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China customs ecommerce backdown boosts Australia vitamin stocks

China customs ecommerce backdown boosts Australia vitamin stocks

BEIJING: A decision by Beijing to delay a planned increase to ecommerce import taxes boosted Australian and New Zealand-based vitamin and food stocks, underlining the importance of Chinese online sales to the region’s consumer brands. Shares in supplement company Blackmores and dairy group a2 Milk Company rose as much as 19.1 per cent and 5.3 per cent, respectively, on Tuesday following an announcement by China’s ministry of commerce that a planned tax rise on ecommerce purchases from overseas would be delayed until January 2018. The planned increase, announced last April, met with a push-back from retailers in the booming cross-border ecommerce market worth an estimated $90bn annually. Beijing’s decision provides a temporary respite for foreign companies that had been fretting the revamped rules would crimp the flow of imported food and consumer goods into China.

China’s total cross-border ecommerce market has grown from Rmb53bn ($7.7bn) in 2011 to an estimated Rmb626bn in 2016, according to consultancy Mintel, making it a crucial channel into the country for overseas consumer companies. Peter Nathan, chief executive of a2 Milk Company, on Tuesday said the decision signalled “a strengthening of the commitment to the cross-border ecommerce channel from the Chinese regulators”. The policy’s original announcement last April prompted steep declines in shares of Australian stocks such milk powder maker Bellamy’s, whose products had been popular with Chinese consumers and personal shoppers — known as daigou — who run small-scale online stores selling foreign products into China. Food safety scandals are not unusual in China and foreign products are typically regarded as higher quality than domestically produced alternatives. This has benefited Australian and New Zealand companies, which either sell directly into China or use informal supply chains provided by daigou.

China’s Commerce Ministry clarified on Friday that goods coming into the country via ecommerce platforms would temporarily be regarded as personal trade, rather than for commercial distribution, making them subject to a lower tax rate. Personal transactions are tax-free up to Rmb20,000 per person, whereas commercial imports are subject to import tax, consumption tariffs and VAT. Such goods also avoid additional requirements related to domestic registration or labelling. The commerce ministry said that retailers in 15 of the country’s largest cities including Beijing, Shanghai and Guangzhou had been approved to import in accordance with the new regulations starting from January.  Organic food maker Bellamy’s Sydney-listed shares closed 15.7 per cent higher on Tuesday. Shares in Hong Kong-listed Biostime, which owns Australian vitamin maker Swisse and would have been affected alongside Blackmores by new labelling requirements, jumped as much as 9.7 per cent.