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In this page: Market Access Procedures | Distributing a Product

 

Market Access Procedures

 
 

Customs Procedures

Import Procedures
The Chinese importer (agent, distributor, joint-venture partner, or FIE) gathers the documents necessary for importing goods and provide them to Chinese Customs agents. These documents include: the bill of lading, the invoice, the packing list, the customs declaration, the insurance policy, the sale contract and the inspection certificate of the AQSIQ (General Administration of the PRC for Quality Supervision, Inspection, and Quarantine) or other licenses of safety and quality. To reduce customs clearance time, certain companies can- in cases where description, specifications and quantity of import of goods are determined- declare to the customs in advance and present the documents after the imports are dispatched, before the arrival or in the three days which follow the arrival of the goods in a customs surveillance zone. The Customs authorities will examine the goods directly and will release the goods after their arrival.

Customs declarations can be done via the customs site. Exporters must indicate the place of arrival of the goods and they must complete all customs data. Once the data is analysed by the customs, a receipt will be sent, so that the company can complete the cargo of the goods. Custom duties can then be paid by bank transfer.

For more information, please visit the website of Chinese Customs.
Specific Import Procedures
The import of food and beverage in China is supervised by multiple government agencies and departments, mainly the State Administration for Market Regulation (SAMR), the National Health Commission of China (NHCC), and the General Administration of Customs of China (GACC). Exporters and Importers of foreign food and beverage must be recorded through the “Registration Systems of Imported Food and Cosmetic Importers and Exporters” or the “Internet + customs platform” of the GACC. Furthermore, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) requires registrations for the import of cereals and oilseeds and live seafood.  Similarly, the China Food and Drug Administration (CFDA) has issued registration requirements for infant formulae, health food, food for special medical purposes and new requirements for online food trade.

Certain items are prohibited from entering China: arms, counterfeit currencies, documents which are deemed to be detrimental to the political, economic, cultural and moral interests of China, lethal poisons, illicit drugs, disease-carrying animals and plants, foods, medicines, and other articles coming from disease-stricken areas, used garments, local currency, etc.
Importing Samples
From 9 January 2019, the ATA (Temporary Admission) carnet can be used for the import, export and re-export of trade samples. It must be written on the product that it is a free sample and cannot be sold. China now accepts ATA Carnets for Commercial Samples (CS) and Professional Equipment (PE). Previously China only accepted ATA Carnets for Exhibitions and Fairs (EF) which is limited to 6 months or less from the date of entry. Both CS and PE are accepted to stay up to the full validity period of the carnet (up to 12 months).

For more information contact the Customs General Administration of the People's Republic of China.

 

To go further, check out our service Import controls and Export controls.

 
 

Customs Duties and Taxes on Imports

Customs threshold (from which tariffs are required)
RMB 50
Average Customs Duty (Excluding Agricultural Products)
7.6% (a relatively low rate). For more information, click here.
Products Having a Higher Customs Tariff
Duties vary from 3% to 30% depending upon whether imports are encouraged or not (import of automobiles is for example discouraged) by the authorities.
Preferential Rates
Granted to imports coming from countries with which China has signed trade agreements (e.g. Asia-Pacific Trade Agreement; ASEAN–China Free Trade Area; Mainland and Macau Closer Economic Partnership Arrangement). China may apply preferential tariff rates in the case of goods that the Government has identified as necessary to the development of a key industry.
Customs Classification
China applies the Customs Harmonised system (on the basis of the international six figure key). 
Method of Calculation of Duties
Customs duties are calculated Ad valorem on the CIF value. The amount of customs duties depends on the price or value of the imported goods. It is calculated on the price of the goods subject to the transaction. Besides the basic value of the goods, this amount also includes transport costs and insurance premiums paid to protect the goods before their arrival in China. The value does not include value added taxes or consumption taxes. To assess a value, all Customs officers have access to a valuation database that lists appropriate valuations for various imports, based on international market prices, foreign market prices and domestic prices. Customs officers check the price reported by the importer against this database. Normally, Customs officers will  accept the importer's price, unless the reported value is too far out of line with the database. For agricultural products, China Customs information frequently does not reflect seasonal changes in pricing or the effects of quality/grade on pricing. As a general rule, China Customs will charge based on the highest price reflected in their database.
Method of Payment of Customs Duties

There are two ways to pay import taxes:

  • Pay directly to the customs agency
  • Pay through your shipping company, which will pay in advance and require payment before the final delivery of the products.
Import Taxes (Excluding Consumer Taxes)

The following three types of taxes are applicable to companies importing products from or exporting products to China: customs duties, value-added tax and consumption tax. Value-added tax is a form of a consumption tax that is imposed on a product when the value is added at each stage of the supply chain, beginning with production to the end sale. In China, the consumption tax is applied to the following five categories of products:

  • Products that are harmful to health, social order and the environment, including tobacco, alcohol, and fireworks
  • Luxury goods such as precious jewelry and cosmetics
  • High-energy consumption and high-end products like motorcycles and passenger vehicles
  • Non-renewable and non-replaceable petroleum products like diesel oil and gasoline
  • Financially significant products like tires for motor vehicles
 

List of tariffs and local taxes that apply to your product on our service Customs duties and local taxes.

 

Labeling and Packaging Rules

Packaging
It must be in conformity with medical and safety regulations. Packaging materials must not be poisonous or dangerous and must be easily degradable and recyclable. All wood packages should carry an IPPC mark, or they will be subject to further requirements.
Languages Permitted on Packaging and Labeling
All products sold in China must have their labels or notes in Chinese.
Unit of Measurement
The metric system is used in China, but Chinese measuring units are also used.
Mark of Origin "Made In"
Information on the country of origin of the product must clearly be indicated.
Labeling Requirements
Name and address of the distributor registered in the country.
Specific Regulations
Labels for food products must contain the net weight, the list of ingredients, the address of the Chinese distributer, the date of production and the expiry date.
The General Administration of the RPC Condition for the Supervision of Quality, the Inspection and the Quarantine (AQSIQ) must be competently handled by the labeling management. All wood packages should carry an IPPC mark, or it will be subject to further requirements. Products requiring the China Compulsory Certification CCC mark, in addition to undergoing an application and testing process, must have the mark physically applied on products before entering or being sold in China.

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Distributing a Product

 

Distribution Network

Types of Outlet

Hypermarkets and supermarkets
Located in the big Chinese cities, they have food and non food products.
Lianhua Supermarket Holdings Co, Beijing HuaLian, Wu-mart, Ren Ren Le
Specialized Hypermarkets and Supermarkets
Hypermarkets specialized in a range of products. Located in the residential areas or the pedestrian streets.
Guo Mei (home appliances), Farmácia de elefantes (pharmacy), Homejia (decorations), Ikea (furniture).
Department stores
Stores distributed in different specialized ranges. Located in the big Chinese cities.
Wing on, Sincere, Intime, Parkson
Mall centers
Located in periphery of cities, these are large set-ups.
CITIC Plaza, Grand Gateway, New Century Global Center, Eurasia Shopping Mall
Street stores and markets
Especially in the rural areas, they are replaced by stores in the urban areas.
 

Evolution of the Retail Sector

Growth and Regulation
China's retail sector offers great opportunities for food product exporters. In 2021, total retail sales of consumer goods in China reached 44,082.3 billion yuan, up by 12.5% over the previous year with an average two-year growth of 3.9%. In December 2021 the retail sales of consumer goods in urban areas was 3.52 trillion yuan (532 bn USD). However, there still are many challenges in selling foreign food products in the retail sector. Demand for imported food and beverage is expected to remain resilient, as consumers  perceive imported products to be safe and of high quality. The major drivers of China's retail growth include rapid urbanisation and an increase in the number of middle class consumers. China's consumers expect their food purchases to be easy and convenient. As a result, electronic commerce (e-Commerce) has become an important tool for businesses in the retail sector to use and to adapt to in order to reach their customers.

Many different business models within the retail industry have emerged recently. Small convenience stores and specialty stores remain the most common retail model. In recent years, however, large retailers are increasing market share as they are able to realise greater efficiencies through better supply chains and wider distribution channels. Furthermore, the industry has undergone many mergers and acquisitions (M&A) which has strengthened the large retailers' position in the market.

Traditional retailers are transitioning to include online components to their business. The era of traditional standalone retail stores is being phased out in China. Offline food retailers include hypermarkets, supermarkets, specialty stores, discount stores, community stores and convenience stores. Online food retailers, who supply food products online and deliver the items to the consumer, are the fastest-growing sector recording record-breaking figures.
In 2021, retail sales of supermarkets increased by 6%, department shops by 11.7% and specialist shops by 12% compared to the previous year. However, the upward trend in China's online retail sales can easily be seen by looking at the 2021 turnover, which reached 198.7 billion USD), an increase of 24.6% over the previous year.

High quality and premium priced food products, including imported food and beverage will remain in demand in the market, although there are some difficulties: high import tariffs, regulations and expensive shipping costs. As a result of globalisation and development, China's younger populations have become accustomed to imported food products being available at retail stores in major cities.
Market share
Mass distribution in China is dominated by large Asian groups, with Chinese distributors taking the most significant market share. According to the USDA Foreign Agricultural Service, the top ten national retailers’ combined sales reached over $88.4 billion in 2019.

Gaoxin Retail semi-annual report for the 2022 fiscal year stated a revenue of 41.534 billion yuan or 6.22 billion USD  (as of September 30, 2021) down 5.0% year-on-year, and net profit of 112 million yuan, down 87.6% year-on-year. CR Vanguard and Lianhua own more than 3,000 shops and have an average turnover of $13.6 billion and $7.8 billion, respectively. Yonghui, is also a major player in China. Among these leading retailers, there are two internationally recognized brands, Walmart and Carrefour. In 2021, Walmart's sales reached 11.43 billion USD.
Convenience stores are widespread and their numbers are increasing in response to a growing number of consumers who are looking to save time and money. The leading chain in terms of outlets is YiJie with more than 27,000. The only international convenience store is 7 eleven.
Moreover, there are five major e-commerce players: Tmall.com is considered the largest, followed by JD.com, VIP.com, Pinduoduo and Suning.

Retail Sector Organisations
China Chain Store and Franchise Association
 

E-commerce

Internet access
As of July 2017, there were 751 million internet users in China (almost 20 million more than 2016), thus the internet penetration rate in China reached 54.3%, up by 1.1% from the previous year. Nevertheless, the difference in penetration between urban and rural areas remains high, the latter recording a rate of 34% compared to 73.3% of urban areas. In terms of network usage among internet users, the urban-rural gap is smallest in instant messaging, where the rural penetration rate is only 2% lower than urban, but when it comes to business transactions, mobile payments, news, and similar applications, the gap is much higher. Beijing, Shanghai, and Guangdong are the top three regions in China with the highest internet penetration rates of over 74%. The number of mobile internet users in China rose to reach 724 million at the end of the first half of 2017. Smartphones were the top devices for internet access in China in 2016 with over 95% users, followed by desktop computers (60.1%) and laptops (36.8%). The search engines market is dominated by local players, with Baidu having a prominent role (76%), followed by Shenma (8.78%), 360 Search (7.87%) and Sogou (3.31%).
E-commerce market
China is the largest e-commerce market in the world. According to eMarketer, e-commerce sales in China are estimated to have passed US$ 1.13 trillion in 2017, accounting for nearly half of the worldwide retail e-commerce sales and 23.1% of all retail sales in China (with an expected increase to 40.8% by 2021). The growth compared to 2016 reached a spectacular 33%. The total number of e-shoppers is projected to surpass 650 million by 2018. In recent years, the online retailing growth was driven by third and fourth tier cities, and for the first time, these cities have surpassed first and second tier cities, due mostly to Alibaba’s investments in delivery infrastructure across the nation that facilitated greater access to rural and smaller urban areas. The top five categories of internet applications in China are instant messengers, news, search engines, videos, and music. In 2017, 45.3% of Chinese companies deployed online sales activities, 45.6% online purchase and 38.7% online marketing. Alibaba is the biggest Chinese e-commerce platform, with more than 500 million people using its shopping apps. The group as a whole - which includes Taobao, TMall, and Alibaba.com together with the payment platform AliPay and other businesses – had a turnover of US$ 23.8 billion and lead operations in more than 200 countries. Tmall - a Chinese-language website for B2C online retail operated by Alibaba Group and one of the world's top 20 most visited websites – is a platform for local Chinese and international businesses to sell brand name goods to consumers in mainland China, Hong Kong SAR, Macau SAR and Taiwan, China. JD.com is one of China’s largest online retailer by revenue, offering direct sales of electronics products, general merchandise, books, home appliances, digital communications, apparel, food, and other goods. Vipshop Holdings is one of China’s leading online discount retailers and distribution companies, characterised by flash sales and time-limited offers. Other platforms include Suning, Gome, Yihaodian, Dangdang, Amazon.cn, and JMei. China’s whole digital scene is mobile dominated, so that optimising store pages for mobile is of pivotal importance. Virtual reality shopping has also exploded with consumers able to explore products digitally via virtual reality simulations. Intellectual property rights infringement across e-commerce platforms is common in China.
E-commerce sales and customers
According to the U.S.-China Business Council, roughly half of all China’s e-commerce sales are made on mobile devices, nearly 16% more than the global average. The rise of m-commerce is expected to continue, with eMarketer predicting more than 75% of ecommerce sales – over US$ 1 trillion - will be transacted via a mobile device in the next future. Cross-boarder shopping is also growing, with Chinese buying abroad items that are either too expensive or too scarce at domestic vendors. Chinese consumers’ primary motivation for shopping online has moved from price, assortment and convenience to quality, value, service and experience. Thus, developing a platform with a smooth, intuitive shopping experience is evermore an important factor in the Chinese e-commerce market. The ease and security of e-payment (with mobile apps connected to a user’s banking) is also cited as a key reason for the rise of e-retail spending. China’s mobile digital payment systems via WeChat & Alipay are widely used (nearly half a billion businesses within China use Alipay and consumers are now even using it overseas when they travel). Credit card remains the main payment method, while cash on delivery, PayPal, debit card and bank transfer are less used.
Social media
China is the world's largest social network market. As of 2018, there are an estimated 911 million social network users in China (Hootsuite). Leading international social-media platforms (such as Facebook, Twitter, Instagram, WhatsApp, Snapchat, Pinterest, Tumblr etc.) as well as video/audio streaming platforms (such as YouTube, DailyMotion, Vimeo, Twitch, Spotify etc.) are all blocked in China due to the Chinese government’s restrictve internet filtering policy (also referred to as the “Great Firewall”). The majority of Chinese digital consumers use social media to do product research or get recommendations. The three biggest social media players are WeChat (963 million monthly active accounts), a social network QQ Zone (861 million monthly active accounts) and a micro blog Weibo (300 million monthly active users). WeChat allows retailers to feature online stores and has a third-party payment function.  It also features push messages to introduce new product lines or deliver promotions. In early 2018, WeChat reached 1 billion user accounts across the world. With Weibo (a hybrid between Facebook and Twitter), in addition to publishing long articles with images or short posts, hyperlinks or videos, users can also repost, comment, search and send messages on trending topics. Weibo has also had an impact with influencers: Weibo posts for brand influencers are now used for direct product promotion and sales, especially since the platform was purchased by Alibaba. QQ is a messaging platform owned by Tencent, the same company that owns WeChat. It started as a desktop app rather than a phone app, in fact users don't need a phone number to use QQ, which means younger people who don't have a phone yet can use it to send and receive messages. Youku - one of China’s top online video and streaming platforms - is more similar to YouTube, except that it contains more professionally created videos compared to the more user generated content of YouTube.
 

Direct Selling

Evolution of the Sector
According to the World Federation of Direct Selling Associations, China's direct retail sales in 2016 amounted to USD 33,888 million, a 1.9% increased compared to 2015. Although an official number of independent representatives is not available, deep-rooted problems such as the wealth gap and unbalanced development of urban areas vs provinces make direct selling attractive to Chinese citizens.

Euromonitor International highlights the Chinese government revised its direct selling laws in 2016 to cancel the three-year of experience requirement before companies are allowed to enter China's Free Trade Zones (Shanghai, Guangdong, Tianjin, and Fujian). On March 13, 2016, China's Ministry of Commerce restricted direct sales products to cosmetics, cleaning products, health food products, health care equipment, small kitchen implements, and household electronic appliances.

National companies have fared better than international direct selling companies; Perfect and Amway both saw lowered value in their sales while local companies improved their performance. However, Nature (NSP China) did see a 91.4% increase in net sales in 2017 compared to 2016. Best World International, a Singapore company, has also had success by introducing its products through a network of nail spas, beauty and hair salons in second-tier cities instead of taking the traditional direct selling route in top markets. This strategy allowed them to grow aggressively, with Bloomberg projecting a USD 196 million revenue stream for 2017 and its stock climbing more than 220% in 12 months.

As in other countries, e-commerce poses the greatest threat to the industry. This is especially true in younger generations that prefer to buy health and beauty products online.

 
 

Commercial Intermediaries

Trading Companies
 
  • Type of Organization
A foreign company wishing to export products in China must obtain distribution and trading rights. The foreign company can have recourse to a Chinese trading company. These trading companies generally have authorizations to trade a vast range of products. The big trading companies have some offices everywhere in the world and on the Chinese territory. However, transport and diversity of the regions do not allow them to operate on the whole of the Chinese territory. The FICEs (Foreign invested commercial enterprises) can also obtain import and export licenses since 2006.
  • Main Actors
China Qingdao Hong Jin Trading Company Ltd, Nexfar Ltd, Wenzhou Nanlong import & export trading company Ltd,
Wholesalers
 
  • Type of Organization
In China, distribution comprises services of an agent, wholesaler and retailer services. A commercial intermediary is indispensable for selling products: a wholesaler, an import-export company, etc.
  • Main Actors
Chinese wholesalers
 

Using a Commercial Agent

The Advantages
Using the services of a commercial agent is generally necessary for business in China. China has many local sales agents who handle internal distribution and marketing. Most of these firms do not have import/export authorisation. Localised agents possess the knowledge and contacts to better promote products and break down institutional, language, and cultural barriers and can assist in keeping track of policy and regulatory updates, collect market data and quickly respond to changes. This is particularly the case in a tender process. Given the width of the Chinese territory, It is advised to have recourse to several agents for each region.
Where to Be Vigilant
Employing a third party results in an additional cost and some control and visibility loss over sales/marketing. It also increases the risk of your product being copied or counterfeited.
Elements of Motivation
The commission amount is an important element of motivation.
The Average Amount of Commission
10 to 20% according to the sectors.
Breach of Contract
During the end of the agency contract or if the agent ends the contract, the agent is entitled to a remuneration of an appropriate amount.
Finding a Commercial Agent
Finding a commercial agent
Alibaba
 

Setting Up a Commercial Unit

The Advantages
To be able to locally manage its own presence, its own teams and marketing trends. In other words, one can establish commercial relations with China directly from Europe. But to obtain convincing results, investments must be made in developing relations by establishing a local presence. Whether for purchases or sales, the problems faced are primarily dependent on the execution of services.
Where to Be Vigilant
- Cultural differences, difficulties of managing Chinese teams
- administrative difficulties
- Relative absence of legal groundwork (attention copyright)
- Dissensions with foreign partners

Read the work of Benoit AMS on the difficulties faced by foreign companies in making deals in China.
Different Possible Forms of Settlement
 
  • A Representative Office
For the majority of the foreign companies, the first form of establishment in China is the representative office. For a long time, it was the only possible form of presence involving 100% of foreign assets. It remains today the fastest and simplest presence to establish, as well as the cheapest (in terms of both establishment and operational fees). The representative office does not facilitate trading in Chinese territory, but enables the following: renting offices (only in certain types of buildings), e-recruiting personnel (via FESCO) and organising follow-up actions to market operations (carrying out market research, promoting products of the parent company, generating customer and supplier contacts and supervising and coordinating the local operations of the parent company).

The representative office of a foreign company is a "hybrid" structure as it does not enjoy any legal status under Chinese law. In other words, a representative office structure does not allow you, for example, to register a brand (which must be done by the parent company) or to initiate legal actions against a third party. A representative office may employ no more than four foreign representatives at a time. Moreover, the existence of an "X" company representative office cannot prevent setting up an "X" Chinese company in the same city. Finally, the representative office head in China is legally responsible on his or her own behalf for the activities of the structure. The office is however a structure adapted relatively well to the management of local partners, suppliers or distributers.

In the last few years many companies have opted for a wholly foreign owned consulting or service enterprise rather than a representative office, as this offers more flexibility and allows invoicing and collection of RMB payments.

  • A Branch Office
No possibilities of creating a branch office.
  • A Company
Companies with 100% foreign capital (WOFE): this structure presents, on paper, many advantages, including considerable independence as compared to the local partner, which may lead to various "problems." Today, foreign companies can create a WFOE (Wholly foreign owned enterprise) in trade (import/export activities with due respect for local sales), production/assembly (local and foreign sales for local and/or export resale) or in services (to companies or to private individuals).

The concerned activity type will have to be defined very specifically in your project. For example, a distribution firm cannot manage logistics, including storage or delivery (logistics is a closed sector to foreigners) and  thus delivery must be sub-contracted to a specialised logistics company. The process of establishing a WFOE is quite long. WFOEs generally have to register capital, unless their scope of business relates to consulting, trading, retailing or information technology. In China, regulations are not the same for everyone; they are arbitrary, complex, in constant change and opaque. Also, general terms presented by the central administration are only a reference base requiring negotiations on a case-by-case basis with authorities responsible for industrial parks, provinces or districts of municipalities, which enjoy broad discretionary power in negotiations with foreign investors. 

Finally, WFOEs are generally set up for a period of 15 to 30 years.

 

Franchising

Evolution of the Sector
China is one of the largest franchise markets in the world and a key target for international franchisors due to its large middle-class consumer base. In January 2019, the Ministry of Commerce (MOFCOM) reported 4,368 franchisors registered with it, while unofficial statistics indicate that China already has over 4,500 franchises and chains with about 400,000 outlets in operation, making China one of the largest franchise markets in the world. Among the franchises registered , many are national and small brands, with an average of about 90 outlets per franchise system. The Chinese franchising market is dominated by traditional franchise operations like food and beverage (F&B) and retail outlets. According to China Chain store and the China Franchise Association (CCFA), China’s food and beverage sector reached approximately $595 billion in 2019, a 7.8% increase over 2018.

Foreign franchise brands are receiving greater interest from second and third-tier market developers as markets in Beijing and Shanghai become more saturated. It's noteworthy that some major locations that were abandoned by foreign multinationals over the past few years were almost all in first-tier cities where their Chinese story began. High rent is expected to hit more foreign franchises in Beijing and Shanghai. However, there is room for growth in China's west and inland regions that boast advantages such as lower labor costs, reasonably-priced real estate facilities and untapped consumer spending. Additionally, we are seeing an increase in food and beverages companies entering the market as wholly owned enterprises to manage their brand, demonstrate proof-of-concept and create a strong foothold prior to expanding into the franchise model.

The most recent legislation released by the Ministry of Commerce (Commercial Franchise Administration Regulation 2007) stipulates that franchise firms can start franchising in China as long as they own and operate two company-owned stores for one year in any part of the world. In addition, franchise firms must file with the local commercial authority for record within 15 days after the execution of the initial franchise contract.
Some Big Franchises
Mc Donald's, fast food
Subway, fast food
Century 21, real estate agencies
Franchises present in China
The 10th Shanghai International Franchise Exhibition
For Further Information
CCFA, Chinese association of department stores and the franchise
, Chinese Ministry of Commerce
 
 
 
 

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Latest update: June 2022

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