Beijing hopes next year’s import expo will convince domestic consumers to shop more at home
Contribution of domestic consumption to GDP growth in China dropped last year even as overseas spending has grown by double digits in the past decade
China is considering allowing consumers to buy imported goods from e-commerce companies during the China International Import Expo, which will be held in November 2018.
The fair, a national undertaking, is aimed at drawing more foreign companies to sell their products on Chinese soil and hopes to attract 150,000 institutional, domestic and foreign buyers.
Deputy commerce minister Wang Bingnan, who heads a newly established bureau overseeing the fair, held a meeting in Shanghai this month to garner opinion from officials as well as academics and companies on how to better prepare for the event, according to people familiar with the matter.
While government bodies, including the top regulator for state-owned assets, are expected to help state-owned enterprises deliver their orders, e-commerce companies could sell quality imported goods to consumers during the fair, which will be open to the public “in an orderly way”, according to a draft work plan seen by the South China Morning Post.
On Friday, the Shanghai commerce commission held a follow-up meeting with a dozen domestic companies, a group that has access to a large pool of overseas sellers and could help to bring them to the fair.
These enterprises included state-owned retail, food and equipment majors such as Bailian Group, Bright Food (Group), Shanghai Donghao Lansheng International Service Trade (Group) and Shanghai Electric Group. The meeting was also attended by several private companies, including e-commerce companies, according to another document seen by the Post.
Every year, Chinese consumers spend as much as US$260 billion on everything from luxury items – bags and shoes – to basic necessities, but offshore. And Beijing hopes the import fair will help to keep this spending at home and make domestic consumption the mainstay of economic growth.
Nothing illustrates its significance more than the fact that President Xi Jinping has spoken about the fair on at least two occasions this year – during the Belt and Road Summit in Beijing in May and at this month’s Apec summit in Vietnam.
The fair is part of the central government’s drive to shift reliance from exports and investment to domestic consumption for growth. Domestic consumption’s contribution to gross domestic product growth last year was 64.6 per cent, according to the National Bureau of Statistics. This was down 1.8 percentage points from 2015.
The expo could help to attract some overseas expenditure back home by granting domestic consumers a wider spectrum of choices, commerce minister Zhong Shan said this month.
What the government aspires to achieve depends on the country’s hundreds of millions of consumers. Chinese overseas consumption has grown by double digits annually in the past decade.
Jason Yu, the general manager of market research company Kantar Worldpanel for Greater China, said Chinese shoppers have a bigger appetite for upmarket imported consumer goods thanks to growing affluence.
The expo aims to attract about 25,000 global brands, according to a senior official at the China Development Bank (CDB), one of China’s policy lenders.
In recent years, China has accelerated the implementation of policies to boost imports. But tariffs continue to be a sticky issue. The CDB official said the issue could be resolved through discussions with related parties and government agencies.
China’s average import tariff sits at about 10 per cent, a level similar to other World Trade Organisation members, according to Bryan Tang, an EY tax partner.
The expo could also add weight to China’s ongoing internationalisation of its markets and the yuan, anchored by the Belt and Road trade strategy as a centrepiece of its economic ambition.
Chinese officials are examining ways of popularising the use of the yuan in rising overseas investments and acquisitions. Expanding the yuan’s usage offshore encompasses the country’s goal of exporting and implementing the China model of development finance on a wider scale.
The central bank governor, Zhou Xiaochuan, in an article in May described the model as a sustainable financial framework backed by capital from a cross between concessions and commercial funds. It is self managed, stresses on long-term investments and returns based on credit scores, and operates according to market forces with no government subsidies.
Of China’s total overseas investment in 2016, US$14.53 billion were invested in Belt and Road countries, with the figure growing.
But there is a long way to go before the yuan becomes a mainstream currency for cross-border deals, for which the US dollar remains a benchmark, particularly in developing markets and in far-flung countries on the Belt and Road routes.