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How Thai SMEs can win over Chinese hearts?

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Navigating thru China’s cross-border e-commerce: How Thai SMEs collaboration can win over Chinese hearts?

For Thai SMEs planning to tap into the Chinese market, cross-border e-commerce (CBEC) is becoming a prominent and interesting option to consider.

EIC views that to enhance success in CBEC in China, SMEs need to position themselves strategically, especially on the following criteria

  • 1) select products appropriate for CBEC platform
  • 2) plan online-offline strategy – online via Chinese platform and offline in strategic locations with high Chinese tourist density in Thailand and
  • 3) leverage online medium, for example, social media as tools to communicate with Chinese consumers and to create product familiarity.
  • SMEs with limited financial ability should strategically collaborate to list stores and products on China’s online platforms. Collaboration between complementary products or in the form of a multi-brand store will help boost online presence. Other synergistic benefits are, for example, shared cost savings.
  • To facilitate operations in China, SMEs could also hire experienced e-commerce professionals such as online merchant middlemen on Chinese platforms or companies that provide online business operation services.  

China’s CBEC market is poised for continued strong growth, especially from China’s CBEC platform

According to AliResearch, China’s cross-border e-commerce import value reached CNY 900 billion in 2015. It is expected that by 2020, China’s CBEC import value will reach CNY 3 trillion, representing a compound average annual growth rate (CAGR) of 30%, a growth rate highest among all types of trade.

The stunning growth of imports via CBEC is expected to increase CBEC import value portion from 3% of total trade value (imports and exports via online and offline channels) in 2015 to as high as 9% in 2020 (Figure 1). Note that imports are mostly delivered from 2 distinct types of CBEC platform.

The first and most prominent CBEC platforms are Chinese-based with sponsorship by the Chinese government. These platforms aim to help foreign entrepreneurs connect with local Chinese consumers. Meanwhile, the second type is foreign owned, though with trivial usage. These platforms aim to provide Chinese consumers with more alternatives by offering products from foreign entrepreneurs.

Figure 1: China’s import and export value

Remarks: Traditional import and exports are ones that are not via CBEC platforms
Source:
EIC analysis based on data from The Ministry of Commerce, General Administration of Customs, iRearch, Analysys.cn, AliResearch

China’s extraordinary growth in retail CBEC, especially imports, was fueled by relaxed government policy and improved payment services. In 2016, the Chinese government issued a very important piece of policy, the Cross Border E-Commerce Import (CERI), which provides preferential tax for cross-border e-commerce products.

Currently, there are three types of taxes that apply to general imports – import duties and consumption tax that varies depending on product category, and value added tax (VAT) of 17%. Under the new policy, eligible CBEC products will enjoy import duties exemption with consumption tax and VAT collected at 70% of the standard rate, but with a set quota. Individual buyers are allowed a limit of CNY 5,000 per single transaction with a combined quota of CNY 26,000 per year.

CBEC imports exceeding the quota will be taxed in a similar manner as general imports. In January 2019, the Chinese government further relaxed CBEC regulation with these notable changes 1) extending the list of goods eligible for preferential tax, 2) raising the single transaction quota from CNY 2,000 to CNY 5,000 and the annual quota from CNY 20,000 to CNY 26,000 Yuan, 3) expanding the new policy to 22 different cities from existing 15 to reach more citizens. Improved technological advanced in payment services that allowed safe and secured transactions from players such as Alipay or WeChat Pay also played a significant role in boosting CBEC growth. These new and…

Author: Pattharapon Yuttharsaknukul

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Wang Yi, China’s Foreign Minister, will visit Australia to discuss trade and technology.

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China’s Minister of Foreign Affairs, Wang Yi, will visit New Zealand and Australia from March 17 to March 21, 2024, following invitations from both countries. The visit will include discussions on various bilateral and regional issues, including trade relations and scientific cooperation.


UPDATE (March 15, 2024): China’s Minister of Foreign Affairs, Wang Yi, is set to embark on a key diplomatic mission to New Zealand and Australia from March 17 to March 21, 2024. This visit comes following invitations from New Zealand’s Deputy Prime Minister and Foreign Minister, Peters, and Australian Foreign Minister Marise Payne. A pivotal aspect of Wang Yi’s agenda will be his attendance at the seventh round of China-Australia Diplomatic and Strategic Dialogue (hereinafter, “the Dialogue”), scheduled during his stay in Australia. The Dialogue is anticipated to tackle various bilateral and regional issues.

As reported by SCMP on February 29, 2024, Australia has extended an official invitation to China’s foreign minister, Wang Yi, marking a significant development in the ongoing dialogue between the two nations.

Against this backdrop, the invitation reflects a concerted effort to address a range of contentious issues that have strained diplomatic ties in recent years.

The upcoming discussions between China and Australia will center around critical issues that have the potential to shape the trajectory of their bilateral relations. The negotiation dynamics between these two countries are marked by a nuanced interplay of interests, priorities, and strategic imperatives.

Australia’s Department of Foreign Affairs and Trade (DFAT) is actively advocating for the lifting of sanctions on Australian wine and lobsters, which have strained trade relations between the two countries. Seeking sanctions relief underscores Australia’s efforts to alleviate economic pressures and facilitate bilateral trade and investment.

Concurrently, China is pressing Australia to commit to a new Science and Technology Agreement, aiming to foster collaborative efforts in areas of mutual interest. Despite challenges posed by the broader geopolitical context, China’s emphasis on scientific and technological cooperation reflects its acknowledgment of the benefits of engagement and partnership in addressing global challenges and promoting sustainable development.

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

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China props up state-owned developer Vanke as property crisis deepens

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China has asked 12 banks to provide financing to the beleaguered state-owned real estate firm, Vanke Group, just days after the housing and urban-rural development ministry vowed to let insolvent property developers go bankrupt.

The Chinese government’s support bucks its recent trend of letting indebted developers take their own downward course, which has compounded a spiraling crisis in the sector, once a major economic growth driver. 

Privately-held Evergrande Group and Country Garden Holdings were left to their own devices as their debts soared, leaving their creditors and homebuyers high and dry in trying to recover investments. The Hong Kong High Court issued a liquidation order for Evergrande in January. A similar fate looms for Country Garden which received a liquidation petition from one of its creditors in Hong Kong. Both companies are listed in Hong Kong.

In contrast, rescue efforts for Vanke, part-owned by the Shenzhen government, are being coordinated by the State Council, China’s cabinet amid Chinese President Xi Jinping’s policy of advancing state enterprises and a retreat of the private sector. 

The State Council has requested financial institutions to make swift progress and called on creditors to consider private debt maturity extension, according to a Reuters report on Monday, citing unnamed sources. 

Separately, the state-owned Cailian Press reported that the 12 institutions are expected to raise as much as 80 billion yuan (US$11.1 billion) for Vanke. But the report cited sources saying that the attitude maintained by each bank was conservative.

Shaky ground

Nonetheless, Vanke is likely to stay on shaky ground among investors after rating agency Moody’s lowered its credit rating to “junk.” 

“The rating actions reflect Moody’s expectation that China Vanke’s credit metrics, financial flexibility and liquidity buffer will weaken over the next 12-18 months because of its declining contracted sales and the rising uncertainties over its access to funding amid the prolonged property market downturn in China,” said Kaven Tsang, a Moody’s senior vice president in a statement this week.

The rating agency said it has placed all the ratings on review for downgrade, as it saw the company’s ability to recover sales, improve funding access, and maintain an adequate liquidity buffer to be worrying.

The government’s bid to save Vanke has aroused discussion online. Some netizens questioned the discrepancy between saving Vanke and abandoning Evergrande, while others worried that saving Vanke would reduce national resources at a time when the economy is growing at its slowest pace since 1990. There are also many posts rationalizing the government’s efforts to support Vanke.

A Vanke sign is seen above workers working at the construction site of a residential building in Dalian, Liaoning province, China September 16, 2019. (Stringer/File Photo/Reuters)

The blogger “Wuxinxinshuofang” believes that propping up Vanke is to ensure that the “hunt” for foreign capital won’t be disrupted by a Vanke-triggered real estate crisis. 

“The collapse of Vanke will bring about the debt crisis and liquidity crisis of all real estate companies. Efforts so far to prop up the market have only begun to show effects. Vanke can fail next year, but not this,” the blogger wrote.

Zombie developers to zombie banks?

Frank Xie, a professor at the University of South Carolina Aiken Business School, attributed Beijing’s support to Vanke’s state-owned background.

“The Chinese Communist Party cannot let Vanke fail, because the CCP [Communist Party of China] treats its own people and outsiders differently,” Xie pointed out. 

The failure of any state-owned assets would be “tantamount to the bankruptcy of national capital, questioning the Communist Party’s ability to run enterprises.”

Xie said that Chinese banks have accumulated a large backlog of mortgage loans involving real estate, and even assisting Vanke will only delay the explosion.

“As for other private companies facing the same problems as Evergrande, the CCP cannot save them, nor does it want to save them,” he added.

Beijing has also established a “white list” of approved property projects by distressed developers that banks and financial institutions should support in a stop-gap measure. Those deemed beyond rescue should go bankrupt.

2024-03-12T053841Z_1854898123_RC24K6AOK1VU_RTRMADP_3_CHINA-PROPERTY-DEBT-VANKE.JPG
A person walks past by a gate with a sign of Vanke at a construction site in Shanghai, China, March 21, 2017. Picture taken March 21, 2017. (Aly Song/File Photo/Reuters)

Chen Songxing, director of the New Economic Policy Research Center at National Donghua University in Taiwan, said that the Chinese official statement of “bankruptcy should be bankrupt” is merely to show the outside world Beijing is unable to save real estate developers. 

Chen said the amount of rescue for Vanke this time was insufficient to solve the problem, given how intertwined the real estate and banking industries are. He warned this was only a delay tactic which could lead to a bigger crisis.

“China’s current financial situation actually does not have the ability to save the real estate industry, as this is just transferring the debts of real estate developers and local governments to banks. 

“If you continue to save these zombie real estate developers this year, it is very likely that banks will also become zombies in the future. It is very detrimental to China’s economic development,” Chen said.

Edited by Taejun Kang and Mike Firn. 

Read the rest of this article here >>> China props up state-owned developer Vanke as property crisis deepens

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China to update M&A Regulations in 2024: Changes to Filing Thresholds

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China’s State Council has implemented revised Provisions on Declaration Standards for Business Operator Concentration, effective from January 22, 2024. Originally proposed by SAMR in June 2022, the 2024 Provisions have raised turnover criteria, benefiting big tech firms and multinational companies involved in M&A activities.


China’s State Council has released the revised Provisions of the State Council on Declaration Standards Regarding the  Concentration of Business Operators, which took effect from January 22, 2024.

The 2024 Provisions were initially proposed by the State Administration for Market Regulation (SAMR) in June 2022. The comparatively slow legislation process indicates the Provisions had been subjected to heated discussion within the government organs.

Notably, the 2024 Provisions dropped some specific standards proposed in the 2022 draft that required any deal involving a company with annual China revenues over RMB 100 billion to be subject to review by the authorities. According to analysts, this roll-back was designed to favor the big tech firms originally, but will concurrently benefit all multinational companies (MNCs).

This article delves into the significant revisions to China’s M&A declaration thresholds and their implications, providing crucial insights for businesses and stakeholders involved in merger activities.

The 2024 Provisions have significantly raised the turnover criteria for the declaration threshold for concentration of undertakings.

The term “concentration of undertakings” refers to any of the following circumstances:

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.

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