployment Rate Since 2009, China's unemployment rate has shown a significant downward trend. It was 3.9 percent in 2017, down 0.12 percentage points from

13 Figure 1-3: Unemployment Rates from 2008 to 2017 Source: National Bureau of Statistics (IV) Industrial Structure 1.4 Industrial Structure The primary industry maintained a steady development momentum, with the added value reaching 1.32 trillion yuan in the second quarter of 2018, up 3.2 percent year-on-year Added value of primary industry(per hundred million yuan) Added value of the primary industry(year-on-year growth) 3

14 Figure 1-4: The Added Value and Growth of the Primary Industry Source: national bureau of statistics The growth rate of the secondary industry in the past five years shows a downward trend on the whole. In the second quarter of 2018, the added value was 9.18 trillion yuan, up 6% year on year Added value of the secondary industry(per hundred million yuan) Added value of the secondary industry(year-on-year growth) Figure 1-5: The Added Value and Growth of the Secondary Industry Source: National Bureau of Statistics The added value of the tertiary industry in the second quarter of 2018 was trillion yuan, up 272 billion yuan from the previous quarter and 7.8 percent year-on-year, up 0.2 percentage points from the same period last year. 4

15 Added value of the tertiary industry(per hundred million yuan) Added value of the tertiary industry(year-on-year growth) Figure 1-6: The Added Value and Growth of the Tertiary Industry Source: National Bureau of Statistics The contribution rate of the secondary industry to GDP growth is continuously decreasing, while the tertiary industry is gradually increasing. The tertiary industry contributed 58.8% to GDP growth in 2017, followed by the secondary industry with 36.3% and the primary industry with 4.9% Contribution rete of primary industry(%) Contribution rete of tertiary industry(%) Contribution rete of secondary industry(%) 5

16 Figure 1-7: Contribution Rate of Three Industries to GDP Growth Source: National Bureau of Statistics 1.5 Retail of Consumer Goods From January to August 2018, the total retail sales of consumer goods reached trillion yuan, up by 9.3% year-on-year. Growth in August was 9 per cent year on year, up 0.2 percentage points from July / / / / / /2018 Retail sales of consumer goods(per hundred million yuan) Retail sales of consumer goods year-on-year(minus price factors)(%) Retail sales of consumer goods year-on-year(%) Figure 1-8: Growth in Retail Sales of Consumer Goods Source: National Bureau of Statistics In August 2018, the total retail sales of urban consumer goods reached 2.72 trillion yuan, up 8.8% year-on-year. Retail sales of rural consumer goods totaled billion yuan, up 10.2 percent year-on-year. 6

17 / / / / / /2018 Retail sales of consumer goods in urban areas(per hundred million yuan) Retail sales of consumer goods in rural areas(per hundred million yuan) Retail sales of consumer goods in urban areas on year-on-year basis(%) Retail sales of consumer goods in rural areas on year-on-year basis(%) Figure 1-9: Growth of Retail Sales of Consumer Goods in Urban and Rural Areas Source: National Bureau of Statistics 1.6 Fixed-Asset Investment In 2017, the growth rate of fixed asset investment decreased to trillion yuan, 7.2% year-on-year growth in December and 8.14% year on year the average Cumulative amount of completed investment(per hundred million yuan) Amount of completed investment(year-on-year growth in%) 7

18 Figure 1-10: Fixed-asset Investment Source: National Bureau of Statistics In December 2017, the investment in the primary industry was 2.09 trillion yuan, up by 11.8% year on year. Investment in the tertiary industry was 37.5 trillion yuan, up 9.5 percent year on year. The second industry s growth remained steady The primary industry(per hundred million yuan) The secondary industry(per hundred million yuan) The tertiary industry(per hundred million yuan) The primary industry(year-on-year growth over the same period of last year) The secondary industry(year-on-year growth over the same period of last year) The tertiary industry(year-on-year growth over the same period of last year) Figure 1-11: Fixed-asset Investment by Industry Source: National Bureau of Statistics 1.7 International Trade In 2017, China's total import and export of goods trade reached 27.8 trillion yuan, up 14.2 percent year-on-year. China's exports totaled trillion yuan, up 10.8 percent year-on-year. Total imports were trillion yuan, 8

19 up 18.7 percent. The trade surplus was 2.86 trillion yuan, down 14.5 percent year-on-year Total export(per hundred million yuan) Total import(per hundred million yuan) Growth of total export(%) Growth of total import(%) Figure 1-12: China's Import and Export of Goods from 2001 to 2017 Source: General Administration of Customs In 2017, China's total import and export of service trade reached 4.69 trillion yuan, up 6.44 percent year on year. Of this, exports totaled 1.54 trillion yuan, up 9.64 percent year on year. Total imports were 3.16 trillion yuan, up 4.89 percent year on year. The trade deficit was 1.62 trillion yuan. 9

20 Service trade exports(per hundred million yuan) Service trade imports(per hundred million yuan) Growth of service trade export(%) Growth of service trade import(%) Figure 1-13: China's Import and Export of Service from 2001 to 2017 Source: General Administration of Customs 10

21 II. Overview of China's Import In recent years, China's total import volume has remained stable. The import of high-tech products in the total import of goods has increased rapidly, and the transport service and information service in the import of service trade have maintained a sustained growth. 2.1 Overview of the Import of Goods Total Import Volume of Goods From 2014 to 2017, the overall scale of China's goods import tends to be stable, with a slight decline in 2015 and 2016, and a rise in 2017, with a total import of $18,410 billion Total import volume of goods(per hundred million yuan) Year-on-year growth(%) Figure 2-1: The Size and Growth Rate of China's Goods Import Source: China Customs General Administration 11

22 The top five sources of Chinese goods imports are South Korea, Japan, China's Taiwan, the United States and Australia. South Korea has been China's largest source of imports for five years Picture 2-2: China's Major Goods Import Source Countries (RMB 100 million) Source: China Customs General Administration Import of Agricultural Products China is the world's largest importer of agricultural products. In 2017, the total import amount of China's agricultural products reached 854 billion yuan, and from January to August 2018, the cumulative import amount of China's agricultural products reached 606 billion yuan. 12

23 (1-8) Figure 2-3: China's Agricultural Product Import Scale (100 million yuan) Source: China Customs General Administration China's main agricultural imports include soybean, dairy, beef, wine and so on. In the past three years, the import scale of soybean, dairy, beer, wine and other products continued to increase. Table 2-1: China's Import Statistics of Agricultural Products (100 million yuan) Category (1-8) soybean dairy beef wine pork palm oil barley rice mutton sorghum frozen chicken colza oil

24 sugar beer maize wheat soy-bean oil olive oil peanut oil Source: China Customs General Administration Import of Clothing Products Since 2014, China's garment imports have been increasing. China imported 48.7 billion yuan of apparel products in 2017, up 14.3 percent year on year; From January to August 2018, China's garment imports totaled 35 billion yuan (1-8) Picture 2-4: China's Clothing Products Import Scale (100 million yuan) Source: China Customs General Administration 14

25 2.1.4 Import of Automobile In recent years, the overall scale of China's auto imports has been relatively stable, with 1.24 million cars imported in 2017 and a total import volume of billion yuan (1-8) Number(per ten thousand) Amount(per hundred million yuan) Figure 2-5: China's Automobile Import Scale Source: China Customs General Administration From January to August 2018, China imported 780,000 cars, a decrease of 2% compared with the same period last year. Due to the upgrade of imported models, China imported usd286 billion from January to August 2018, a year-on-year increase of 9%. Table 2-2: China's Automobile Import Statistics Commodity number (ten thousand) (1-8) amount amount amount (hundred (hundred (hundred million Yuan) number (ten thousand) million Yuan) number (ten thousand) million Yuan) number (ten thousand) amount (hundred million Yuan) 15

26 automobile sedan car Four-wheel light suv Minipassenger bus Source: China Customs General Administration Import of High-tech Products In recent years, China's import of high-tech products has been steadily rising. In 2017, China's imports of high-tech products totaled 395 million yuan, up 14.1 percent year-on-year. From January to August 2018, China's total import of high-tech products was 300 million yuan (1-8) Figure 2-6: China's High-tech Products Import Scale (100 million yuan) Source: Commerce Department The import of high-tech products in China is dominated by electronic 16

27 products and computer and communication products. In 2017, the imported amount of electronic products and computer and communication products was 208 million yuan and 76 million yuan respectively (1-8) Biotechnology Photoelectric technology Electronic technology Material technology Other technologies Life sciences and biotechnology Computers and telecommunicatons Computer integrated manufacturing technology Aerospace technology Figure 2-7: Import Categories of High-tech Products (10 thousand yuan) Source: China Customs General Administration Import of Electronic and Mechanical Products The overall import scale of electronic and mechanical products is on the rise, among which the import scale of radio equipment, medical devices, integrated circuits, textile machinery and other products has increased significantly. Table 2-3: Import scale of some electronic and mechanical products (ten thousand yuan) Category (1-8) Compressor for refrigeration equipment 69, , ,999 17

28 Air conditioner - 40,207 29,622 Refrigerator and refrigeration equipment 554, , ,942 Household air purifier 70,934 76,821 14,633 Filter and purification machine for non-domestic water Filling equipment for beverage and liquid food Processing machinery and parts for food and beverage industry Machinery and parts for paper and paper-making products Printing and binding machinery and parts 172, , , , , , , , , , , ,192 4,810,972 5,277,250 3,581,216 Textile machinery and parts 1,697,637 2,366,187 1,591,922 Automatic data processing equipment 1,055,026 1,118, ,169 Central processing unit 1,660,235 1,563,753 1,061,707 storing device 12,101,682 12,389,569 9,519,390 Parts of automatic data processing equipment Machines and devices for making single - crystal columns or wafers A machine or device for manufacturing semiconductor devices or integrated circuits Machines and devices for manufacturing flat panel displays Radio navigation radar and remote control equipment 8,411,846 9,535,058 7,275, , , ,588 3,457,352 4,261,792 5,305,410 2,819,444 4,795,935 4,651, , , ,315 Laser video disc player 50,713 42,028 47,071 18

29 TV camera, digital camera and video camera Audio recording or playback equipment Radio equipment (including recording machine and complete components) 3,895,968 3,137,371 1,832,679 25,375 33,079 24, , , ,754 color television set 28,609 16,548 13,066 Zero accessories for television, radio and radio equipment 6,212,508 8,274,457 4,993,258 Liquid crystal display panel 21,048,380 20,418,336 11,339,584 Medical instruments and appliances 5,920,527 6,563,185 4,753,093 Automatic control instrument and apparatus for measurement, test and analysis 19,854,159 22,212,152 16,678,833 Source: China Customs General Administration 2.2 Overview of the Import of Service China's service trade imports 3.16 trillion yuan in Among them, travel service, transportation service, other business service and information service are the main components of the import service trade. 19

30 Telecommunication s,computers and information services Insurance service Cultural and Other business entertainment service service Financial services Government service Transportation Construction Travel Figure 2-8: China's Service Imports (100 million yuan) Source: China Customs General Administration From January to April, 2018, the import scale of China's import service trade increased significantly in terms of travel, transportation, insurance, intellectual property royalty and culture and entertainment, while the import scale of medical treatment, study abroad, telecommunications and other aspects decreased year on year. Table 2-4: China's Service Import Statistics (100 million yuan) (1-4) import export Class of service Year-on-year Year-on-year amount increase amount increase (%) (%) Total Transportation Sea transportation Air transportation

31 Travel Studying abroad Medical treatment Construction Insurance service Financial service Telecommunications, computer and information service Telecommunications computer and information service Intellectual property royalties Royalty of R&D achievements Licensing fees for audio-visual and related products Personal, cultural and recreation service Maintenance and repair services Source: China Customs General Administration 2.3 Overview of the Port Total Number of Ports China's commodity trade can pass through water transport ports, aviation ports, highway ports and railway ports. In 2006, 2011 and 2016, the total number of import and export ports was 258, 283 and 300 respectively. 21

32 Air ports Shipping ports Road ports Railway ports Figure 2-9: Total Number of China s Ports Source: China Port Almanac Major Ports Table 2-5: Import and Export Freight Volume of China's Major Maritime Ports in 2016 Provinces Name of port Import and export cargo volume (ton) Rank Shandong Qingdao 298,370,511 1 Hebei Tangshan 294,365,760 2 Shanghai Shanghai 276,327,246 3 Tianjin Tianjin 239,801,426 4 Shandong Shijiu 223,919,471 5 Zhejiang Ningbo 202,727,515 6 Zhejiang Zhoushan 132,528,096 7 Liaoning Dalian 125,094,658 8 Shandong Lanshan 122,997,915 9 Jiangsu Lian Yungang 110,001, Guangdong Zhanjiang 78,657, Guangxi Fangcheng 66,834, Shandong Yantai 60,646, Fujian Xiamen 60,359,

33 Shandong Longkou 46,977, Guangdong Yantian 41,039, Fujian Quanzhou 39,245, Guangdong Shekou 38,887, Guangdong Nansha 36,482, Fujian Fuzhou 34,267, Source: China Port Almanac Table 2-6: Import and Export Freight Volume of Major Inland Ports in China in 2016 Provinces Name of port Import and export cargo volume (ton) Rank Jiangsu Zhangjiakou 76,256,569 1 Jiangsu Taicang 62,180,070 2 Jiangsu Nantong 51,403,683 3 Jiangsu Jiangyin 32,234,602 4 Jiangsu Zhenjiang 28,186,806 5 Jiangsu Nanjing 24,828,370 6 Anhui Ma anshan 20,170,210 7 Jiangsu Changshu 17,308,463 8 Heilongjiang Mohe 16,167,251 9 Hubei Wuhan 14,144, Jiangsu Jingjiang 12,352, Jiangsu Taizhou 12,148, Jiangsu Rugao 9,586, Jiangsu Yangzhou 9,351, Jiangsu Changzhou 5,794, Chongqing Chongqing 5,710, Guangdong Gaoming 4,397, Anhui Tongling 4,359, Guangdong Zhongshan 3,976, Anhui Wuhu 3,798, Source: China Port Almanac 23

34 Table 2-7: Import and Export Freight Volume of China's Major Aviation Ports in 2016 Provinces Name of port Import and export cargo volume (ton) Rank Shanghai Shanghai Airport 4,746,330 1 Beijing Capital Airport 1,853,736 2 Guangdong Guangzhou Airport 1,631,938 3 Henan Zhengzhou Airport 251,260 4 Fujian Xiamen Airport 227,548 5 Tianjin Tianjin Airport 193,116 6 Sichuan Chengdu Airport 170,374 7 Guangdong Shenzhen Airport 167,826 8 Jiangsu Nanjing Airport 141,900 9 Chongqing Chongqing Airport 140, Shandong Qingdao Airport 126, Zhejiang Hangzhou Airport 95, Hubei Wuhan Airport 71, Liaoning Dalian Airport 52, Yunnan Kunming Airport 29, Zhejiang Ningbo Airport 26, Shangxi Xi an Airport 24, Xinjiang Urumiki Airport 15, Shandong Yantai Airport 14, Fujian Fuzhou Airport 14, Source: China Port Almanac Table 2-8: Import and Export Freight Volume of Major Highway Ports in China in 2016 Provinces Name of port Import and export cargo volume (ton) Rank Xinjiang Khorgos 25,575,568 1 Intermongolia Ganqimaodu 15,535,196 2 Guangdong Huanggang 13,522,881 3 Intermongolia Ceke 11,977,688 4 Guangdong Wenjindu 6,167,

35 Yunnan Ruili 4,143,674 6 Guangxi Youyiguan 3,197,590 7 Yunnan Hekou 2,650,512 8 Xinjiang Laoyemiao 2,289,251 9 Guangdong Shenzhen Bay 1,858, Guangdong Hengqin 1,779, Liaoning Dandong 1,665, Yunnan Tengchong 1,585, Yunnan Mohan 1,585, Guangdong Futian 1,162, Jilin Nanping 1,081, Intermongolia Erenhot 795, Intermongolia Ebuduge 679, Heilongjiang Suifenhe 635, Intermongolia Manzhouli 621, Source: China Port Almanac Table 2-9: Import and Export Freight Volume of Major Railway Ports in China in 2016 Provinces Intermongoli a Intermongoli a Name of port Import and export cargo volume (ton) Manzhouli 13,957,721 1 Erenhot 9,703,068 2 Heilongjiang Sufenhe 8,875,453 3 Xinjiang Alataw Pass 6,512,344 4 Jilin Hunchun 1,957,069 5 Xinjiang Khorgos 567,434 6 Guangxi Pingxiang 407,917 7 Yunnan Hekou 390,524 8 Jilin Tumen 161,085 9 Liaoning Dandong 134, Ran k 25

36 Henan Zhengzhou 128, Heilongjiang Ha erbin 86, Jilin Ji an 30, Shanghai Shanghai Station 23, Beijing Beijing West Station 15, Guangdong Guangzhou 3, Guangdong Zhaoqing Guangdong Foshan Guangdong Dongguan Guangdong Shenzhen - 20 Source: China Port Almanac 26

37 III. China's Import Customs Policy 3.1 The Policy of Imposing Import Tariffs Standards for Import Tariffs Import duties are customs duties levied on imported goods. There are two types of import taxes in China: import tariff and additional tax. China sets the most favored country tax rate, agreement tax rate, preferential tax rate, inclusive tax rate, tariff quota rate and other tax rates for import tariff. Additional tax rates shall be set as anti-dumping duty rates, countervailing duty rates, safeguard duty rates and retaliatory duty rates. Table 3-1: List of Tariff Rates for China s Import Import tariff rate Most favored nation tax rate Tariff rate Conventional tariff rate Provisional tariff rate on imports MFN tariff applies to the import of goods from WTO members or regions that are co-applicable to MFN treatment clauses with China, or the import of goods from countries or regions that have signed bilateral trade agreements with China that provide MFN treatment clauses to each other. The tariff rate is the tariff rate levied on a part of the goods subject to the tariff rate quota, which is lower than the import tax rate outside the quota. The tariff agreement applies regional provisions containing tariff preference which are originated from China The provisional tax rate is the lower tax rate adopted on the basis of the MFN tariff rate, replacing the affected MFN tariff rate clause. It is 27

38 Additional tax rate Concessionary rate of tax ITA tax General Rates Rate of antidumping duty Countervailing duty rates determined annually by the customs tariff commission in accordance with the import and export tariff regulation. Its application period is usually January 1, solstice, December 31 of each year. Preferential tax rates apply to imports from countries and regions with which China has entered into trade agreements containing special preferential terms.preferential tax rates are generally lower than MFN and agreement rates. ITA tax rate is the tax rate of non-full tax information technology products. According to relevant agreements on China's accession to the WTO, China has joined the information technology products agreement (ITA) since December 2001 and cancelled all the duties of information technology products agreed in the agreement. The general tax rate applies to products whose origin cannot be determined, products of countries that have no reciprocal trade agreements with China, products of non-wto members, products of countries that are members of the WTO but which China does not provide most-favoured-nation treatment to, and products of certain regions within eu member countries. Anti-dumping duty rate is a kind of import surcharge levied on imported goods that are being dumped. The countervailing duty rate is an import surcharge imposed on imports and articles that directly or indirectly receive bonuses or subsidies. 28

39 Safeguard tariff rate Retaliatory tariff rate Safeguard tariff rate is an import surcharge imposed when serious injury or threat of serious injury is caused to domestic industries that produce similar or directly competitive products. Retaliatory tariff rate is a kind of import surtax which is imposed on China by prohibiting, restricting, imposing tariffs or other countries or regions that affect normal trade. The basic principle to levy China's import tax: if certain imported goods are applicable to two or more different tax rates at the same time, we generally choose appropriate tax rates in accordance with the principle of "applying the lower rate". This means that in case of there being provisional tax rates for import goods that apply MFN tax rates, provisional tax rates shall be applied; Import goods that are subject to preferential or agreed tax rates, while having provisional tax rates, shall apply the lower tax rates. For imported goods subject to the general tax rate, even if the goods have temporary import tax rate, they can only be taxed at the general tax rate. For goods subject to the administration of tariff quota, the tariff rate shall be applied within the quota and other tax rates shall be applied outside the quota Procedures for Imposing Import Tariffs The consignee or consignor or its agent of the imported goods shall, within the prescribed time limit and place, examine the customs in the form of electronic data declaration and paper declaration, and bear legal 29

40 responsibility for the authenticity and accuracy of the contents declared. The customs shall examine and verify the declaration documents of import and export goods, and the main focus is to examine and verify the commodity name, commodity number, specification and model, price, place of origin and quantity of the imported goods. The computer system generates the tax information automatically after the document review. After the consignee and consignor of the import and export goods or their agents submit the documents at the customs site, the customs will print the documents such as "customs duty payment form" and other tax documents. Computer systems will automatically finish deducting tax and verification work if electric payment is chosen. The consignee or consignor or his agent go to the counter of a bank to make payment with "customs tax payment. Then they shall provide which will be sealed by the bank. of the" customs tax payment "to the import and export of goods by and will pay the customs as certificate of tax cancel after verification and release of goods, after finishing artificial tax cancel after verification, the customs will release the goods. 30

41 Customs Declaration of Electric Data Customs Declaration of Paper Documents Customs Verification Review the name, number, specifications, price, origin and quantity of imported goods Customs Duty Payment Form Release of Goods Computer System Automatically Completes the Actual Deduction and Verification of Taxes Consignee or Agent shall Pay at Bank with Customs Duty Payment Form Figure 3-1: Procedures for the Imposition of Import Tariffs Import Commodity Classification System Commodity classification system is one of the essential elements of import declaration. In order to complete and accurate declaration, the importer must provide the customs tariff code of the goods. The code determines tariff rates, import and export controls and quotas, licensing regulation, commodity inspection, and so on. The customs will conduct investigation on importers and exporters in the import and export links or after customs clearance to ensure the accuracy of the declaration number. In 2017, with the revision of the commodity classification catalogue of the convention on commodity name and coding coordination system of the world customs organization, China's import and export tariff items have been adjusted in a large range, mainly involving agriculture, chemical industry, electromechanics, textile, wood and other fields. After adjustment, the total number of tax items in China in 2018 is 8,

42 3.1.4 Customs Value of Imported Goods According to the examination and approval of the customs of the People's Republic of China import and export goods customs value method "and" regulations on the import and export tariff of the People's Republic of China, the implementation to clinch a deal the price for the principle of valuation methods, and shall include the goods arrived in the territory of the People's Republic of China enter site before discharge transportation and related fees and insurance premium, appraisal procedure fair and transparent Origin of Imported Goods According to the regulations of the People's Republic of China on the origin of imported goods, China adopts the predetermination management method for the origin of imported goods. When examining and determining the origin of imported goods, the customs may require the consignee to submit the certificate of origin of the imported goods for examination. The tariff rate of the preferential trade agreement can be enjoyed in China for imported original products that conform to the rules of origin under the preferential trade agreement and meet the relevant customs management requirements. The importer shall submit the certificate of origin electronically as required for the goods imported under the preferential trade agreement to be declared in the "paperless customs clearance" 32

43 manner. Goods imported under preferential trade agreements that have achieved electronic information exchange of origin do not need to submit electronic data and commitments of direct transport rules for evidence of origin documents, nor do they need to upload evidence of origin documents electronically. Table 3-2: Exchange of Electronic Information on Origin of Preferential Trade Agreements Name of preferential trade agreement Asia-Pacific Countries Trade Agreement Protocol code 1 Whether electronic information exchange of country of origin is realized Yes No China-Asean free trade agreement 2 No The mainland and Hong Kong closer relationship arrangement 3 Yes The mainland and Macao closer economic partnership 4 Yes arrangement The mainland has imposed zero tariffs on some agricultural 6 No products in Taiwan China-Pakistan free trade agreement 7 No China-Pakistan free trade agreement 8 No China-New Zealand free trade agreement 10 Yes China-Singapore free trade agreement 11 No China-Peru free trade agreement 12 No The least developed countries have special preferential tariff 13 No treatment Comment Korea only Other member states C/O(certificate of origin) only 33

44 Economic cooperation framework agreement China-costa Rica free trade agreement China-Iceland free trade agreement China-Switzerland free trade agreement China-Australia free trade agreement China-south Korea free trade agreement China-Georgia free trade agreement 14 Yes 15 No 16 No 17 No 18 No 19 Yes 20 No 3.2 Import Goods Inspection Policy Since January 1, 2000, China has established a new customs clearance system for inspection and quarantine goods, and implemented the mode of "first inspection, then customs declaration". For goods subject to entry and exit inspection and quarantine, the customs clearance form for entry goods shall be used and affixed with a special seal for inspection and quarantine. For the goods listed in the catalogue of inbound and outbound commodities subject to inspection and quarantine by the entry-exit inspection and quarantine organ, the customs shall, on the strength of the "entry cargo clearance form" issued by the entry-exit inspection and quarantine organ at the place of customs declaration. An inspection certificate issued by an inspection institution formulated, approved or approved by the general administration of quality supervision, inspection and quarantine of the 34

45 People's Republic of China may also be issued for imported goods not listed therein, except as otherwise provided by the general administration of quality supervision, inspection and quarantine Inspection and quarantine procedures generally include inspection/inspection and quarantine procedures. The Inspection and Quarantine Institution Inspects Goods and Issues the Customs Clearance Form, for which the Customs examine and release Goods. Qualified Issue the Notice of Inspection and Quarantine of Import Goods Goods Imported Unqualified Issue the Certificate of Inspection and Quarantine for claims by relevant enterprises Figure 3-2: Procedures of Inspection and Quarantine Entry Commodity Inspection The general administration of quality supervision, inspection and quarantine and the inbound and outbound inspection and quarantine authorities of the port shall conduct quality, quality and supervision and administration of imported commodities. The procedure for conformity assessment of imported commodities includes sampling, inspection and inspection; Assessment, verification and assurance of conformity; Registration, accreditation and approval and a combination of each. 35

46 3.2.2 Entry Animal and Plant Quarantine According to the law on the entry and exit animal and plant quarantine and its implementation regulations, the general administration of quality supervision, inspection and quarantine of the state and its port entry and exit inspection and quarantine authorities shall implement the entry supervision and administration system of animal and plant quarantine on the production, processing and storage of imported animals and plants and animal and plant products Frontier Health Supervision Entry and exit inspection and quarantine institutions according to the frontier health and quarantine law "and its implementing rules, and other health laws and regulations and national health standards, at the inlet port for inbound and outbound means of transport, goods, transport container and port districts in public places, the environment, living facilities, production equipment for sanitary inspection, identification, evaluation and sampling Quality Certification of Imported Commodities The logo of China Compulsory Certification (CCC) is the Certification mark which is allowed to import and use, which realizes the unified catalogue, unified standard, unified mark and unified charge standard. The 36

47 regulations on the management of compulsory product certification were approved by the general administration of quality supervision, inspection and quarantine (aqsiq) at a meeting of the general administration of quality supervision, inspection and quarantine (aqsiq) on May 26, 2009, and came into effect on September 1, 2009.According to the description and definition table of compulsory product certification, there are 20 categories and 158 types of products. 3.3 Customs Clearance Facilitation Reform Policy Predetermination Policy Policy Basis: Interim measures on administration of pre-order of customs of the People's Republic of China 1 Main Content: It was deliberated and adopted at the general administration of customs office on December 12, 2017, which will take effect from February 1, 2018.Prior to the actual importation of goods, the applicant may apply for a preliminary determination of the commodity classification of the imported goods, the origin or origin qualification of the imported goods, the relevant elements and valuation methods of the customs value of the imported goods, and other customs affairs specified by the general administration of customs. 1 Website: 37

48 3.3.2 Classified Customs Clearance Policy Policy Basis: Implementation plan of customs classification clearance reform 2 Main Content: Formulated in July 2012, it has been fully covered by the national customs. Comprehensive risk factors such as enterprise category, commodity classification, price, license, trade country, airline route and logistics information, etc., carry out differentiated management of "low risk quick release", "medium risk document examination" and "high risk key examination" Paperless Customs Clearance Policy Basis: Notice of carrying out paperless reform of customs clearance operation in pilot projects of national customs 3 Main Content: issued in July 2012, it was comprehensively promoted nationwide in 2015 based on the comprehensive review and evaluation of the pilot. Enterprises shall apply for "paperless operation of customs clearance", and shall send the signing application of "paperless operation of customs clearance" to any customs directly under the state through the 2 Website: 3 Website: 38

49 "paperless signing system of customs clearance" Single Window Policy Policy Basis: Implementing the reform plan of "three ways to each other" to promote the construction of large customs clearance, Several opinions on improving the work of ports to support the development of foreign trade, Framework opinions on the construction of "single window" of international trade 4 Main Content: To push forward the construction of a "single window", at present, China's "single window" has covered all the ports of the country, 9 service functions of import and export are online available, including cargo declaration, manifest declaration, the declaration of the means of transport, permit application, certificate of origin for, enterprise qualification, query statistics, export tax rebates and pay taxes and fees; The ministry of public security, the ministry of environmental protection, the ministry of communications, the ministry of agriculture, the ministry of commerce, the people's bank of China, the general administration of customs, the state administration of industry and commerce, the state administration of taxation, the general administration of quality supervision, inspection and quarantine, the forestry bureau and other 4 China International Trade Single Window: 39

50 information systems of 11 ministries and commissions have achieved "total to total" connection and data connectivity. Enterprises can declare to the customs once through the "single window" customs declaration and inspection. 40

51 IV. China s Import Management Measures 4.1 Regulations on Import Goods Prohibited from Import According to China s Foreign Trade Law, goods prohibited from importation include those which jeopardize state security or social public interest, harm people s life and health, destroy eco-environment and which must be prohibited according to the global pacts and agreements concluded or acceded to by People s Republic of China. The list of goods prohibited from importation is formulated, adjusted and published by the Ministry of Foreign Trade and Economic Cooperation(MOFTEC) of the State Council together with the relevant departments of the State Council. Table 4-1: List of Goods Prohibited from Import List of Goods Prohibited from Importation (I) Announcement 19 of MOFTEC In 2001 List of Goods Prohibited from Importation (II) Announcement 80 of the Ministry of Foreign Trade and Economic Cooperation, General Administration of Customs of PRC and General Administration of Quality Supervision, Inspection and Quarantine of PRC in

52 List of Goods Prohibited from Importation (VI) Announcement 116 of the Ministry of Commerce, the Ministry of Foreign Trade and Economic Cooperation, and Ministry of Ecology and Environment of PRC in 2005 List of Solid Waste Prohibited from Importation Announcement 80 of Ministry of Ecology and Environment of PRC, Ministry of Commerce, National Development and Reform Commission, General Administration of Customs of PRC, General Administration of Quality Supervision, Inspection and Quarantine of PRC in Goods Restricted from Import The list of goods restricted from importation is formulated, adjusted and published by MOFTEC of the State Council together with the relevant departments of the State Council. The management methods include tariffrate quota management and import license management. 1. Tariff-rate quota management The list of imported goods subject to tariff-rate quota management is formulated, adjusted and published by MOFTEC of the State Council together with the relevant departments of the State Council. Within the tariff quota, the import is conducted in accordance with the tariff quota duty rates after being approved by the state; If the imports exceed the quota limits, tax shall be levied at extra-quota rates. China abides by WTO 42

53 commitments and implements TRQs only on some of the agricultural products. In 2018, China implements TRQs management on 8 categories of agricultural goods wheat, corn, rice(husked and unhusked), sugar, wool, wool tops, cotton and chemical fertilizer. 2. Import license management The Ministry of Commerce and the authorized certification authorities shall issue, in accordance with law, license for the import of goods subject to quantitative or other restrictions. In 2018, goods subject to import license management are mainly key used mechanical and electrical products and ozone depleting substances. The bureau of quota and license affairs of the Ministry of Commerce is responsible for issuing import licenses of specified used mechanical and electronic products; local commercial authorities authorized by the Ministry of Commerce are responsible for issuing import licenses for ozone-depleting substances. The import license is valid from the date of issuance to December 31 of that year. The import license shall be used within the validity period and shall automatically become invalid upon expiration Goods Subject to Free Import All goods except those which are prohibited or restricted from importation 43

54 are subject to free importation. In view of the need to monitor the import of goods, the competent foreign trade department and the relevant economic administrative departments of the State Council may, according to the functions and duties prescribed by the State Council, exercise automatic import license management over some goods subject to free importation.the Catalogue of Goods Subject to Automatic Import License Management is published at least 21 days before implementation, normally on December 10 of each year. The automatic import license for nonmechanical-and-electrical goods is issued by the license issuing agency authorized by the Ministry of Commerce, and the automatic import license for mechanical and electrical goods is issued by the Ministry of Commerce (department of mechanical and electrical and scientific and technological industries), the commercial department of the provinces, autonomous regions municipalities directly under the central government or with independent planning status, coastal open cities, special economic zones and the import and export office of mechanical and electrical products of the State Council. Automatic import licenses are valid for six months and are valid for the Gregorian calendar year. Automatic import license can only be extended or changed by the original license issuing agency and the old license shall be revoked at the same time. 44

55 4.2 Import Standards and Regulations High-end Intelligent Equipment Interim Provisions on Application Software Preset and Distribution Management at Mobile Intelligent Terminal Ministry of Industry and Information Technology issued Interim Provisions on Application Software Preset and Distribution Management at Mobile Intelligent Terminal. According to the Decision of the Standing Committee of the National People's Congress on Strengthening Network Information Protection, the Cyber Security Law of the People's Republic of China, Regulations of the People's Republic of China on Telecommunications and Administrative Measures for Internet Information Services, mobile intelligent terminal manufacturing enterprises and internet information service providers providing application software distribution services for mobile intelligent terminal should provide mobile intelligent terminal application software to consumers according to laws and regulations, and fully respect consumers' right to know and right to choose. 5 This part is classified according to the six exhibition areas of goods trade in Import Expo 45

56 4.2.2 Consumer Electronics & Appliances Approval Document for the Import of Audio and Video Products Approval for the import of audio-visual products is a license issued by the competent department of the State Administration of Press, Publication, Radio, Film and Television for the supervision and management of importation of audiovisual products, radio, film and television programs, CD-roms in processing trade, disks returning home after overseas processing. Regulations on Mandatory Product Certification The Regulations on Mandatory Product Certification was reviewed and adopted at the meeting of the General Administration of Quality Supervision, Inspection and Quarantine on May 26, 2009, and came into effect on September 1, According to the Description and Definition Table of the Mandatory Product Certification Catalogue, there are 20 categories and 158 types of products, and products included in the List of Products Subject to Mandatory Product Certification are household appliances, electrical wiring, cable, toys, etc Automobile National standards for vehicle structure 46

57 The National Automobile Standards Committee revised compulsory national standard for vehicles Dimensions, Axle Load and Total Mass Limit for Automobiles, Trailer and Automobile Train (GB ) under the organization of The Ministry of Industry and Information Technology. The standard was officially approved and issued on July 26, 2016 by the General Administration of Quality Supervision, Inspection and Quarantine and the Standardization Administration of China. This standard stipulates the exterior dimensions and mass limits of automobiles, trailers and automobile trains. It is applicable to all vehicles used on the road. It is one of the most basic technical standards of automobile industry. National standards for ancillary facilities Signs for Automobile Control, Indicators and Signaling Devices (GB ) specifies color display of automobile control parts, indicators and signaling devices. This standard is applicable to M, N automobiles, and is not applicable to the special control device, indicator and signaling device of electric vehicles. National standard for new energy vehicles Regulations on New Energy Vehicle Manufacturers and Product Access was put into effect on July,1st, It states the administrative measures and examination requirements for product access and new energy vehicle 47

58 manufacturers in China. It also stipulates requirements on new energy vehicle manufacturers for strengthened safety supervision and production consistency. Interim Measures for the Parallel Management of Average Combustion Consumption in Passenger Vehicle Enterprises and New Energy Vehicle Points came into force on April,1st, It stipulates the average annual fuel consumption requirements for enterprises selling passenger vehicles in China, and assessment and compliance requirements for annual production proportion of new energy vehicles, as well as penalties for vehicles that fail to meet the standards. Light Vehicle Energy Consumption Labeling Part 2: Plug-in Hybrid Electric Vehicles and Pure Electric Vehicles (GB ) specifies the content, format, material and paste requirements of the automobile energy consumption label. Emission Control Requirements and Measurement for Light Hybrid Electric Vehicles specifies the measuring methods of waste gases exhausted from outlet, blow-by of crankcase and vaporization of fuel and exhaust smoke density of the light hybrid electric vehicles as well as the durability of their emission control devices; moreover, technical requirements for on-board diagnostic system are specified Apparel, Accessories & Consumer Goods National Technical Specifications for Textile Products 48

59 National Technical Specifications for Textile Products was issued by the General Administration of Quality Supervision, Inspection and Quarantine and the Standardization Administration of China. It took effect on August,1st, This standard provides a unified technical basis for the production, sales, use and supervision of textile products in China, and plays an important role in effectively protecting the health of Chinese consumers and regulating the market. Technical Specifications for Infant and Children s Textile Products Technical Specifications for Infant and Children s Textile Products was issued by the General Administration of Quality Supervision, Inspection and Quarantine and the Standardization Administration of China. it is the first national compulsory standard targeted at infant and child textile products. This standard stipulates safety technical requirements for infant and children s textile products, the test method and inspection rules, and it further improves the safety requirements of imported infant and children's textile products Food & Agricultural Products National standard for food nutritive fortifier According to Food Safety Law of PRC, China has notified all WTO 49

60 members of the national standards for nine categories of food nutritive fortifier, and has clarified their applicable scope, technical requirements and inspection methods. National standard for maximum pesticide residue in food According to Food Safety Law of PRC, China has twice notified all WTO members of the national standard for maximum pesticide residue in food, the maximum residue limit of 1,291 items of 259 pesticides is included. Hygienic standard for feeds According to Food Safety Law of PRC, China has notified all WTO members of the national hygienic standard for feeds which stipulates the maximum limit and detection method for toxic and hazardous substances and micro-organisms in animal feeds. Measures for the Supervision and Administration of the Inspection and Quarantine of Imported Aquatic Animals China establishes access-after-quarantine system. AQSIQ releases access list after risk analysis and evaluation of hygienic and safety control system are conducted for first imports and retrospective review of traditional trade is carried out. Moreover, China has established trace system which registers overseas aquaculture and packaging enterprises and keeps records 50

61 of domestic consignees. Overall China has set up a safety supervision system based on official controlling and monitoring to ensure the hygiene and safety of imported aquatic animals. Administrative Measures for the Registration and Filing of Dietary Supplement On February, 26th, 2016, China's Food and Drug Administration issued the Administrative Measures for the Registration and Filing of Dietary Supplement and it came into force on July, 1st of the same year. This Measure stipulates the departments in charge of the registration and filing of dietary supplement and describes their responsibilities; it also clarifies the procedures of registration and filing as well as requirements for application and stipulates the implementation and penalty provisions. Administrative Measures for the Registration of Product Formula of Infant Formula Milk Powder China s Food and Drug Administration issued Administrative Measures for the Registration of Product Formula of Infant Formula Milk Powder, and it took effect on October,1st, This Measure requires that the product formula of all infant formula milk powder produced and sold in China or imported to China must be registered and be approved by the Food and Drug Administration. 51

62 Notice on the Implementation Date of Formula Registration for Imported Infant Formula Milk Powder Products On November, 22nd, 2017, AQSIQ issued Notice on the Implementation Date of Formula Registration for Imported Infant Formula Milk Powder Products. The Notice points out that the overseas production enterprises of infant formula milk powder products imported by general trade shall be registered with AQSIQ in accordance with the law, and infant formula milk powder products produced after January, 1st,2018 by overseas production enterprises shall be registered with Food and Drug Administration in accordance with the law and the registration number shall be marked on the label of product package Medical Equipment & Medical Care Products Catalogue of Medical Equipment To fully implement the requirements of Regulations on the Supervision and Administration of Medical Equipment and Suggestions on Reforming the Examination and Approval System of Drug and Medical Equipment of the State Council (Document of the State Council), China s Food and Drug Administration had revised the Catalogue of Medical Equipment which took effect on August, 1st,

63 Management Measures for Medical Equipment Recall Management Measures for Medical Equipment Recall was deliberated and approved by the executive meeting of the Food and Drug Administration on January, 5th, 2017 and came into force on May, 1st, According to the Measure, the agent designated by the overseas manufacturer of medical devices in China shall timely report to the Food and Drug Administration the relevant information of the medical device recall conducted outside the country; when China is involved in a recall, the designated agent in China shall organize and implement the recall in accordance with the Management Measures for Medical Equipment Recall. Management Methods for Adverse Events Monitoring and Reassessment of Medical Equipment State Administration for Market Regulation and National Health Commission of PRC have jointly issued Management Methods for Adverse Events Monitoring and Reassessment of Medical Equipment, which will take effect on January, 1st,2019. Medical devices that have their registration certificates revoked or have their records canceled shall not be produced, imported or used. Foreign holders of imported medical devices and holders of domestic medical devices for overseas market shall take the initiative to collect the adverse events of their medical devices occurred 53

64 overseas. The designated agent of overseas holders of medical equipment and holders of domestic medical equipment shall report the adverse event which cause or may cause severe damage or death within 30 days from the date of discovery or knowledge. Management Measures for the Registration of Specially Formulated Foods for Medical Use China s Food and Drug Administration has drawn up Management Measures for the Registration of Specially Formulated Foods for Medical Use and relevant supporting documents, which specify the requirements and procedures for the registration of special medical-use formula foods, and the additional materials that should be submitted when applying for the registration of special medical-use formula foods. 54

65 V. Cross-border E-commerce Import Policy 5.1 Customs Supervision Policy for Import Clearance Process for Bonded Import Eligible e-commerce enterprises or platforms are connected with the customs, and e-commerce enterprises transport the whole batch of goods into the customs special supervision area or bonded logistics center, and declare the goods to the customs, and the customs manage the account books. When the domestic individual purchases goods in the area, the e- commerce enterprise or platform transmits the electronic order, payment voucher and electronic waybill to the customs; the e-commerce enterprise or its agent submits the list to the customs; the customs collects duty on imported goods in accordance with cross-border e-commerce retail; after checking and releasing the account book is automatically canceled Clearance Process for Direct Mail Import Eligible e-commerce enterprises or platforms connect with customs. After cross-border online shopping is made by domestic individuals, e- commerce enterprises or platforms transmit electronic order, payment voucher, electronic waybill and other information to customs; the e- commerce enterprise or its agent submits the list to the customs; the goods are transported by express mail, and the entry shall be supervised through 55

66 the express mail place of customs; the customs collects duty on imported goods in accordance with cross-border e-commerce retail. 5.2 Import Tax Policy Policy Basis: Notice on the Tax Policy of Cross-border E-commerce Retail Imports Main Content: On March,24th, 2016, the Ministry of Finance, the Administration of Customs and State Administration of Taxation announced that new tax policy on cross-border e-commerce retail imports will be implemented from April, 8th, and the postal tax policy will be adjusted. Imported goods in cross-border e-commerce retail will no longer be subject to postal tax, but to customs duties and import VAT and consumption tax. The single transaction limit for cross-border e-commerce retail imported goods is 2,000 yuan, and the annual transaction limit for individuals is 20,000 yuan. For cross-border e-commerce retail imported goods within the limits, the tariff rate is temporarily set at 0; duty exemption for import VAT and consumption tax is abolished and tax will be temporarily levied at 70% of the legal tax payable. A single transaction which exceeds the individual annual limit and a single indivisible commodity whose customs value exceeds the limit of 2,000 yuan is taxed 56

67 in full according to the general trade. In the meanwhile, the four tax items (corresponding tax rates are10%, 20%, 30% and 50% respectively) in postal tax will be adjusted to three tax item 1 is mainly for commodities from the most favored countries for which tax rates were 0; tax item 3 is for high-grade consumer goods on which consumption tax is levied; other goods fall to the category of tax item 2. The new tax rates for tax item 1, 2, and 3 are respectively 15%, 30% and 60%. 5.3 Import Policy for Comprehensive Pilot Zones Cross-border e-commerce comprehensive pilot zones are pilot urban areas established in China which are aimed to try and implement new policies in terms of technical standard, business process, supervision mode and information construction of cross-border e-commerce payment, logistics, clearance, tax refund, exchange settlement and other links, and to provide replicable experience for the healthy development of cross-border e- commerce in China. In March, 2015 and January, 2016, the State Council established crossborder e-commerce comprehensive pilot zones in Hangzhou and other 12 cities. In July, 2018, the State Council continued to enlarge pilot zones for cross-border e-commerce, and has set up another 22 comprehensive pilot zones for cross-border e-commerce. Currently, China has established 57

68 cross-border e-commerce comprehensive pilot zones in 35 cities Hangzhou, Tianjin, Shanghai, Chongqing, Hefei, Zhenzhou, Guangzhou, Chengdu, Dalian, Ningbo, Qingdao, Shenzhen, Suzhou, Beijing, Hohhot, Shenyang, Changchun, Har bin, Nanjing, Nanchang, Wuhan, Changsha, Nanning, Haikou, Guiyang, Kunming, Xi an, Lanzhou, Xiamen, Tangshan, Wuxi, Weihai, Zhuhai, Dongguan and Yiwu. On May, 11th, 2016, China granted a one-year transition period to the regulation of cross-border e- commerce retail imports, and the period was further extended to the end of On September, 20th,2017, the 187th executive meeting of the State Council decided to further extend the transition period to the end of In other words, the implementation of Notice on the Tax Policy of Crossborder E-commerce Retail Imports in pilot zones will be delayed, and imported goods in cross-border e-commerce retail are still regarded as personal goods on which postal tax is levied. 5.4 Administrative Measures for Imported Goods Norms for the Record of Cross-border E-commerce Operators and Commodities took effect on January, 1st, It stipulates that Crossborder e-commerce operators which carry out cross-border e-commerce businesses should get registered with AQSIQ; moreover, before the goods are put up for sale for the first time, cross-border e-commerce enterprises 58

69 shall have the goods registered with AQSIQ. Policy Basis: Lists of Cross-border E-commerce Retail Import Goods The first list includes 1142 items with eight-digit tax ID and the second list contains 151 items with eight-digit tax ID.The goods in the lists are exempt from submitting the license to the customs, and the inspection, quarantine and supervision shall be conducted in accordance with the provisions of the relevant laws and regulations. Direct purchase goods are exempt from inspection of clearance documents; clearance documents of onlinepurchased bonded goods shall be verified in accordance with the goods at entry of bonded zone, and they are exempt from inspection when getting out of the region. Medical equipment and special food (including dietary supplements, special medical-use formula food, etc.) that need to be registered according to law shall be inspected in accordance with relevant laws and regulations. Policy Basis: Lists of Cross-border E-commerce Retail Import Goods, Food Safety Law Dietary supplements imported for the first time through cross-border e- commerce retail must get registered with China s Food and Drug 59

70 Administration; supplements of vitamins, minerals and other nutrients imported for the first time must get recorded with China s Food and Drug Administration. Policy Basis: Lists of Cross-border E-commerce Retail Import Goods, Food Safety Law, Administrative Measures for the Registration of Product Formula of Infant Formula Milk Powder The infant formula milk powder imported through cross-border e- commerce retail must obtain the registration certificate of product formula in accordance with the law. Policy Basis: Lists of Cross-border E-commerce Retail Import Goods, Regulations Concerning the Supervision of Cosmetics Cosmetics imported for the first time shall obtain approval document issued by China s Food and Drug Administration (non-special purpose cosmetics shall get record certificate). All imported cosmetics in crossborder e-commerce retail shall obtain approval document in accordance with relevant regulations. 60

71 Policy Basis: Special Management Measures of Exemption for Small Quantity Imports of Cross-border E-commerce from Mandatory 3C Certification Inspection and Quarantine Bureau of Chongqing issued Special Management Measures of Exemption for Small Quantity Imports of Crossborder E-commerce from Mandatory 3C Certification. Chongqing comprehensive pilot area implements special monitoring and supervision measures which exempt cross-border e-commerce import from compulsory certification, and the processing time of relevant procedures is shortened from 2 to 3 months to 2 to 5 working days. 61

72 VI. Important Import Exhibitions Exhibitions for Goods Trade High-end Intelligent Equipment Organizer: National ministries and commissions Exhibition Name Organizer Date Host place China Machine Tool Exhibition Foreign Trade Development Bureau of Ministry of Commerce Feb. 26th- Mar.1st,2019 Shanghai Exhibition description: A nation-level trade platform showing the development of China's equipment manufacturing industry and cutting-edge information Website: China International Industry Fair Ministry of Information and Information Technology September, 2019 Shanghai Exhibition description: The most influential international industrial exhibition in China's equipment manufacturing industry Website: China (Mianyang) Science & Technology City International High-Tech Expo Ministry of Science and Technology September, 2019 Mianyang Exhibition description: Abundant in scientific and technological innovation elements; having a far-reaching impact in terms of openness and cooperation Website: The China International Equipment Manufacturing Exposition Ministry of Finance 1st- 5th,Sep.2019 Shenyang 6 The exhibitions are classified according to the six goods trade display areas and five service trade display areas in Import exhibitions 62

73 Exhibition description: An international expo of famous brands,integrating product display, information exchange,order placing,investment negotiation and technical cooperation Website: Organizer: Provincial and municipal governments Exhibition Name Organizer Holding time Host place the World Robot Conference Municipal government of Beijing August,2019 Beijing Exhibition description: a full display of cutting-edge research achievements, application products and solutions in the field of robots around the world Website: Organizer: Industry guilds Exhibition Name Organizer Date Host place Power Transmission and Control China Hydraulics Pneumatics & Seals Association 6th-9th,Nov.2018 Shanghai Exhibition description: Asia s first and world s second professional exhibition in power transmission industry Website: China International Machine Tool Show China Machine Tool&Tool Builders Association 15th- 20th,April,2019 Beijing Exhibition description:china's most prestigious international machine tool exhibition, one of the world's four major international machine tool exhibitions Website: Asia Intellect China Association of Plant Engineering 12th-14th, June,2019 Beijing Exhibition description: The exhibits cover all fields of the intelligent manufacturing industry; it is a regular exhibition in the field of intelligent manufacturing Website: China International Robot Show China Machinery Industry Federation 10th- 13th,July,2019 Shanghai 63

74 Exhibition description: featured by international high-end conferences and professional exhibitions; one of the four major exhibitions in the field of robotics in the world Website: International Internet of Things Exhibition IOT Industry Application Alliance 30th,July- 1st,Aug.2019 Shenzhen Exhibition description: one of China s large-scale professional IOT exhibitions Website: Organizer: Relevant enterprises Exhibition Name Organizer Date Host place ELEXCON UBM Creativity 20th- 22nd,Dec.2018 Shenzhen Exhibition description: Important professional exhibition in electronics and embedded field in south China Website: Electric Power ASIA China Southern Power Grid Company Limited 11th- 13th,June,2019 Guangzhou Exhibition description: China's most influential power industry event Website: China (Guangzhou) International Robot & Intelligent Manufacturing Exhibition China National Machinery Industry Corporation September,2019 Guangzhou Exhibition description: The most influential brand exhibition in the field of robot, intelligent manufacturing in south China Website: Consumer Electronics & Appliances Organizer: National ministries and commissions Exhibition Name Organizer Date Host place 64

75 China International Consumer Electronics Show Ministry Commerce of July,2019 Qingdao Exhibition description: China s largest and most influential and professional international consumer electronics exhibition Website: Organizer: Provincial and municipal governments Exhibition Name Organizer Date Host place China Electronics Fair Municipal government Shenzhen of 9th-11th,April,2019 Shenzhen Exhibition description:china's oldest and most authoritative exhibition China's NO. 1 electronics exhibition Website: in electronics industry; Organizer: Industry guilds Exhibition Name Organizer Date Host place Appliance & Electronics World Expo China Household Electrical Appliance Association 14th- 17th,March, 2019 Shanghai Exhibition description:one of the world's three major home appliances and consumer electronics show Website: China International Photograph &Electrical Imaging Machinery and Technology Fair China Culture&Office Equipment Association 12th- 15th,April,20 19 Beijing Exhibition description: Asia's most authoritative photographic equipment expo, one of the world's three major international video exhibitions Website: 65

76 Asia VR&AR Fair & Summit Guang Association Cyber Culture Dong of 9th-12th, May,2019 Guangzhou Website: Beijing International Consumer Electronics Expo China Consumer Electronics Association 28th- 30th,June,20 19 Beijing Exhibition description: one of world s largest display platforms for consumer electronic products and solutions in the world, the third largest consumer electronics show in Asia Website: China Joy Game Publications Committee of Publishers Association of China 2nd-5th, Aug, 2019 Shanghai Exhibition description: the most influential event in global digital interactive entertainment field Website: Organizer: Relevant enterprises Exhibition Name Organizer Date Host place CES Asia CES Shanghai 11th-13th, June,2019 Shanghai Exhibition description: The only industry event dedicated to the Asia Pacific market Website: Automobile Organizer: National ministries and commissions Exhibition Name Organizer Date Host place 66

77 AUTO Guangzhou China Foreign Trade Center 16th-25th, Nov Guangzhou Exhibition description: One of China's top three automobile exhibitions Website: Dalian International Automotive Exhibition China Council for the Promotion of International Trade August, 2019 Dalian Exhibition description: one of China s auto exhibitions with the largest sales volume, the longest running time and the largest number of vehicles on display Website: Organizer: Provincial and municipal governments Exhibition Name Organizer Date Host place Chengdu Motor Show Municipal government of Chengdu September, 2019 Chengdu Exhibition description: the largest and grandest annual automobile gathering in the western region Website: Organizer: Industry guilds Exhibition Name Organizer Date Host place AUTO Shanghai China Association of Automobile Manufactures April,2019 Shanghai Exhibition description: China s most authoritative exhibition in automobile industry with the largest scale and the highest degree of internationalization Website: 67

78 Organizer: Relevant enterprises Exhibition Name Organizer Date Host place Shanghai International Energy-saving and New Energy Automobile Industry Expo Qiyang co. LTD Exhibition 3rd-5th, July,2019 Shanghai Exhibition Description: the first exhibition focusing on new energy vehicle industry in China Website: Green Car China China National Machinery Industry Corporation 12th- 15th,Sep Guangzhou Exhibition description: Top-quality professional exhibition in new energy intelligence with the largest scale and the strongest influence Website: Apparel, Accessories & Consumer Goods Organizer: National ministries and commissions Exhibition Name Organizer Date Host place China International Consumer Goods Fair Ministry Commerce of 7th- 10th,June,20 19 Ningbo Exhibition description: China s largest exhibition for daily consumer goods Website: China Yiwu International Commodities Fair Ministry Commerce of October, 2019 Yiwu Exhibition description: China's largest, most influential and most productive fair for daily consumer goods Website: 68

79 Organizer: Industry guilds Exhibition Name Organizer Holding time Host place China International Fashion Fair China National Garment Association 12th-14th, Mar.2019 Shanghai Exhibition description: the largest and most influential clothing professional expo in Asia Website: China Sport Show China Sporting Goods Federation 23rd-26th, May,2019 Shanghai Exhibition description: the largest and most authoritative sports events in the Asia-pacific region Website: China Watch & Clock Fair China Horology Association 20th- 23rd,June,2019 Shenzhen Exhibition description: China s largest professional horological exhibition; third largest horological exhibition Website: the world's China(Guangzhou)International Expo Beauty Guangdong Beauty&Cos metic Association September,2019 Guangzho u Exhibition description: abundant in famous brands; an ideal platform for one-stop purchase Website: China International Furniture Expo China National Furniture Association 9th- 12th,Sep,2019 Shanghai Exhibition description: one of the most important trading platforms around the globe for purchase of finished furniture, materials accessories and home decorations Website: 69

80 Shenzhen International Jewelry Fair Gems &Jewelry Trade Association of China September,2019 Shenzhen Exhibition description: the most influential international professional jewelry trade fair in Mainland China with the largest scale and the largest group of buyers Website: China Toy Expo China Toy &Juvenile Products Association October, 2019 Shanghai Exhibition description: Asia's largest international professional and comprehensive business platform in the industry Website: Organizer: Relevant enterprises Exhibition Name Organizer Holding time Host place International Gifts, Handicrafts, Watches and Clocks, and Household Goods Exhibition Reed Huabo Exhibitions 25th- 28th,April,2019 Shenzhen Exhibition description: the leading gift & home fair of its kind in Mainland China Website: CBME China UBM China International Exhibitions Ltd. 24th- 26th,July,2019 Shanghai Exhibition description: the world's leading children, baby, maternity expo Website: China Daily-use Articles Trade Fair Reed Huabai Exhibitions 25th- 27th,July,2019 Shanghai Exhibition description: the flagship exhibition of housewares industry with a large scale and a long history in Asia Website: 70

81 6.1.5 Food & Agricultural Products Organizer: Industry guilds Exhibition name Organizer Holding time Host place China International Alcoholic Drinks Expo China Alcoholic Drinks Association 16th- 18th,Nov,2018 Shanghai Exhibition description: the exhibits cover the world famous wine brands and the whole industrial chain Website: Shenzhen Tea Expo Shenzhen Huajuchen Industrial co. LTD 13th- 17th,Dec,2018 Shenzhen Exhibition description: the largest high-end exhibition in global tea industry Website: Food Ingredients China Food Ingredients China 18th-20th, Mar.2019 Shanghai Exhibition description: World famous brand exhibition of food additives and ingredients industry with the highest degree of internationalization and the strongest industrial cohesion in Asia Website: China (Beijing) International Food & Beverage Expo China Food Industry Association 17th-19th, April, 2019 Beijing Exhibition description: Asia's largest and most influential industry event in the food industry Website: 71

82 Bakery China China Association of Bakery & Confectionery Industry 6th-9th, May,2019 Shanghai Exhibition description: Asia Pacific International Trade Exhibition, which serves the entire industry chain of the baking industry Website: Beijing International High Quality Agricultural Products Fair China Association for the Promotion of International Agricultural Cooperation October,2019 Beijing Website: Organizer: Relevant enterprises Exhibition name Organizer Date Host place China Food and Drinks Fair China Sugar Alcohol Group Corporation 21st- 23rd,Mar,2019 Chengdu Exhibition description: A large-scale exhibition of China food and alcohol industry with a long history and far-reaching impact Website: SIAL China COMEXPOSI UM Group 14th- 16th,May,2019 Shanghai Exhibition description: the largest food and beverage trade fair in Asia Website: IFE China Informa Exhibitions 26th- 28th,June,2019 Guangzhou Exhibition description: China s largest and most efficient event in food industry Website: 72

83 Shanghai International Frozen and Chilled Food Exposition ITE Group 28th- 30th,Aug,2019 Shanghai Exhibition description: China s leading comprehensive exhibition for frozen food Website: Medical Equipment & Medical Care Products Organizer: Industry guilds Exhibition name Organizer Date Host place International Elderly Services Expo Chinese Association for Life Care 7th- 9th,Mar.2019 Chengdu Exhibition description: China s largest international pension service expo and medical health expo in spring Website: China International Medical Devices Exhibition China Healthcare Industry Association 11th-13th, July, 2019 Shanghai Website: Guangzhou International Health Care Food Exposition Guangdong Healthcare Association 30th,Aug- 1st,Sep.2019 Guangzhou Exhibition description: the most influential health care industry event which covers the whole industrial chain Website: Care & Rehabilitation Expo China China Disabled Persons Federation October,2019 Beijing Exhibition description: China's largest care&rehabilitation exposition Website: 73

84 Organizer: Relevant enterprises Exhibition name Organizer Date Host place DenTech China China International ConferenceCe nter for Science andtechnolog y 31st,Oct.- 3rd,Nov.2018 Shanghai Exhibition description: China s earliest professional oral exhibition; one of the most influential oral exhibitions in Asia Website: PHARM CHINA Reed Sinopharm Exhibitions Co., Ltd. 4th- 6th,Dec.2018 Guangzhou Exhibition description: a trading fair for pharmaceutical preparations,health care products and relevant technology and service with in China Website: CHINA MED Beijing International Trade Exhibition co. LTD 22nd- 24th,Mar.2019 Beijing Exhibition description: an influential professional exhibition for medical equipment in China and entire Asia Website: API China Reed Sinopharm Exhibitions Co., Ltd. May, 2019 Hangzhou Exhibition description: The oldest and largest exhibition of China's pharmaceutical industry Website: 74

85 China International Medical Equipment Fair Reed Sinopharm Exhibitions Co., Ltd. 14th- 17th,May.2019 Shenzhen Exhibition description: an integrated service platform covering the whole industrial chain of medical devices and integrating product technology, service innovation and trade, academic exchange, education and learning Website: Guangdong International Medical Industry Fair ZDVC Research September,2019 Guangzhou Exhibition description: the exhibition covers all fields of medical industry such as intelligent medical devices, medical biology, biological innovation technology, medical service, traditional Chinese medicine and international medical treatment Website: Exhibitions for Service Trade Tourism Organizer: National ministries and commissions Exhibition name Organizer Date Host place China International Travel Mart Ministry of Culture and Tourism 16th- 18th,Nov.2018 Shanghai Exhibition description: Asia s largest professional fair for tourism Website: Organizer:Provincial and municipal governments Exhibition name Organizer Date Host place 75

86 Beijing International Tourism Expo Beijing Municipal Commission of Tourism Development 10th- 12th,May,2019 Beijing Exhibition description: one of the well-known tourism fairs Website: Organizer: Relevant enterprises Exhibition name Organizer Date Host place Guangzhou International Travel Fair Hannover Milano Fairs Shanghai Ltd. 21st- 23rd,Feb.2019 Guangzhou Exhibition description: the oldest large-scale international tourism exhibition in China which covers outbound tourism, inbound tourism and incentive travel Website: IT&CM China TTG Asia Media 19th- 21st,Mar.2019 Shanghai Exhibition description: China's leading international professional platform for conferences, awards tourism, conventions and exhibitions Website: China (Xiamen) International Leisure Tourism Expo Xiamen Jianfa International Travel Service Group co. LTD 19th- 21st,April,2019 Xiamen Exhibition description: China s first international recreation tourism exhibition hosted by a travel agency Website: IBTM China Reed Exhibitions September,2019 Beijing 76

87 Exhibition description: highly mature and high-profile professional exhibitions for business travel, conferences and rewarding tourism in China Website: Emerging Technologies Organizer: National ministries and commissions Exhibition name Organizer Date Host place China Hi-Tech Fair Ministry of Commerce 14th- 18th,Nov.2018 Shenzhen Exhibition description: A large and influential science and technology exhibition in China Website: PT Expo China Ministry of Industry and Information Technology 18th- 22nd,Sep.2019 Beijing Exhibition description: one of the largest and most influential ICT events in Asia Website: Organizer: Provincial and municipal governments Exhibition Name Organizer Date Host place Internet plus powered by CEBIT China Council for the Pr omotion of International Trade Guangdong Com mittee October,2019 Foshan Exhibition description: the largest Internet + event in China Website: Organizer: Industry guilds 77

88 Exhibition name Organizer Date Host place The 12th China(Jinan)International Information Technology Exposition China Information Technology Industry Federation September,2019 Ji nan Exhibition description: the most effective and most influential international event in China for information technology Website: Culture & Education Organizer: National ministries and commissions Exhibition Name Organizer Date Host place Beijing International Book Fair State Administratio n of Press,Publicat ion, Radio, Film and Television August,2019 Beijing Exhibition description: World s second largest book fair Website: Organizer: Industry guilds Exhibition name Organizer Date Host place Higher Education Expo China Website: China Association of Higher Education April,

89 Popular Science Products Expo Shanghai Association for Science &Technology August,2019 Shanghai Website: China Education Expo China Education Association for International Exchange October,2019 Beijing Exhibition description: the exhibition with the highest level of internationalization among similar exhibitions in China Website: Music China China Musical Instruments Association October,2019 Shanghai Exhibition description: one of the most influential fairs for musical instruments in the world Website: Organizer: Relevant enterprises Exhibition name Organizer Date Host place Shanghai International Early Childhood Education Supplies Equipment Expo Shanghai Pengyu Culture Media co. LTD 7th- 9th,Mar.2019 Shanghai Exhibition description: China s first international preschool education exhibition Website: Education plus 2019 International Summit and Exhibition for Vocational Education China Machinery Industry International Cooperation Co.LTD September,2019 Guangzhou 79

90 Website: Beijing International Children s Out-Of- School Education And Products Exhibition China World Trade Center October,2019 Beijing Website: Creative Design Organizer: National ministries and commissions Exhibition name Organizer Date Host place Beijing Design Week Ministry of Culture and Tourism September,2019 Beijing Exhibition description: the largest and most influential platform in Asia for creative design exhibition, promotion, exchange and trade Website: Organizer: Provincial and municipal governments Exhibition name Organizer Date Host place Shenzhen International Industrial Design Fair Municipal government of Shenzhen 5th- 7th,Nov.2018 Shenzhen Exhibition description: World's largest industrial design exhibition Website: Organizer: Relevant enterprises Exhibition name Organizer Date Host place 80

91 Guangzhou Design Week CITIEXPO Ltd. 27th- 29th,Nov.2018 Guangzhou Exhibition description: China's largest design +material selection fair with the largest number of participants, the greatest influence and the highest degree of internationalization Website: Design Shanghai Media 10 6th- 9th,Mar.2019 Shanghai Exhibition description: World s top designing event; Asia s NO.1 fair for designing Website: Service Outsourcing Organizer: National ministries and commissions Exhibition name Organizer Date Host place China International Fair For Investment & Trade Ministry of Commerce 8th- 11th,Sep.2019 Xiamen Exhibition description: The only event in China aiming at promoting two-way investment; the world's largest investment exhibition Website: Organizer: Provincial and municipal governments Exhibition name Organizer Date Host place China (Nanjing) International Software Product & Information Service Trade Fair Provincial government of Jiangsu August,2019 Nanjing Exhibition description: one of the largest and most influential international ICT exhibitions in China Website: 81

92 VII. Import Policy Query Channels Department China's General Administration of Customs Ministry of Commerce Ministry of Finance China's General Administration of Customs National certification and accreditation administration committee National standards management committee Board of Health Relevant websites official website: Internet+ Customs: Enquiries can be made on import customs policy official website: Online government affairs hall: Import tariff quota approval related information can be inquired China foreign economic and trade bulletin : Enquiries can be made on the latest import management policies official website: Customs department: Enquiries can be made on the latest tariff policy official website: Administration of quality supervision, inspection and quarantine: The general administration of quality supervision, inspection and quarantine can inquire its supervision policy official website: Mandatory product attestation, voluntary product attestation can be inquired official website: National standard information public service platform: our country, industry and local standard can be inquired official website: Administrative hall of the health committee: The 82

93 administrative licensing documents of food and medical institutions can be checked National center for food safety risk assessment official website: Food safety national standard can be inquired Ministry of Science and Technology National certification and accreditation administration committee Ministry of Agriculture and Rural Affairs Ministry of Ecological Environment official website: Technical conditions and standards can be inquired : official website: Mandatory product certification (3C certification) related information can be inquired official website: The agricultural product import management policy can be inquired official website: Enquiries can be made on environmental protection standards for imported products 83

94 VIII. Development Status of Imported Goods in E-commerce Platform 1. New bond : Overall analysis of China s imported goods and e- commerce platform consumption Under the gradual, dual-track reform and opening up, China s economic transition from planned economy to market economy has global significance: the average annual growth rate of China s economy and China s foreign trade from 1978 to 2017, for 39 years in a row, reached 9.5% and 14.5%, respectively. 7 According to the data analysis of the National Bureau of Statistics of China, with the continuous development of China's Reform and Opening-Up Policy, the total amount of imported goods has grown rapidly over the past 20 years (see the figure below). In 2015, the total amount of imported goods was RMB trillion; the total amount of imported goods in 2016 was RMB trillion; and the total value of imported goods in 2017 was RMB trillion. For imported goods in 2017, the amount of general trade was RMB trillion, an increase of 23.2% over the previous year; high-tech products accounted for RMB trillion, an increase of 14.1% over the previous year. Since the beginning of this year, the growth rate of China s imports has been significantly higher than that of exports during the same period. 7The Miracle in Economic Transmission - Justin Yifu Lin Believes That China s Gradual, Dual-track Reform Model Has World Significance, Issue No. 9, 2018, Money China. 84

95 Table 1: Total Amount of Imported Goods from 1997 to 2016 (Source: National Bureau of Statistics of China) In this context, the steady growth of general trade and the steady growth of high-tech products have brought opportunities for the consumption upgrade of Chinese residents. According to the latest data from China s General Administration of Customs, in the first three quarters of 2018, the cumulative amount of China s imports reached RMB trillion, a year-on-year increase of 14.1%, close to the overall level in Specifically, the amount of China s imported high-tech products was RMB 3.26 trillion, a year-on-year increase of 14.8%. Imports of beef, cosmetics, electric manned vehicles, and other products grew significantly. Actively expanding imports is an independent policy choice based on market demand and development needs, which helps to expand consumer welfare and better adapt to the trend of households upgrading their consumption. 8 8 Dong Yan: Proactively expand imports: Openness and Confidence in the New Era, Economic Daily, Third Edition, May 15,

96 E-commerce platform transactions represent a considerable proportion of China's import and export trade, expanding China s imports, and e-commerce platforms have become an important channel for consumers to purchase imported goods. Big data from China s largest retailer, JD.com, shows that the number of users purchasing products from international brands increased by 37.1% in 2017 compared with The quantity of imported goods also increased by 150% in 2018 compared with The increase in the number of imported goods 9 has significantly exceeded that of domestically produced goods, indicating that the numbers of imported brands are becoming more and more abundant. Besides, according to the China Cross-border E-commerce Market Data Monitoring Report of the First Half of 2018, the size of China s crossborder import e-commerce transactions in the first half of 2018 was RMB 1.03 trillion, a year-on-year increase of 19.4%. It is expected that the size will reach RMB 1.9 trillion for the whole year in By the end of June 2018, there were 75 million users frequently conducting cross-border online shopping in China. 10 This data shows that China s e-commerce platform has become an important "new bond" connecting imported goods with Chinese consumers. 9 The imported brand data in this report is the complete sales data of imported branded goods. 10 E-commerce Research Center: China Cross-border E-Commerce Market Data Monitoring Report of the First Half of 2018, September 19,

97 2. Consumption structure: Overall analysis of imported goods categories of e-commerce platforms JD Big Data shows that in the first half of 2018, the top five categories of imported goods in term of sales were: mobile phones, computer & office, home appliances, maternal and childcare and digital products. According to the China Cross-border E-commerce Market Data Monitoring Report of the First Half of 2018, the top ten categories of crossborder online shopping users in China during the first half of 2018 were: beauty care, shoes and garments, accessories and luggage, maternal and childcare products, household products, outdoor recreation, food, digital home appliances, fresh food and health products. In May 2018, the Ministry of Commerce of China (MOC) issued the Statistical Analysis Report on the Supply and Demand of Major Consumer Goods. According to the report, demand for imported goods among Chinese consumers has been strong. Consumers whose purchases of imported goods exceeded 30% of their total spending account for over 20% of all respondents. Top categories include electrical and electronic products (36.4%), cosmetics (36.1%), maternal and childcare products (33.4%), clocks, watches and glasses (28.9%), passenger cars (27.3%), and jewelry (22.7%).After analyzing the above three reports, we find that the demand of Chinese residents for imported goods has matched current supply, and 87

98 the e-commerce platforms have met the consumers vision for a better life and their demand for consumption upgrading. Ranking JD Big Data (October 2018) 1 Mobile phones Beauty care Cross-border E- commerce Market Data (September 2018) MOC Demand Data Concerning Major Consumer Goods (May 2018) Electrical and electronic products 2 Computer and office Shoes and clothing Cosmetics 3 Home Maternal and childcare Accessories and luggage appliances products 4 Maternal and Maternal and childcare Clocks, watches and childcare products glasses 5 Digital Household products Passenger cars Table 2: Chinese Residents Demand Types for Imported Goods VS the E- commerce Supply 3. Mutual benefit and win-win: Imported brands promote the transformation and upgrading of Chinese brands In regards to consumption of imported goods by Chinese consumers, internationally renowned brands have long held a competitive advantage over similar national products. However, the growth of imported goods may lead to general concerns as follows: the Chinese brand position has been abridged, the Chinese brand reputation has been dwarfed, and the quality evaluation system has been affected. 11 According to JD Big Data, in terms of the sales of top 100 products, the gap between Chinese and international brands is narrowing. Taking 11 Qu Lingyan, Zhou Nan, and Zhai Yongguan: Some Chinese Brands Are Faced with a Dilemma: Despite High Quality and Price Advantage, They Still Cannot Win the Market Share, the eighth issue of 2018 (Part I), Police Research & Exploration. 88

99 mobile phones as an example, we can see the Chinese mobile phone brands represented by Honor, Xiaomi, Huawei, etc., are narrowing the gap with the international brand Apple in both sales volume and sales amount. On the e-commerce platforms, Chinese consumers still pay more attention to quality when they choose imported goods. Further, the places of origin for these products are mainly developed countries such as the United States, Japan, South Korea, Germany, and the Netherlands and so on. At the same time, the repurchase rate of Chinese brands has increased for three consecutive years, and the growth rate of them has also been higher than that of imported brands. In addition, China s branded goods have begun to focus on high tech and high quality. In some areas, they are catching up with international brands. For example, in the top ten categories in which the proportion of Chinese brand consumption amount increased the fastest in , products for maternal and children were ranked at the forefront. In general, the relationship between imported brands and Chinese brands is a dialectical relationship between bringing in and going global. On the one hand, the strong performance of imported brands on the e- commerce platforms reflects China s initiative to proactively expand imports, introduce high-quality brands, and improve the consumption structure. The e-commerce platforms have promoted import trade 89

100 facilitation, driven consumption upgrades, and contributed to the quality improvement of the consumer goods supply. According to JD Big Data, among the top thirty categories sold on the JD platform, in addition to the stable sales of maternal and childcare products and smart products, there has been a significant increase in the sales of fresh food, household cleaning supplies, home improvement items and building materials. Additionally, with the gradual shift of e-commerce consumption from the first-tier and second-tier cities to the third, fourth and fifth-tier cities, and with the improvement of infrastructure construction, supply chain efficiency, and other aspects, the e-commerce platform has further promoted the comprehensive performance of imported brands in the domestic market, which will be an important growth point for the global commodity market in the future. On the other hand, imported brands have a comparative advantage in high-end, intelligent and eco-friendly aspects. The new technologies and concepts brought about by them will promote the technological progress of Chinese brands and help to increase the exports of Chinese brands. Empirical studies have found that the technologies, complete sets of equipment and deficient resources used by imported commodities have propelled domestic technological progress and promoted the transformation and upgrading of the export industry, ultimately improving the competitiveness of export products and being conducive to export 90

101 products, both of which are Granger causality for each other. 12 It can be seen that the relationship between Chinese brands and imported brands is not a zero-sum game. Instead, they can be mutually beneficial and promoted from each other, achieving win-win results. 12 Ji Yu, Wang Chengxin, Li Yanan, and Li Mi: An Empirical Study on the Relationship between China's Foreign Trade and Economic Growth since the Reform and Opening up, Issue No.4, 2017, Foreign Economic Relations & Trade 91

102 IX Analysis of Consumer Portraits and Consumption Behaviors of Imported Brands (I). The overall consumption characteristics of imported brands under the e-commerce platform 1. Development Status of Imported Brands in the E-commerce Field 2. More consumers have increasingly chosen to buy goods of imported brands Chinese Brands Imported Brands Table 3: Growth Rates of Quantity of Goods of Imported and Chinese Brands in

103 A growth rate of 37.1% Table 4: Growth Rates of the Number of Users of Imported Brands With the continual promotion of the sales of imported brands via e- commerce platforms, in terms of the quantity of imported branded goods, the growth rate of in 2018 was more than 150% compared with that of The increase in the number of imported goods has significantly exceeded that of domestically produced goods, indicating that the types of imported brands are becoming more and more abundant and that an increasing number of Chinese consumers have begun to select import-branded goods. According to JD Big Data, the number of people choosing import-branded products was up by 37.1% in 2017 compared with that of In terms of the sales growth rate for imported brands, the top five categories are: jewelry, fresh food, pet supplies, mobile phones, and personal care. The sales amounts of import-branded products of these categories were above four times that of

104 40% 35% 37% 30% 26% 25% 20% 23% 15% 10% 14% 5% 0% Q1 Q2 Q3 Q4 Table 8: Sales of Imported Brands in 2017 by Quarterly Proportion According to JD big data, in 2017, the sales volume of imported brands in the fourth quarter and the second quarter was significantly higher than the other two quarters. Considering that the Double 11 (Nov 11) and 618 (June 18) e-commerce platform promotions are respectively in the fourth and second quarters of each year, it shows that the e-commerce platforms have effectively promoted the sales and promotion of imported brands in China. 94

105 3. A continual rise in the awareness of imported brands Chinese Brands Imported Brands Table 5: Growth Rates of First Purchase Rates of Imported and Chinese Brands in According to JD big data, in the first half of 2018, the top five categories of imported goods in terms of sales were: mobile phones, computer & office, home appliances, maternal and childcare products and digital. By sales amount, home appliances, 3C (computer, communication & consumer electronics) products and lifestyle goods are also top categories among Chinese consumers buying Chinese brands. It shows that there is a strong convergence in the distribution of sales of imported and Chinese branded goods by Chinese e-commerce platform consumers and their habits in doing so. Through the help of e-commerce platforms, Chinese consumers have built a strong sense of trust in imported brands. 95

106 In addition, it is also evident from the data that the first purchase rate of imported brands in was 2.7% higher than that of Chinese brands. This shows that the awareness of consumers to imported brand products is still relatively strong, which also constitutes one of the competitive advantages of imported brands in the Chinese market. 4. Imported brands win market trust with high quality and high technology Ranking Categories 1 Photography and video recording 2 Diapers 3 Dishwasher 4 Infant formula 5 Perfume & makeup Table 6: Typical Categories of Imported Brands with a Ratio of Sales Amount above 50% in 2017 In 2017, according to the data concerning the proportion of imported brands out of Chinese brand consumption, imported brands had an absolute market advantage in high-priced, high-tech goods such as photography and video recording products, dishwashers, and so on. At the same time, such products as infant formula, diapers and other products related to food quality and safety showed that Chinese consumers had a higher degree of trust in imported brands. The level of trust that consumers have in such products has been facilitated by the high-trust e-commerce platforms 96

107 represented by JD. And the quality credibility of imported products in the Chinese market has been further amplified. More importantly, among categories of products associated with food safety, high technology and fashion design, imported brands not only have a large market share, but also maintain strong growth momentum. In , sales of well-known imported brands in categories including maternal and child products, high-tech home appliances, luxury goods, sportswear were among those that increased rapidly. The growth rates of sales in a number of brands such as Dyson, Aptamil, Honeywell, Adidas, Enfamil, and Nestle exceeded 50%. Consumer word-of-mouth has also confirmed the strength of imported brands in terms of market share and growth rate. Among the most-searched keywords of imported branded goods on the JD Platform, high quality, safe and reliable, and appearance design consistently rank high, suggesting that imported branded products have gained universal recognition and trust from Chinese consumers because of their quality and high-tech content. The popularity of import-branded maternal and childcare products in China is the most typical example of high quality imported brands. According to the data in the Internet Plus China Brand Innovation and Development Report released by JD Research Institute in June 2017, the top five infant formula brands by sales are Wyeth, Friso, Danone (Aptamil and Nutrilon), Abbott, and Mead Johnson. In terms of the sales of diapers, 97

108 the top five brands are Merries, Huggies, Pampers, Moony (MamyPoko and Moony), and Goo.N. For both formula and diapers, the top five brands are big international names. From 2011 to 2017, the sales volume of Huggies increased by 26 times, while the brand Friso increased 57-fold, and those of Merries and Aptamil rose by more than 100 times, which is a staggering growth rate indeed. 5. Imported brands propel Chinese brands to develop in the high-end, green and intelligent markets Thanks to their superior quality and technological content, imported brand goods have played an important role in the upgrading process of Chinese commodity consumption. According to JD big data, in , the per capita consumption growth rate of domestically branded smart toilet lids was 27% higher than that of imported brands and the growth rate of domestically branded rice cookers in terms of sales volume has been 13% higher than that of imported brands. Through the development of the import market, China has promoted the formation of a new pattern of comprehensive opening-up and introduced first-class brands from all over the world into the domestic market. On the one hand, it will force domestic enterprises to expand R&D investment, improve product quality, build local brands, enhance the efficiency of their value chains, and form a new high-quality development situation. On the other hand, China will raise the 98

109 quality and lower the price by adopting the market-oriented competition of domestic and foreign branded commodities, thus forming a Chinese market with world-class brands and meeting the growing needs of the Chinese people for a better life and entering a new realm of high-quality life. Based on the data released by JD, imported brand products have mainly developed in the high-end, intelligent and eco-friendly segments of China s consumption upgrading process, and in terms of intelligence, greenness and fashion, Chinese brands have made great progress. Nevertheless, when it comes to high-end, there is still a certain gap between Chinese branded commodities and imported brand ones. Imported Brands Home-made Brands High-end Intelligence Green Fashion Health Table 7: Distribution of Chinese Brands and Imported Brands in 2018 by Types of Quality Characteristics 99

110 6. Imported brands have a long way to go Chinese Brands Imported Brands Table 9: The Gap between Imported and Chinese Brands in Terms of Growth Rate of Sales of Primary Energy Efficiency Products in Imported brands have obvious advantages in the domestic market in the high-quality, high-tech commodity categories. However, the overall development of imported brands in the domestic e-commerce market still has a long way to go. First, sales of Chinese brands still outperform imported brands. In addition, in recent years China s branded goods have begun to focus on high tech and high quality and they are catching up with imported brands in some areas where imported brands have an advantage. For example, in the top ten categories where the proportion of Chinese brand consumption amount increased the fastest in , maternal and childcare products were ranked at the forefront. 100

111 Ultimately, Chinese brands are better at using national policies to promote their own market sales. For instance, in recent years they have made great efforts to improve energy efficiencies of products. With the promulgation of a series of environmental protection policies implemented by the Chinese government in the industrial field, compared with imported brands, Chinese local brands have shown a more flexible attitude in product development, and they can make more active use of relevant benefits of such policies. As shown by the data, among the primary energy efficiency products, in terms of sales volume, the year-on-year growth of Chinese brands in 2018 so far is higher than that of imported brands by 29.4%. (II). Consumer portraits, attitudes, and behaviors of imported brands 1. Young and middle-aged male white-collar workers are the mainstay of imported brand consumption According to JD big data, with consumption amount as the analytical dimension, the mainstay of imported brand consumption is generally male, young and middle-aged (26-45), white-collar workers and educators, and in the middle- and high-income brackets. Compared with Chinese brands and all the consumer groups on e- commerce platforms, imported brand consumers share similar 101

112 demographic characteristics. They are mainly high-end groups. Being more mature in age, they are more educating and have higher incomes. 56 years old or above Ages Ages Ages Ages %-6.00%-4.00%-2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00%12.00% Table 10: Consumer Groups of Imported Brands at Various Ages VS All the Consumer Groups on E-commerce Platforms Medical staff Students Small town residents Financial practitioners Teachers Civil servants/institution Workers/personnel in the service sector White collars/general staff %-15.00%-10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% Table 11: Consumer Groups of Imported Brands Engaged in Various Occupations VS All the Consumer Groups on E-commerce Platforms 102

113 Female Male % -5.00% 0.00% 5.00% 10.00% Table 12: Male and Female Consumer Groups of Imported Brands VS All the Consumer Groups on E-commerce Platforms General Income High Income Lower Income Medium and Low Income Medium and High Income -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% Table 13: Consumer Groups of Imported Brands Earning Various Incomes VS All the Consumer Groups on E-commerce Platforms 103

114 2. Consumers in the provinces, municipalities, and autonomous regions in East China, Northeast China, and North China have become the mainstay of imported brand consumption. Ranking Region 1 East China 2 Northeast China 3 North China 4 Southwest China 5 Northwest China 6 South China 7 Central China Table 14: Ranking of Imported Brands in 2017 by Region and Sales Amount Ranking 1 Zhejiang 2 Shanghai 3 Heilongjiang 4 Liaoning 5 Beijing 6 Tianjin 7 Sichuan 8 Hebei 9 Jiangsu Provinces & Municipalities 10 Fujian Table 15: Top 10 Regions for Imported Brands in 2017 and Consumption Amount Ratio According to JD big data, the consumers in the provinces, municipalities, and autonomous regions in East China, Northeast China, and North China have become the mainstay of imported brand consumption. Notably, East China ranked No. 1 in the consumption amount of imported brands. It may have something to do with the fact that the overall consumption level of residents in East China is higher. The 104

115 proportion of imported brand consumption amount in Northeast China is also relatively high, especially in Heilongjiang Province and Liaoning Province. The trend in Northeast China is that the people have an increasing interest in fashion, with many who are advocates of international first-line brands. However, on the whole, all the regions in the country have shown a relatively balanced situation. The proportion of imported brand consumption amount in Central China is only 1.4% lower than that in East China, which also reflects that with the continuous deepening of economic development and the structural reforms, the gap in overall consumption among different regions has been narrowing and the regional consumption balance trend has become more and more obvious. 3. Urban groups in the first and second-tier cities are the mainstay of imported brand consumption Ranking Tier (cities) 1 First-tier 2 Second-tier 3 Fifth-tier 4 Third-tier 5 Fourth-tier 6 Sixth-tier Table 16: Ranking of Imported Brands in Cities of Different Tiers in 2017 by Consumption Amount Ratio According to JD big data, urban citizen groups in the first and second-tier cities are the mainstay of imported brand consumption. In addition, the third-tier cities were ranked No. 4, only 0.2% lower than the 105

116 proportion of the fifth-tier cities. If we take specific cities as the analysis dimension, according to the sales data released by JD in the first half of 2018, the top ten cities in terms of sales volume of imported goods are: Beijing, Shanghai, Guangzhou, Chengdu, Shenzhen, Tianjin, Suzhou, Wuhan, Chongqing, and Shenyang. This also proves once again that the regional (urban) economic development level and the purchasing power of residents are an important factor for the consumption of imported brands. 4. Lower-tier cities pay more attention to imported brands With the increasing prosperity of e-commerce and the gradual improvement of infrastructure like logistics, under the general trend of consumption upgrading, more consumers are increasingly paying attention to and purchasing import-branded goods. According to JD big data, in 2017, the fourth-tier cities ranked the first among all cities in terms of the growth rate of sales amount from that of The third-tier cities and the secondtier cities ranked No. 2 and No. 3, respectively, while the first-tier cities ranked in the last place. It indicates that currently, lower-tier cities have gradually paid attention to imported brands. Correspondingly, the demand for imported brands in cities with relatively backward economic development is on a gradual increase, which also represents the constant equalization of the Chinese consumer market. 106

117 Fourth-tier cities Third-tier cities Second-tier cities Fifth-tier cities Sixth-tier cities First-tier cities Table 17: Growth Rates of Imported Brands in Cities of Different Tiers in by Sales Amount 5. Brands from developed countries and regions are more popular with Chinese consumers. According to JD big data, whether it s measured in terms of sales amount, sales volume or the number of users, Chinese consumers prefer products from developed countries. Notably, in terms of sales amount, the top five countries are: The United States, Japan, South Korea, Germany, and the Netherlands. In general, thanks to the advantages in brand and quality, the products made in developed countries are more popular with Chinese consumers. Moreover, the average price of goods from the topranking countries is relatively high, showing that Chinese consumers still pay more attention to quality when they choose imported goods. 107

118 Ranking Countries 1 The United States 2 Japan 3 South Korea 4 Germany 5 The Netherlands Table 18: Top 5 Countries by Sales Amount for Imported Brands 6. Quality of imported brands has been more easily recognized by consumers. According to JD big data, in , the return rate of Chinese brands on the whole was four times as much as that of imported brands. This shows that the quality of imported brands has still won public praise. Nevertheless, relative to , the return rate of Chinese brands in significantly decreased. On the whole, it was close to that of imported brands. 108

119 7. Consumers of imported brands have higher loyalty Home-made Brands Imported Brands High Low Table 20: Imported Brands VS Chinese Brands by Loyalty in A gap of 4.4% Chinese Brands Imported Brands Table 21: Imported Brands VS Chinese Brands in Terms of Growth Rates of Repurchase Rates in Overall, according to JD big data, consumers have a higher loyalty to imported brands. It indicates that imported brands have certain advantages 109

120 in terms of brand culture and quality control. However, in , the loyalty of Chinese brands increased by 4%, while that of imported brands did not show a significant trend in terms of growth. In addition, the repurchase rates of both imported brands and Chinese brands in 2018 increased compared with 2017, but the growth rate of Chinese brands exceeded that of imported brands. This shows that the gap between Chinese brands and imported brands is gradually shrinking in terms of brand loyalty. 8. Consumers concerns about imported brands have changed. The report also analyzes the data concerning typical evaluation words of representative imported brands. The three evaluation phrases selected are good quality, safe and secure and good appearance. The results show that although imported brands have a good reputation in terms of product quality, safety and appearance design on the whole, they began to differentiate in In , the number of evaluations identifying products as good quality rose 53%, showing that the good reputation of imported products in quality is constantly consolidating, which is also the key advantage of imported brands when compared with Chinese brands. However, the number of products deemed as safe and secure and good appearance decreased. 110

121 1. Conclusion Based on the big sales data of JD, the consumption of imported brands in China on e-commerce platforms presents the following overall characteristics: 1. Because awareness and sales volume of imported brands are rising and domestic consumers of imported brands and Chinese brands have strong convergences, imported brands have posed a strong challenge to the market position of Chinese brands in fresh food, pet supplies and other categories. 2. Quality, technology content and safety are still the main advantages imported brands have historically had relative to Chinese brands. This has particularly been the case with categories such as maternal and childcare products, high-tech home appliances and digital products. Therefore, imported brands have also enjoyed a high amount of loyalty and a good reputation among domestic consumer groups. 3. Imported goods have played an important role in accelerating the process of Chinese consumption upgrading. In particular, they have played a leading role in promoting the process of high-end Chinese consumption. 111

122 4. Thanks to their highly efficient logistics networks, e-commerce platforms have effectively promoted the sales and popularization of imported brands in China and rapidly increased the product variety of imported brands. The e-commerce platforms represented by JD have helped imported brands to facilitate sales and quickly realize wide coverage of various regions and populations. 5. Reputable imported brands can leverage high-quality platforms with strong reputations for authenticity and quality to sell their products. Product sales on the e-commerce platforms with a good reputation have promoted the superposition and enlargement of consumers trust, and further spread and passed the reputation of imported brands. Through this mutual positive influence, both e- commerce platforms and imported brands have realized common growth. 6. In recent years, domestic Chinese brands have also been catching up in product quality and technological content and have created enormous challenges for the existing advantages of imported products. As a result, imported brands must continue to innovate and find new channels for growth in order to keep increasing their sales. 112

123 X. The Overall Consumption Characteristics of Representative Goods This report provides a special analysis of representative imported commodities. The categories of these commodities mainly include: smart products, food and agricultural products, consumer electronics and home appliances, consumer staples, clothing and apparel, medical devices and health care. In the case of making a specific analysis, the commodities of these categories contain the following sub-categories: Smart products: smart devices, smart watches, and smart bracelets, etc. Food and agricultural products: agricultural resources & green planting, fresh food, alcohol, food and beverages. Consumer electronics and home appliances: home appliances, digital products, and mobile phones Consumer staples: kitchenware, household cleaning paper, personal care, cosmetics and skincare, household daily use, maternal and childcare products, and pet supplies. Clothing and apparel: apparel underwear, jewelry, footwear, and sports outdoor Medical equipment and health care 113

124 (I) Regional contribution of import brand consumption growth 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% South China North China East China Central China Southwest China Northwest China Northeast China Daily necessities Food and agricultural products Medical equipment and health care Clothing and apparel Consumer electronics and home appliances Table 22: Consumption Ratios of Imported Brand Main Categories of Different Regions 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% First-tier Second-tier Third-tier Fourth-tier Fifth-tier Sixth-tier Daily necessities Food and agricultural products Medical equipment and health care Clothing Consumer electronics and home appliances Table 23: Consumption Ratios of Imported Brand Main Categories of Cities with Various Tiers 114

125 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% South China North China East China Central China Southwest China Northwest China Northeast China Daily necessities Food and agricultural products Medical equipment and health care Clothing Consumer electronics and home appliances Table 24: Consumption Ratios of Chinese Brand Main Categories of Different Regions 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% First-tier Second-tier Third-tier Fourth-tier Fifth-tier Sixth-tier Daily necessities Food and agricultural products Medical equipment and health care Clothing Consumer electronics and home appliances Table 25: Consumption Ratios of Chinese Brand Main Categories of Cities with Various Tiers 115

126 Northeast China North China East China South China Central China Northwest China Southwest China Daily necessities Food and agricultural products Medical equipment and health care Clothing Consumer electronics and home appliances Table 26: Sales Amount Growth Rates of Imported Brands of Different Regions in First-tier Second-tier Third-tier Fourth-tier Fifth-tier Sixth-tier Daily necessities Food and agricultural products Medical equipment and health care Clothing Consumer electronics and home appliances Table 26: Sales Amount Growth Rates of Imported Brands of Cities with Various Tiers in When it comes to the consumption amounts of domestic products and imported products in the category of consumer staples, clothing and apparel, food and agricultural products, consumer electronics, home 116

127 appliances, medical devices and health care, by region, the consumption amount proportions of imported and Chinese brands in South China, East China, and North China were above the remaining regions of China. The proportions of Central China and Southwest China were in the middle, whereas those of Northeast China and North China obviously lagged. It shows that Chinese consumers of imported brands have mainly been distributed in South China, East China and North China with strong economic bases and concentrated populations. In terms of the consumption of imported apparel, East China far exceeds the other regions. The coastal areas of East China,close to economic metropolises such as Shanghai, are more easily integrated with international standards in aesthetic fashion. Considering that the centers of the fashion industry are located in Europe, North America and other places, this result reflects the attention and pursuit of fashion information in East China. By contrast, despite the low consumption amounts of imported clothing in Northwest China, Northeast China, Central China, and Southwest China, the growth rates of consumption amounts there were relatively high. It shows that the consumer groups in these areas have a tendency to gradually increase their consumptions of imported clothing, which opens the door to a region with huge potential where currently there are underdeveloped areas in the consumption of imported clothing. 117

128 Notably, the purchasing power of imported products in medical devices and health care in North China and East China was overwhelmingly superior to any other region. At the time of launching imported medical devices and health care products, they should pay closer attention to the potential to buy of those underdeveloped areas with underdeveloped medical conditions. Although Northwest China is an underdeveloped region, the consumption amounts of all commodity categories maintained a high positive growth rate. For example, Northwest China showed a strong consumption potential for imported consumer electronics, home appliances and daily necessities. The growth rate of consumption amount there far exceeded that of any other region. Although Northwest China is a sparsely populated region with a weak economic base, if we reflect upon the current two changes of consumption concepts and consumption levels in the region; it is one that companies should keep their eyes on. The Northeast China region, which is similar to the consumption level in the Northwest China region, is also an area where the number of imported products is relatively backward but the growth rate of consumption amount is relatively high. If an imported brand wants to open up the market in Northeast China, it needs to improve brand trust and promotion efforts and continuously consolidate the trust and consumption potential of consumers in Northeast China. 118

129 Among the same categories of goods, the trend of choosing domestic and imported goods converged in all regions. In terms of medical equipment and health care, imported products beat domestically branded products by a large margin. Among food and agricultural products, consumer electronics and home appliances, domestically branded products outperformed imported counterparts with certain advantages. For clothing and apparel, both categories were basically the same. Imported brands entering the JD platform shall also be aware of the dependence of JD consumption power on imported products on different types of goods. From the perspective of city tier classification, the purchasing powers of first-, second-, and sixth-tier cities were significantly higher than those in third-, fourth-, and fifth-tier cities. To a certain extent, the consumption concepts and consumption habits formed by the long-term life and work of migrant workers from new-type small and medium-sized cities and towns in the first- and second-tier cities are gradually being transmitted back to their hometowns through purchases from different places and transfer of consumption, and other means. Being similar to the regional distribution, the rankings of cities with various tiers in terms of sales amount changed based on different imported and domestic categories of commodities, but the overall pattern is relatively stable. First- and second-tier cities showed great purchasing powers due to relatively good economic levels, which are far ahead of those of third-, 119

130 fourth- and fifth-tier cities in terms of both imported and Chinese domestic brands. Notably, the echelon's growth rate of imported products in medical devices and health care is relatively low and the growth rate of imported clothing brands in the first- and second-tier cities is rather low, indicating that the first-tier and second-tier cities are becoming more saturated in the consumption of imported brands in these two categories. Users started to favor domestic brands, largely due to the reputation, personalized design, quality improvement, and cost efficiency of domestic brands in these two categories. The sales in the sixth-tier cities far outperformed those in the third-, fourth, and fifth-tier cities, mainly because of the population reflux driven by high housing prices and costs of living in the first- and second-tier cities in recent years. Especially, the number of permanent residents in the firsttier cities such as Beijing and Shanghai has shown a significant downward trend. According to JD data, the six-tier cities have a strong purchasing power in importing apparel. It can be seen that the young people living in towns are the fashion consumption mainstay of the six-tier cities. Their concepts of consumption have been constantly shifting, upgrading and changing overall. Notably, the rise of short social media videos such as douyin.com and kuaishou.com, in recent years, has further stimulated the young people living in towns to pursue fashion, and gradually shifted their attention from domestic apparel brands to imported apparel brands. 120

131 Notably, however, in terms of the consumption of imported consumer electronics and home appliance, the sixth-tier cities ranked fourth, and the consumption was significantly lower than that of first- and second-tier cities. For medical devices and health care consumption, sales of imported medical devices and health care in sixth-tier cities far lagged behind those of the first- and second-tier cities. It can be seen that the huge population base gives the sixth-tier cities an advantage in the purchasing power, but due to the limitation of the per capita purchasing power, the dependence of the sixth-tier cities on imported brands, especially the high-priced products, is still weak. The third-, fourth- and fifth-tier cities were relatively weak in terms of sales of imported and domestic brands according to the data. However, due to the huge siphon effect of the resources of the first-tier cities, highend talents are still pouring in. Through the implementation of population distributing policies, practitioners of middle and low-end industries are gradually leaving these cities. Along with the proposal of the population red line of the first and second-tier cities and the transfer of industries to the third, fourth and fifth-tier cities, the imbalance of local resources in China will be effectively alleviated in the future. The transfer of industry and employment will lead to the growth of both the economy and the income of residents in lower-tier cities. In the future, among the residents in lower-tier cities, the proportion of the population with high income will 121

132 significantly increase, the number of wealthy cities in prefecture-level cities will increase, and the distribution of middle- and high-income people will continue to expand. 2. Consumption characteristics of top imported brands 1) Smart devices Statistics show that Chinese consumers have a clear dividing line between choosing smart devices from Chinese and foreign brands. Specifically, Chinese consumers prefer Chinese brands when buying a smart bracelet, with MI bracelet being the leading brand, but they prefer foreign brands when buying a smart watch, like Apple Watch. 2) Food and agricultural products In terms of food and beverages, Nestle has been in the Chinese market for decades, and it has a strong market base; among casual snacks, cookies and cakes, consumers favor imported brands such as Oreo, Lay s, and Orion, while Chinese brands only have Want among the top brands. However, for roasted seeds and nuts, consumers like to choose Chinese brands including Three Squirrels, BESTORE, BE&CHEERY etc. Judging from the sales comparison between Chinese and imported raw and fresh goods, Chinese consumers prefer homegrown products due to the prices and location. Nevertheless, with the increasingly developed logistics networks, import of fresh goods is growing fast. According to data 122

133 released by JD.com, in July 2017, its Canadian Mall went live, being the first Chinese e-commerce arrangement of its kind. In April 2018, JD.com reached a cooperation agreement with Global Aquaculture Alliance (GAA). In June, 2018, five overseas JD Fresh Farms in Chile, Canada, New Zealand, Japan, and Spain were licensed. In August, 2018, by joining five major high-quality salmon production regions: Canada, Denmark, Chile, Norway, and Scotland, a salmon alliance was formed. In Sept., 2018, Global Fruit Brands Strategic Alliance was established in Hong Kong, with the first 18 international well-known fruit companies joining the alliance. Afterwards, all 18 companies signed a strategic cooperation agreement with JD.com. 3) Consumer electronics and home appliances For home appliances, Chinese brands and foreign brands have different market tendencies. For individual health care and small appliances, Chinese consumers like Philips, Panasonic, Braun, and other foreign brands better, while they prefer Chinese brands for large home appliances and kitchen utensils. In recent years, with improved quality and increasingly strict supervision standards, Chinese applicance brands have been widely recognized. At the same time, excellent aftersales service is the noticeable advantage that appliances Chinese brands have. 123

134 In terms of digital products, Chinese consumers like to choose imported goods when buying computer accessories, digital components, peripherals, and photographic equipment. Japanese brands like Sony and Panasonic have been in the Chinese market for a long time and took stable market shares in their own fields. Although digital products developed independently by China have made breakthroughs one after another, foreign brands have also advanced with the times to remain relevant in the China market. China has a particularly weak position in photographic equipment manufacturing. Except for simple accessories, the core components market has always been occupied by foreign brands. But that is not the case for China-made digital product brands. MI and its new ecological-chain brand MIJIA are among the top shots. The company, which first made its name with mobile phones, has expanded its territory into the air purifier, water purifier, portable power source, smart bracelet and electric self-balancing scooter market over the past few years, noting that new ideas of China-made products can upgrade China s manufacturing industry. Affordability and high quality have helped MI gain popularity in China. People s growing attention to health has boosted the smart bracelet market. In this regard, the Huawei bracelet has become a popular digital product thanks to its high cost efficiency and fashionable appearance. 124

135 When it comes to mobile phones, foreign brands including Apple and Samsung still take a large chunk of market shares in China by sales amount despite the fact that Chinese brands like Honor, MI, Huawei, and Meizu are growing rapidly in the competition. It is worth noting that the sales of Honor and MI mobile phones have far exceeded Apple and Samsung in sales quantity. Apple and Philips are expanding toward mobile peripherals as the popularization of mobile phones has boosted the growth of the mobile peripherals and accessories market. 4) Daily consumer goods For pet food, Chinese consumers prefer imported products because they are made with advanced technology and have more functions, thus taking a larger market share. Similarly, for kitchen utensils, the consumers like to buy imported airtight and insulated containers while they choose Chinese brands for disposable products such as plastic gloves and kitchen detergents. The new concept airtight container brand - Lock & Lock sells well ahead of other competitors of the same kinds for its excellent performance in keeping cooking ingredients and cooked food fresh. Lock & Lock has also brought brand new concepts of freshness, storage, and healthy living, thus receiving great popularity among Chinese consumers. 125

136 Women Care ranks the first in the category of personal care. Consumers have a wide choice of sanitary napkins, but they prefer imported goods. In particular, Chinese brand SPACE7 and the foreign brand SOFY take the lead with a similar sales quantity. SPACE7 is a brand of sanitary napkins owned by Heng An Group that is targeted at young ladies, with bright and attractive packaging. SOFY originated from Japan and many varieties and styles, thus appropriate for all consumers. SOFY has always focused on brand image by inviting young and popular female stars as representatives of the brand (e.g. Cecilia Cheung and Angelababy). Apart from them, foreign brands such as Kotex and Whisper also take quite a large market share. Chinese brand Laurier has a much lower sales volume. Brand image is an important factor affecting the sales of women care products. The household supplies sales chart reflects that respiratory safety is a great concern for consumers. When selecting relevant products, they obviously prefer foreign brands. 3M, a professional facemasks brand, is an example. For maternity and baby products, foreign brands such as KAO and Pampers enjoy a big advantage over Chinese brands; they have established a stable presence, especially in paper diapers and baby tissue. 5) Apparel For outdoors sportswear, Adidas, Nike, ASICS, Converse, and other foreign brands are favored by consumers. For underwear, consumers 126

137 prefer old China-made brands such as NAN JREN and Langsha, as they are good in quality and inexpensive. Besides, Baleno and other inexpensive foreign brands enjoy much popularity in small and medium cities. Foreign children shoes brands represented by Paul Frank and foreign women shoes brands represented by Daphne have achieved good sales results. The brand Hui Li ranks among the top Chinese brands of shoes and boots. This senior brand has gained the trust of consumers over many years. When choosing slippers and other household shoes, the consumers tend to pick Chinese brands. As for jewelry, the popular brand Swarovski enjoys a ready market in China, with considerable sales among foreign brands, while Chow Tai Fook specializing in gold jewelry leads the sales of Chinese brands in this area. 6) Medical devices, medicine, and health care products With the consumers growing health awareness, the medicine and health care markets are booming in China. Foreign brand health care products including Swisse and Puritan s Pride are popular among Chinese consumers. Omron stands out of the competitors covering health care devices and nursing gears, while Chinese brand YUWELL has taken certain market share. Aside from Chinese time-honored brand Tong Ren 127

138 Tang, By-Health has successfully introduced dietary supplements into the China market through non-direct sales, and is rapidly becoming a leading brand and a benchmark in the industry. The brand 999 which was recognized a few times by the state authorities as a Chinese Trademark of Highest Recognition, and Yunnan Baiyao, which is a specialty originating from Yunnan Province and is protected by China National Geographical Indication, has shown to have high market value. 3. Consumer loyalty of foreign brands in China Food and agricultural products Medical equipment and health care Smart devices Consumer electronics and home appliances Consumer Staples Clothing and apparel Table 28: Comparison of foreign brands repurchase rate in 2018H1 and the whole year of

139 Food and agricultural products Consumer Medical electronics and equipment and home appliances health care Consumer staples Smart devices Clothing and apparel Imported Brands Home-made Brands Table 29:Comparison of repurchase rate between foreign and Chinese brands in the first half of 2018 Overall, each foreign brand in 2018H1 recorded a higher repurchase rate than in 2017, indicating that imported products sold online have received growing customer satisfaction. Food and agricultural products are the categories enjoying the highest repurchase rate among imported goods. For daily consumer goods, medical devices, medicine, and health care products, consumers have shown higher loyalty to foreign brands than they do to Chinese brands. It is worth noting that Chinese brands of daily consumer goods are experiencing a growing repurchase rate and showing potential. As for medical devices and health care, the repurchase rate of Chinese brands from 2017 is lower than that of foreign brands at the same period, with loyalty lower than foreign brands. 129

140 But smart devices and apparel Chinese brands have higher loyalty. For food and agricultural products, consumer electronics, and electric appliances, Chinese brands have gained brand loyalty comparable to that of foreign brands. 4. After-sales performance of foreign brands Although the return/replacement rate of imported brands is generally lower than that of Chinese brands, a few categories such as cooking utensils, household necessities, beauty & skin care, mother and baby, medical devices, medicine and health care shows an inverse tendency. This indicates that the consumers are overall satisfied with imported goods. But when it comes to the imported goods that may affect health and food safety, consumers tend to have higher expectations. Once any discrepancies are found between the actual products and their description, coupled with prolonged logistic time or failure to meet users needs for cost efficiency, quality, use or after-sales services, the consumers may want to return or replace the goods, causing an increase in return/replacement rate. Foreign brands may conduct research among consumers to better understand Chinese consumers habits, create products more suitable for Chinese consumers, and reduce the return/replacement rate. 130

141 5. Reputation of foreign brands 1) Food and agricultural products Table 30:Key words used to assess imported food and agricultural products For food and agricultural products, except for wording that is too general, the words such as taste, texture, and cost efficiency come up frequently. It is worth noting that, when assessing raw and fresh goods, the speed of logistics has a bearing on quality, directly affecting feedback on the goods. Price tags in a supermarket become an important benchmark for imported food. This tells us that, besides preserving food material quality, taste, and texture, attention should be given to matters such as if the logistics system is adequate and good for fresh products, and if their prices are lower than those in supermarkets. 131

142 2) Consumer electronics and home appliances Table 31:Key words used to assess foreign brands of consumer electronics and home appliances For consumer electronics and home appliances, product quality is frequently mentioned but it is not what consumers are most concerned with. In particular, they are concerned with three factors: (1) if appearance looks fashionable and cool. This indicates that when the two competitors are well-matched in quality, appearance will be the deciding factor. (2) if logistic distribution is fast enough; (3) service quality, including online interaction with consumers and after-sales service offline. Therefore, efforts need to be made to improve consumer electronics and appliances online sales from the three aspects mentioned above. 132

143 3). Daily consumer goods Table 32:Key words to assess foreign brands of maternity and baby products Consumers of different kinds of daily consumer goods have different concerns. For maternity and baby products, consumers are concerned with brand strength and image, next to quality, price, styles, and other factors. It is worth noting that JD.com has provided a trustworthy sales platform for these imported products and the term JD is assuring ranks in the top ten phrases. 133

144 Table 33:Key words used to assess foreign brands of daily consumer goods For cooking utensils, personal care products, and household detergents, consumers focus on cost efficiency. Since they are mostly disposable and non-returnable or non-replaceable, lower prices are specially taken into account. Vendors may reduce overhead and prices reasonably to promote sales. For small daily household necessities like activated carbon and drying racks, consumers are most concerned with user experience, such as products being effective or convenient. 134

145 Table 34:Key words used to assess foreign brands of beauty and skin care products For beauty and skin care products, consumers are more concerned with buying authentic products. Many counterfeits of imported goods are put on e-commerce platforms by unauthorized businesses to cheat consumers. Therefore, vendors should give more thoughts on how to improve the credibility of beauty and skin care products offered on JD.com. 135

146 4. Apparel Table 35: Key words used to assess foreign brands of apparel When buying apparel, consumers are most concerned with quality and comfort, followed by style design and fabrics. Therefore, vendors should make a tradeoff between fashion, being pleasing to the eye, and comfort, and make reasonable decisions. In this case, the speed of logistics is not what consumers are concerned with. But for imported jewelry, consumers may care about the logistics speed. 136

147 5). Medical devices and health care products Table 36: Key words used to assess foreign brands of medical devices Since medical devices and health care products are related to health, consumers have to certain extent a similar assessment to that of food and agricultural products. Except for too general wording, taste, texture, and cost efficiency are important assessment factors, and the speed of logistics, and comparison of prices with those in supermarkets are an important benchmark. Appearance also plays a key role for consumers to choose medical devices. 5. Conclusions 1) When launching products into markets and deciding the market layout, tier 1 and 2 cities must be maintained while tier 3, 4, 5 and 6 cities should also be given reasonable consideration to expand market shares and 137

148 seize the opportunity of future consumption upgrading. It should be noted that Chinese brands of daily consumer goods and apparels are more popular in tier 3, 4 and 5 cities. However, it is not the case for food, agricultural products, consumer electronics and appliances, medical devices and health care products, as there exist differences in demand. Following the entry of quality foreign brands, the original market layout is changing. 2) For brands of consumer electronics, appliances, and apparel, mature after-sales service, more accurate and detailed product information, and optimized user experience are the key to reduce the return/replacement rate and increase user stickiness and loyalty. For example, showing concrete details and parameters of products by using high-definition photos, videos, or AR, and other interactive visualization tools to help consumers make better choices. 3) For imported medical devices and home appliance as well as daily consumer goods, it is necessary to improve the compatibility between the imported brands and the Chinese market by better understanding Chinese consumers traditions and habits so that the foreign brands can better meet the local needs when they explore the China market. Meanwhile, imported brands need to maintain their advantage of high technology by constantly developing products with more functions and lower costs, to meet the diversified needs of consumers and raise their reputation in China. 138

149 4) Some high-quality imported food and fresh goods need to enhance marketing and brand promotion even after they have enjoyed good reputation after entering the China market. Furthermore, logistics, warehousing, and distribution have become the very core link of China s e-commerce services, especially for fresh goods since highly effective and quality logistics and distribution are critical for e-commerce players to gain market share. Besides, following the release of the Rural Revitalization Strategy by the Chinese government, market orientation is also undergoing drastic changes. In this context, carefully studying the policy orientation for imported goods is necessary. 139

150 XI. E-commerce Platforms Promote the Market Expansion of Imported Goods 1. E-commerce platforms enhance the quality reputation and consumer trust of imported goods Reputation is the good image of products in the minds of consumers, which truly reflects brand value in the eyes of consumers. As shown in social psychology studies, the process of human beings accepting an outside thing that is independent from themselves falls into three phases, namely, cognition, emotion, and habits. At first, people will understand and grasp the newly encountered products through the senses, imagination, memory, and other ways. Then, the attitude experience and value judgment occurs when the objective things can satisfy their own demands. Finally, they respond to the stimulation resulting from objective things through actions. Therefore, consumers will be subject to a similar process during the brand reception process. The brand awareness and differentiation degree are at the cognition phase of product brand communication, while reputation is the key indicator to evaluate whether consumers emotionally accept the brands and have the consumption intention. 1) The trust effect e-commerce platforms have on foreign brands help increase sales 140

151 With regard to the value cultivation and enhancement of foreign brands, the JD platform actually plays an important relay role. After ten plus years of careful market cultivation and long-term brand operations, JD has become one of the e-commerce platforms with the largest scale and most powerful influence in China. The platform brand is mature, which enjoys higher recognition and good reputation among the customers. The positive impression customers have on the platform psychologically affects their evaluation of the products and services sold on it, forming a trust effect. Relying on the e-commerce platform s own value and the resulting flow, the exposure rate and search rate of imported products grow, while the brand sales sensitivity is also strengthened. This further shortens the market introduction stage of imported products and reduces the cost of access to the domestic market, effectively achieving the value and emotion transmission of consumers. Meanwhile, it also helps create the demand for imported goods, enriches product image, and enhances potential value. The positive incentive effects of high quality platforms, services, and commodities will overlap, further amplifying the consumers satisfaction and trust on the particular brands and achieving the effective transfer of intangible value from the platform to the foreign brands. 141

152 Customers' High Level of Trust & Cognition High Quality Commodity High Quality Service High Quality Platform Table 37: Sales trust effect of foreign brands on e-commerce platforms As shown in Big Data from JD, during the period from 2016Q to 2018Q2, the sales volume of the TOP 100 imported brands generally shows a steady upward trend. Those imported brands can be spread throughout e-commerce users at this speed, which is closely correlated to the platform s own brand reputation. Q1, 2016 Q2, 2016 Q3, 2016 Q4, 2016 Q1, 2017 Q2, 2017 Q3, 2017 Q4, 2017 Q1, 2018 Q2,

153 Table 38: Sales volume change of JD TOP100 imported brands (from 2016Q1 to 2018Q2) 2) Internet-based community patterns help the word-of-mouth of imported products When users are satisfied with commodities they purchase, they often feel additional satisfaction and are willing to spread the word and recommend the products. The e-commerce platform highlights the new development direction of mobile community property, which provides the channel for the users strong social sharing willingness. Under such background, JD actively builds up the organically integrated new development pattern of social networking+platform+commodity+service+data, and also places the socialization and content communication on media as key for its development strategy. By virtue of the content community built in the platform for sharing the shopping experiences and life stories, the consuming groups of imported commodities are organically integrated and converted into fans through social content, to release the word-of-mouth aggregation effects and form the efficient conversion from word of mouth to capital flow. Take the sales of Dove Fresh series as an example. The Dove Fresh series includes chocolates flavored with strawberry, lemon, and green tea. The Dove brand wishes to link the new product with the quadratic element idol to carry out marketing and sales. At the beginning of 2018, Dove 143

154 worked together with the team behind Love and Producer and placed the entire marketing activity on the JD and Wechat platforms to make the campaign a success using the Wechat Mini Program and JD Boundaryless Retail concept. The campaign brought 34,000 new customers in total, with the daily average amount of new customers exceeding 4000 and the monthon-month growth rate of store follower number rising by 245%. Except for attracting new customers, the ROI (return on investment) inside the website was enhanced by 130%. The chain effect for the JD marketing activity was as follows: the ROI outside the Dove JD website was enhanced by 75% and there was a 50 million exposure rate outside the website, which greatly surprised Mars Foods (China) Co., Ltd. When exploring evaluative terms of representative imported brands in-depth, the most popular evaluative terms given by the customers to the imported products from 2016Q1 to 2018Q2 are the 10 terms shown in the figure below. The key words that describe the product quality, size, material, comfort degree, and satisfaction rank top 5 in the quarterly evaluation. These always represent customer concerns and reflect the stable word of mouth of the imported products on the e-commerce platform as well as the higher recognition and satisfaction of consumers and their qualities on the e-commerce platform. These imported brands enter tens of thousands of households as China s domestic brands do, which not only 144

155 enriches consumers purchase choices, but also forms the good positive competition and stimulation of domestic brands. Table 39: Key words used for general evaluation of imported brands given by consumers on the e-commerce platform 2. Facilitating import trade and boosting consumption upgrade 1) Perfecting the platform entry mechanism and strict control over the quality of imported goods Quality is the foundation of products. Therefore, it is impossible to pursue brand reputation and consumer loyalty by ignoring the actual functional value of products. In order to expand the market share of imported products, it is essential to have strict control over quality, ensure the consistency between quality and expectation, and enhance the satisfaction of consumers with excellent cost efficiency to establish a good brand image in the minds of consumers. With regard to the business model of imported products, the JD e-commerce platform mainly adopts the 145

156 parallel mode of self-run overseas direct purchase and bonded import through a third party open platform. Under the self-run mode, the specific overseas purchase department will select and purchase foreign products, and strengthen the quality control of imported goods at the source through the establishment of a threshold, perfection of the entry mechanism, and other methods. In 2018, the JD e-commerce platform launched 6 measures for pre-sales quality control, 7 measures for mid-sales quality control, and 22 after-sales service measures, so as to carry out the traceability inspection by virtue of the self-built logistics system and self-procurement, strictly safeguarding the quality at each link. Meanwhile, the overseas brand suppliers are introduced to enter the platform, making up for the deficiency of self-procurement and also achieving a balance between category and quality. 2). Import facilitation driven by self-run logistics & warehousing Chain Generally, many intermediate links and longer purchase cycles are two major factors restricting the consumption of imported goods. Once an order is placed, consumers are concerned with arrival time and whether the customs clearance process will be smooth, and these concerns greatly affect their shopping experience. Therefore, how to effectively coordinate 146

157 these three major phases -- overseas logistics, commodity inspection and customs clearance, and domestic logistics and offer a seamless connection for each link in the process of cross-border trade, has become a key test for e-commerce platforms. Under JD s self-run model, the JD e-commerce platform establishes the bonded warehouse within the domestic bonded area, and carries out the overseas centralized purchasing as per the platform sales data and in combination with the user preferences and consumption habits upon the imported products, and then directly ships the goods from the domestic bonded warehouse to finally deliver them to customers through JD logistics after customs clearance is completed. This method greatly simplifies the intermediate links of imported goods consumption, which not only saves a lot of time in customs clearance and overseas logistics but reduces the upstream channel cost. Therefore, the user can get the high quality imported commodities at a lower cost in a shorter time. Relying on the advantages of a self-run logistics system that integrates warehousing and distribution, the e-commerce platform effectively invigorates overseas supply and domestic demand at the same time, and greatly promotes import trade, thus ensuring upgraded consumption concepts are met. 147

158 3). The e-commerce platform actively introduces high-quality featured commodities and promotes the consumption upgrade As shown by the JD e-commerce Big Data, the consumption mode of online users shows a more prominent consumption upgrade trend. Being fashionable, going-green, health, and intelligence have become the four major directions of the consumption change. Since 2016Q1, the sales of these four types of commodities have generally presented an upward trend. Among which, the sales of fashionable and green commodities are relatively higher, showing that among all these 4 types of consumption upgrade trends, whether products are fashionable, good looking, and environmentally friendly, is the first consideration for consumers to select and purchase commodities. As import trade becomes easier, consumers have access to more imported goods and raise higher quality requirements. Behind the pursuit of fashionable products, it is the emerging trend of consumers pleasing themselves. When buying imported commodities, they pay more attention to reflecting their own tastes and pursue personal satisfaction resulting from the symbolic and personalized expression behind the fashion. Meanwhile, at a deeper level, the going-green and healthy consumption upgrade represents the continuous growth of prioritizing healthy consumption. Further, more and more consumers wish to make their lives more convenient through AI. 148

159 Q1, 2016 Q2, 2016 Q3, 2016 Q4, 2016 Q1, 2017 Q2, 2017 Q3, 2017 Q4, 2017 Q1, 2018 Q2, 2018 Health Green Fashion Intelligence Table 42: Quarterly Statistics Chart for Sales Volume of Consumption Upgrading 3. Maximizing the aggregation effect of imported products in national and regional exhibition halls With regard to the business layout of imported products, the JD e- commerce platform establishes featured exhibition halls of many countries (regions). It personalizes them as per the specific products and cultural properties of each country and highlights the general features of the imported products. The national (regional) exhibition hall integrates the imported brands from the same country into family buckets of imported products, which not only avoids repeated setups and promotion for online marketing resources of different brands but forms the brand aggregation effect by virtue of the platform integration advantages to effectively enhance the general sales advantages and attraction of imported brands. With regard to the supply, except for self-run direct purchase, the JD e- 149

160 commerce platform directly cooperates with the overseas brands and then ships the goods from bonded warehouses as per the actual order conditions and necessary sales predictions. Such demand-oriented supply pattern is more flexible, being able to predict the imported products market based on previous market data, timely adjustment of the imported products supply, and reduction of the inventory cycle and inventory backlog. In this way, real-time communication and efficient docking of overseas production supply and domestic market demand can be achieved. As shown by JD Big Data, national and regional imported brands have more prominent geographical features and generally demonstrate the characteristics of small intra-region difference and large inter-region difference. The best sellers in the Japanese exhibition hall concentrate on two types, namely, digital electronic products and maternity and baby products, in particular, brands as Sony, Canon, Nikon, Sharp, Epson, Kao, and Mamypoko. The best-selling brands from Australia and New Zealand are mainly of dietary supplements and dairy products, including Anchor, Platinum, Devondale, and Swisse. Imported American products are mainly cell phones and storage digital devices, for instance, Apple phones, Western Digital, and Seagate. Featured exhibition halls effectively allow a large number of consumers to access imported brands, while the differentiated layout promotes precise brand sales. 150

161 XII. Precise user profiling based on Big Data to achieve pointto-point sale and customization Big Data visualizes all consumer behavior on e-commerce platforms. Through deep mining of the diversified data from user behaviors, browsing footprints and personal information, the e-commerce operators extract a comprehensive picture of their user base and get wider feedback from the users. Based on the precise analysis of the user profiling data, e-commerce platforms can identify their users shopping habits and preferences in a timely manner and use algorithms to customize product recommendations for users with specific needs to target the product information to the right audience, increase click-through rate, attention degree, and conversation rate and even provide C2M customization according to the users needs. Different from relying on traditional market survey and feedback, China s e-commerce platforms with JD as the representative today can leverage their wide market coverage and more than a decade of experience in transforming and reshaping Chinese consumers shopping behaviors and attitudes, as well as their own advantages in sales models and information technology, to provide the key information technology support and efficiency assurance for foreign brand owners. These owners need to get a quick and accurate understanding of the Chinese market, know the potential needs of the consumers, and obtain timely feedback from the 151

162 market. The customary consumers of the imported brands on JD platform mainly come from China s eastern provinces, with users in the regions of North China, East China, and South China accounting for more than 70% of the total number of users. North China has the most imported brand consumers, who represent nearly one thirds of China s total. These are mainly the more developed coastal regions of China, where consumers have more access to imported goods, enjoy stronger purchasing power, and want a better quality of life. Analysis of users age and gender shows online shoppers of the imported goods mainly consist of millenials who have stable jobs, higher incomes, higher demand for imported products, and stronger purchasing power. The gender structure shows men are more interested in buying imported products from the e-commerce platforms than women. However, among users between the ages of 26 and 35 there are more women than men. Based on research on the categories of the imported products ranked by sales, we found mother and children products are hot sellers. This means a large percent of the consumers falling in this age group are new or wouldbe parents who have stronger desires to buy high-quality foreign baby products through e-commerce platforms. Through the long-term collection of consumer information, the e- 152

163 commerce platforms can provide strong data support for imported brands that just entered or will enter the Chinese market and try to get the relevant consumer information in advance. E-commerce platforms can make precise market forecasts and judgement for the different categories or even a SKU of the imported brands, profile the potential user base for different products, and target the products to specific groups through marketing platforms such as Jingzhuntong. At the same time, as interactions between the consumers and the platforms become more frequent and deepened, consumer feedback on the imported brands will be continuously supplied to the merchants and the manufacturers to bring them into a virtuous cycle. One example is the high-end Australian baby formula brand a2, which was able to access a target consumer group in a relatively precise way through the JD platform using its Big Data when it first came into the Chinese market. While the brand was promoted on Jingzhuntong, timely analysis and judgement of the sales and the consumers feedback were also made, which in combination with other approaches such as tailor-made marketing, content marketing, and cross-brand alliances, has given a big push to the brand s popularity and recognition in China. By achieving a y- o-y sales growth of 130% in 2017, the brand has become a classical success story among the foreign brands which have entered the Chinese market with the help of the e-commerce platforms. 153

164 Precise consumer profiling using JD Big Data can also make the work a lot easier for manufacturers when they have better understood what consumers think. For example, some online shoppers searching for diapers thought the existing pack of 54 diapers offered was not quite big enough, whereas two would be too many. So, in early 2016, based on the Big Data, JD worked with Moony to launch the tailor-made diaper product in a special pack of 68 pieces, which has not only satisfied consumers needs but also reduced the manufacturing and shipping costs. Southwest, 9.0% Northwest, 5.7% Northwest, 4.0% Central China, 7.9% Norh China,29.1% South China, 22.1% East China, 22.2% Table 43: Distribution of the regions where consumers are more interested in buying imported goods 154

165 Table 44: Gender and age structure of users who placed 12+ orders (male on the left and female on the right) 155

166 XIII. Leveraging SCM capabilities of e-commerce platforms to improve operational efficiency of imported goods Consumers needs and feedback are a kind of information heavily relied upon by all manufacturers and companies in selling their products. Foreign manufacturers which see China as a market with huge potential have to get insights into the consumer needs and behaviors which are very different from those in other markets of the world besides its vast demand and strong purchasing power. Take JD as an example: with its technical strength in collecting, storing, analyzing, and processing consumption data, it has worked with a number of foreign brands including Nestle, Wal-Mart, and Sephora in the past a few years to become their major channel for online sales. With the technical support of the data platform and the sales forecasting capabilities built and repeatedly tested by JD through many years of online sales, JD can support foreign brand owners through joint forecasts and replenishment platforms and make smart forecasts on the purchasing plans in relation to brands, categories, packaging specifications, and SKUs for manufacturers and companies on a quarterly basis. For example, since working with JD Group in 2012, Nestle has achieved a y-o-y growth of 400% in the Chinese market with the support of JD data analysis and market forecasts. 156

167 Through its smart supply chain system, JD was able to generate a 91-day purchasing plan for different brands, categories, and SKUs for Nestle. At the manufacturing side, the manufacturer could use the 3-month replenishment plan to not only better schedule its production to ensure a stable in-stock rate of the products at JD as well as high order filling and coordinated stock-up pace, but also guide the production of the supply chain in advance and transmit consumers needs to the manufacturer. At the same time, it helped to deal with promotion challenges by reducing turnover days and increasing in-stock rate to achieve better cost control and customer experience during the promotion period. The data show that during the 618 promotion period of this year, Nestle s in-stock rate reached 98% and the stock turnover also increased significantly compared with the same period of the previous year. XIV. Suggestions for the future development of imported 157

168 goods in e-commerce Growth strategy: Imported brands can leverage high credibility and reputation created by China s high-quality e-commerce platforms through long-term practice. At the same time they can utilize their strength in technology and logistics to move beyond the traditional model of relying on agencies when entering the Chinese market, quickly achieve wider coverage of geographies and populations, and at the same time overlap the strong reputation of the imported brands with that of the e-commerce platforms to improve the relationship between the imported brands and the e-commerce platforms and achieve mutual growth. Because of the incomparable position of the Chinese consumer market in the world, imported brands have the chance of working with China s e-commerce platforms in building a new world-leading model. Branding strategy: On the one hand, imported brands need to maintain their leading positions in some competitive categories such as maternity and children, high-tech appliances, and digital products, while on the other hand they must also directly compete with the Chinese brands in some mainstream categories on the e-commerce platforms to satisfy the needs of the Chinese consumers by expanding the market share of categories such as fresh food and pets. 158

169 Quality strategy: Facing the challenges of Chinese brands which are constantly improving their product technology and quality, imported brands must still stick to the high-quality and high-tech lines and reinforce localized production. For some categories such as medical devices, home appliances, and commodities, the imported brands must better understand the actual condition of China and further increase their market shares by perfectly tailoring their products to the habits and traditions of Chinese consumers. Regional development strategy: The gap between the consumption of imported goods among the regions and cities in different tiers is reducing as far as economic development and purchasing power are concerned. However, imported brands are advised to employ differentiated e- commerce marketing strategies considering the characteristics of different categories and consumers. For categories with shorter life cycles such as fresh food and home appliances, imported brands should capitalize on the logistics and marketing capabilities of the e-commerce platforms to quickly expand the market and promote the brands to achieve balanced development across the regions. However, for some categories with longer life cycles or low technology, such as clothes and commodities, the primary goal of the imported brands should be to capture the target market and help 159

170 brands grow, develop, and stabilize. Only when potential consumers have come to know and are familiar with the brands, and when a good reputation has been established, can the brands expand to other regions to explore new market opportunities, find new users, and extend the life cycles of the products. Platform strategy: China s e-commerce platforms have played a key role driving the penetration of imported goods into China. In the future, imported brands need to integrate the concept and strategy of growing with e-commerce platforms and helping each other into the production and marketing process. For example, JD has been providing strong support for precision marketing of imported goods with its Big Data. On the other hand, the imported brands should introduce contrarian thinking into their product design and manufacturing, and restructure the design and production processes looking into the characteristics of the marketing system and approaches of the e-commerce platforms, so as to reshape and innovate the entire production and promotion processes, and redefine production and consumption based on new brand concepts such as boundaryless retail. 160

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