China's professional shoppers face renewed scrutiny as government cracks down on agents purchasing goods overseas

PUBLISHED : Sunday, 06 December, 2015, 3:00am
UPDATED : Thursday, 21 June, 2018, 3:18pm

The mainland government may move to sharply curb the booming overseas shopping agency business in an attempt to boost domestic consumption.

"The government is mulling over more severe measures, like legal punishment, against overseas shopping agents. The new policies will be launched soon," said Zhou Ting, director of Fortune Character Institute, a Shanghai-based market research unit. Zhou is also a consultant with the Ministry of Commerce and the Ministry of Finance.

Overseas shopping agency businesses, known as daigou in Putonghua, have grown quickly in recent years as Chinese consumers buy more goods from foreign countries, such as baby formula, cosmetics, luxury handbags and fresh food.

Agents purchase products in overseas markets and sell to mainland customers at a profit, often evading import tariffs to save costs.

But the market is rife with counterfeits, which attract buyers on the hunt for bargains.

One of the major categories for the agents is luxury goods. A report by consulting firm Bain & Co put the value of daigou business for luxury goods at between 55 and 75 billion yuan (HK$93.5 billion) in 2014, nearly half what the brands themselves sell through mainland stores.

"The d aigou agents have not only made the government suffer a loss in tax revenue, but they have also hurt local industries, causing disorder in luxury brands' supply and pricing systems and affecting consumer interests in some cases," Zhou said.

A senior executive of a Hong Kong-based developer with a focus on shopping malls on the mainland said top management at some global brands had visited Beijing this year to discuss the issue with the government.

"Luxury brands do not worry about a slowing economy or anti-corruption campaign. Levels of personal spending are not bad given the growing middle-income class. They are worrying about daigou agents," said the developer who wanted to remain anonymous.

In 2013, a Beijing court handed a three-year sentence for smuggling to a former flight attendant who had opened a daigou store on to sell cosmetics she bought in South Korea to mainland buyers. The case drew wide interest as it was the first known prosecution of a daigou agent.

Mainland authorities began this year to tighten inspection of imported goods bought by individuals.

Many local shoppers and their agents began in September to report their parcels were being held up at customs for weeks.

Some said officers had asked them to pay taxes or even return the goods. Industry figures said customs had received orders from above to be more vigilant with checking individual parcels.

With overseas shopping, the government appears faced with balancing competing interests. It wants to collect tariffs but also stimulate consumption. The question is how much of that buying should remain within the local economy. For many mainlanders, foreign goods are seen as a guarantee of quality.

Premier Li Keqiang said in a meeting earlier this month that the government should not restrict mainlanders from buying a variety of foreign goods but should also strengthen the appeal of buying locally. Towards that end, the government has been encouraging the development of Chinese-based e-commerce companies.

Statistics from the Ministry of Commerce show import sales through e-commerce companies jumped 59 per cent to 476 billion yuan. Sales were 129 billion yuan, up 44 per cent from a year earlier.

"We must open our door wider," Li said at the State Council meeting. Otherwise, traditional companies would have "no idea about what people's new demands are".