Beyond Pilot-Reforms in China: controlled development for Cross Border E-Commerce. The awareness of being economy – model during XIX CCP Congress.

In 2013 Chinese government created the first Free Trade Zone, an area under special regulations aimed to test new type of legislation in the field of international trade and investments. In 4 years the FTZs became 11, with the last 7 approved only in March 2017: Liaoning, Zhejiang, Henan, Hubei, Chongqing, Sichuan e Shaanxi. Each FTZ has its focus: e.g. Chongqing will be related to One Belt, One Road project; Fujian FTZ focuses on trade with Taiwan; Henan on international transport and logistics.

Shanghai FTZ is the example of the success of these districts: almost 48.000 corporates are present in its area. 81 decided to establish their regional headquarters here. According to Shanghai City Commission, since the creation of the Zone high-tech, finance, and research and development sectors have sensibly increased.

A new Negative List on investments in FTZs has been decided in June 2016. The list specifies the industries where investments by foreign companies are prohibited or restricted. In order to invest in some of these sectors enterprises were needed to acquire special approval or enter in a joint venture with a Chinese partner. In the new list 27 special administrative measures have been removed: of these 10 relate to manufacturing, 4 to finance. Overall, the new negative list reduces restrictions in over 20 sectors, including railway transport equipment, pharmaceuticals, road transport, insurance, accounting and audit, and other commercial services. Foreign investors will no longer be forced to enter into a JV when engaging in rail transport equipment or civilian satellite manufacturing.

FTZs offer a significant opportunity to e-commerce: on goods traded online the Chinese government applied a parcel tax: a substitute of conventional custom duties that in many cases resulted to be cheaper. Until April 2016, depending of the product, there were 4 levels of taxation (10%, 20%, 30%, 50%). Moreover, products with a taxable value of less than 50 RMB were tax-free.

Now, retail goods purchased online will be treated as imported goods, subject to import tariff, import VAT and consumption tax. An interim import tariff rate of 0% will be applied to cross-border e-commerce retail goods within the personal limit of RMB 2,000 for a single transaction and a cumulative yearly personal transaction limit of RMB 20,000. Transactions above the personal limit will be levied as general trade items (refunds of tax paid and adjustments to the annual personal limit are possible for returned goods).

But for deals above the cap, consumers will get no tax discounts and will also need to pay customs tariffs.

The import tax rates have been divided into 3 categories and adjusted: Category I – 15% tax rate – includes books, video games, computers, digital cameras, gold and silver, food and beverages and toys. Category II – 30% tax rate – includes sporting goods, textiles, some electrical appliances and goods not included in Categories I and III. Category III – 60% tax rate – includes alcohol and tobacco, valuable accessories, golf balls and clubs, luxury watches and cosmetics. This means that custom duties now affect e-commerce too.

The changes will mean a tax increase for some cross-border e-commerce retail imports, with low price cosmetics (under RMB100 in value) being the most affected (likely increase of around 47%). Conversely, high price cosmetics are likely to actually decrease in import costs (likely decrease of around 3%). The same trend exists in clothing, electronics, watches and bikes – items below RMB250 are likely to increase by around 11.9% and items above RMB250 likely to decrease by around 8.1%. There will also be minor changes to commodities such as baby formula and skincare products.

The new policy aims to level competition between online platforms and traditional brick and mortar import stores, and it is in no way to be seen as a protectionist measure used by the Chinese government. On the contrary, it demonstrates the maturity of the Chinese model and chinese market more oriented on creating good way for quality products with good structured system, more and more open to the world, that the government updates to make it more efficient and well controlled as part of international business environment with awareness of leading role.

China-Abroad

The move also comes as China is stepping up efforts to boost domestic consumption, especially for quality, high-end items. The government said last month it will open 19 new duty-free shops across the country to meet consumer’s growing appetite for high-quality overseas products.

The recent speech of Xi Jinping at the opening of XIX Congress of the Communist Party of China is quite clear on this point: “No country can retreat to their own island, we live in a shared world and face a shared destiny,” he said alluding to the choices of Trump administration.

The Chinese government frequently make use of pilot or experimental legislation. Once a new policy has been tested and evaluated then it is simply corrected. The parcel tax is no exception: it will no more benefits certain goods, but trade in FTZ will continue to be facilitated. The Cross-border E-commerce Retail Import Commodity List is a demonstration: it can be defined as a White List containing a vast number of goods that will be free from submission of license to the customs, the inspection and quarantine supervision. This will shorten delivery time.

The introduction of a clearer and more certain tax rate structure will be helpful in removing one of the major obstacles impairing long term development of the industry, and large enterprises previously holding back due to the immature and unsustainable tax system can now make medium and long term decisions in relation to development of an e-commerce business in China.

This is an optimal time for enterprises with the goal of engaging in cross-border e-commerce trade to begin market research and specific planning.

Companies desiring to invest in China should look very closely at the new opportunities offered by Chinese Model, because the Asian country is no longer merely the place where to invest in low-cost labour: according to a 2016 Euromonitor International research Chinese labour costs in manufacturing are now almost equal to those of Portuguese ad Greek workers (who are considered among the least salaried in Europe). The Pudong Innovation Research Institute of Shanghai has confirmed the analysis, certifying in 2016 an increase of 9% in labour cost. The increase is stronger in centre-western provinces where salaries are still lower in respect of the rest of the country, while cities like Beijing and Shanghai register a 10% rise.

Annunci

FTA as tool for EU to strengthen cooperation with Asia

Free trade agreements (FTA) are international treaties that two or more State negotiate in order to strengthen their commercial relations, making export easier and cheaper.

These agreements are important because even if a very huge number of Countries is today member of WTO (World Trade Organization) and so subject to its regulations, there are still means and ways to protect market form foreign imports. We talk about tariffs as well as non-tariff barriers, e.g. standard regulations and quantitative restrictions (quotas).

With a FTA States can eliminate or reduce barriers to trade between them: this gives companies an easier access to a new market and the opportunity to reduce export costs.

FTA and the European Union

Articles 207 and 218 of the Treaty on the Functioning of the European Union (TFEU) give European institutions competence on dealing with international commerce and so FTA. Member States cannot conclude such agreements by their own.

The procedure to approve a FTA may require much time, for negotiations are not easy to carry and the institutional passages in order to conclude a similar treaty are not few. Nevertheless, as we’ll see later, companies that hope to benefit with these agreements need not to wait too much, as the Council may ask for a provisional entry into force.

Let us have a closer look at this procedure. The initiative to start a negotiation is in the hands of the Council, the institution representing the national governments. They authorize the Commission to meet the third party following precise guidelines.

The negotiations are held behind closed doors; however, the Commission must report the European Parliament and the Council on their status and respect directions of the letter.

Once agreement has been reached on a text, it is translated in all the official languages of the European Union. The Council then approves it. Here technical and linguistic changes are possible.

The Council may now decide to let the agreement entry into force provisionally. Before we go on, first we need to clarify the nature of FTAs: according to the provision in them, we speak of EU-only or mixed FTAs. The formers contain regulations in matters where the EU has exclusive competence, while the letters concern also concurrent legislation. EU-only provisions alone can entry into force provisionally (that’s what happened with CETA).

In order to make the entry into force final and complete, the European Parliament (and in case of the ratification of a mixed FTA, also all the national parliaments) must give its consent.

abe eu

Opportunities for Europe and its partners

After the 2016 US presidential elections and the protectionist positions of the new administration, global trading is rapidly changing. In January 2017 Donald Trump announced the US withdrawal of TPP, the ambitious agreement aiming to create a very strong commercial cooperation between the United States, Canada, Japan, ASEAN and other Pacific Countries (Mexico, New Zealand, Australia, Chile, Peru, Colombia).

The Transpacific Partnership may never entry into force: without its most important member, the agreement as it has been concluded does not fit the others partners. Japan has additionally declared it is not interested in a modified version of the treaty. “it would be meaningless” said PM Shinzo Abe.

TPP failure may nonetheless become an opportunity for Europe. On one hand, Asian Countries like Vietnam and Japan are particularly interested in finding a new important economic partner; on the other hand, the EU may use FTAs as a tool to strengthen cooperation with Asia also in non-economical fields, in competition with China, that works to maintain its dominance in the area.

Hanoi is currently negotiating a FTA with the European Countries. Reaching an agreement is difficult because of human rights situation in Vietnam, but the country needs a new economic partner: European market is an excellent alternative to China, with whom commercial relation are quite unfair for Vietnam. That’s a perfect example where the EU could use FTAs as a political instrument.

Something similar can be said for Japan. In this case Europeans aim to have access to a market where its high-quality products are very appreciated. The EU-Japan FTA is in an advanced state of negotiation, and by the end of the year a text may be agreed.

Beef Market, new opportunity in Japan. The relaunch of Italian production.

The epidemic of Bovine Spongiform Encephalopathy, better known as BSE or Mad Cow Disease, in the late 1990’s had very devastating effects across the world. From livestock having to be slaughtered but not consumed to humans consuming tainted beef and becoming ill, the consequences were disastrous.

One consequence that lasted long after the disease was believed to have been eliminated was that Japan outlawed the import of European beef in 2001. In 2013, Japan began to ease up on its policy and allowed six European Union members (France, Ireland, the Netherlands, Poland, Denmark and Sweden) to export beef to Japan.

carne100italianaIn 2016, Italy has joined the ranks of EU members able to export beef to Japan. Although, the United States and Australia have dominated the beef market in Japan since the Embargo with Europe, there is still profit to be made by doing business there. In 2015, the EU exported 994,000 Kg of beef for a value of over 3.6 million. Over two thirds of the beef and half of the money came from Poland. Although it was not technically allowed to export beef to Japan, data shows that Italy sold 72,000 Kg of beef to Japan for over 280,000 euros. Italy’s exports averaged 3.90 euros per Kg, slightly higher than the EU average of 3.63. The import tax in Japan for European beef is 38.5%, on par with that of the US but significantly higher than that of Australia. Despite these challenges, Europe can still carve out a niche exporting beef to Japan. In order to export beef to Japan, there are several processes that one must go through.

One of the most important things that must happen is one that is controlled by the governments of the EU and Japan, rather than the exporter. A free trade agreement will be necessary between these two parties to ensure that Europe has a role selling beef in Japan. Time for this to happen is running out and if one is not reached before the Trans-Pacific Partnership is ratified, Europe could be squeezed out of the Japanese beef market.

The first step that an exporter must take in order to sell beef in Japan is to knock out the many general requirements. These are requirements for many different exports, not just beef. They include Advance Information on Maritime Container Cargo, Manifest for Aircraft, Manifest for Vessels, Inward Declaration for Aircraft, Inward Declaration for Vessels, Customs Import Declaration, Declaration of Dutiable Value, Commercial, Invoice, Packing List, Certificate of Non-Preferential Origin, Proof of Preferential Origin, Air Waybill, Bill of Lading, and Insurance Certificate.

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After those requirements are taken care of, one must then complete the specific requirements. These are requirements that only relate to the beef industry. The first of these is completing the application for the Import Quarantine Certificate for Meat and Meat Products. This is a document that verifies that the meat has been checked out by a veterinarian upon reaching the Japanese border. One must apply for the inspection with the Animal Quarantine Service in Japan. There is no fee and the time it takes to process the application varies.

The next requirement is the Import Permit for Endangered Species Subject to CITES. The completion of this document is required as a result of the Washington Convention on International Trade in Endangered Species of Wild Fauna and Flora (better known as CITES). This is the document that is needed to be able to import a given species into a country. This document must be filled out for a single species and is valid for a certain period of time (up to one year). It is to be submitted to the Ministry of Economy, Trade and Industry (METI), Trade and Economic Cooperation Bureau, Trade Control Department, Office of Trade Licensing for Wild Animals and Plants in Japan.

After obtaining an import permit, the next document that must be completed is the Veterinary Health Certificate for Animal Products. This is a document filled out in the exporting country that confirms that the meat meets the proper health standards. It is required for customs clearance and market access. It is to be sent to the Animal Health Division, Food Safety and Consumer Affairs Bureau, Animal Health Affairs Office under the Ministry of Agriculture, Forestry and Fisheries (MAFF) in Japan.

Finally, there must be a BSE Certificate filled out. This certificate is similar to the previous one in that it is a health check performed in the exporting country. However, this certificate is specific to BSE. It is not always required if the Veterinary Health Certificate for Animal Products provides relevant information. It is to be sent to the same place as Veterinary Health Certificate for Animal Products is sent to.

Exporting beef from Italy to Japan is a new industry that requires many steps in order to complete and the competition is heavy. However, Italian beef can be a good niche market product and it could be worth exploring opportunity in Japan’s beef market. Our consulting company ADM-EA  in cooperation with governmental departments Japan and other technical offices operating in the industry is recently started new services program for beef exporters which we are now operative to provide market’s info  (B2b segment) and procedure’s application for exporting. 

If Alibaba starts to be strategic partnered service platform for italian brands are we sure to get ready soon for that?

Last month we got first Matteo Renzi’s institutional mission as italian prime minister during official visit in Beijing. And after France and UK it was our turn to sign specific agreements for mutual development on key sectors, and talking about chinese market, as I’m already teaching for executive master programs in NIBI for Internationalization of Businesses on Eastern Asia Markets (New Institute for International Business in Milan), we need first of all to keep on mind how nowadays is very important the role of online sales for import-brands in China.

That’s why the first interlocutor for our Ministry of Economic Development  Mrs. Federica Guidi was Alibaba, main player for online sales that is boosting two specific platforms like Tmall and Taobao for B2c dynamics also for imported products.

elibaba e iitalia

As clarified in presence of chinese prime minister Li Keqiang, some brands as made in italy’s production, have been already introduced some years ago on Alibaba but comparing with other products and brands they are still few and needs more promotion.

In particular it’s really necessary to develop some specific strategies to make on focus features of italian productive’s excellences cause most of the times even if chinese market is pretty interested to buy foreign high quality’s products online, they are not well aware about brands, own distinctive features as much as they’ve never been in Italy before or well familiar with specific products.

In addition if also we should consider how communications strategy and publicity are on continuous development in China, where recently there’s going on get structured well framed scenario for promotion, marketing and PR than before, but comparing with western professional tools of doing business communication they cannot be used as entry-keys for the market,  to facilitate sales of specific brands with high level’s distinctive features, first of all it’s important for foreign brands to be represented as “available” products. So Alibaba is really good choice to start on doing that.

The hardest point on dealing with big group as Alibaba for small medium company  consist of some barriers on company’s registration and access to its services for manufacturers, cause usually in the past Alibaba allowed chinese distributors or whole sellers only as contractors for own specific online sales platforms for b2C  (like Tmall and Taobao).

We needed political and institutional introduction to sit down at negotiation’s table with Mr. Jack Ma, patron of Alibaba, and the strategy of our government seemed having sense in this step: made in italy means excellent quality, small production comparing with potential of chinese market and companies with familiar or low managerial trust’s asset (cfr Francis Fukuyama’s definition about italian corporate system) so the first way to consider internationalization should be get preliminary access on online sales platform as facilitate dimension of entry as follows

– even if the company is still present in Italy without any particular official JV with chinese whole seller / distributor

– simple contracts to get access to services offered by Alibaba

– dedicated team taking care of italian brands

– cooperation for defense of intellectual property for italian products

Even if the agreement represents a new important step ahead it still remains to understand in which way our SME will be able to join such preferential assistance for promoting on Alibaba, the costs of the service and in particular who will manage selection of brands and in which terms (the agreement specifies particular interest for luxury and  high level’s products).

Personally speaking I think that ITA (Italian Trade Agency) directly linked with Ministry for Economic Development, will have important role about such dynamics  and the key person of this joint-program was first of all Fu Yixiang vice-president of Italian – Chinese Chamber of Commerce in Rome, whom introduced Jack Ma on considering this cooperation’s perspective with our Government.  So the match starts as political / institutional agenda.

I think that “the red card” ( or rather political involvement on boosting business issues with chinese counterpart) is totally good strategy (as whoever works with China well knows the importance of political action on market’s issues) but the matter now is represented by orientation’s scheme for brands and companies that would be introduced on online sales maker in China.

china sales

Indeed doing online business in China is totally different than in Europe, USA or Japan and it needs specific training cause probably most of italian SME still don’t have “fully equipped” departments to realize as this step is really internationalization’s matter.

Some successful companies like YOOX for example, if we think about fashion’s brands, put on feature the lack of skills for our brands on approaching online sales in China from 2008 and prepared the best way to get internationalization’s tools for products before promoting them online. It’s great news to know that by now we’ll be able probably to facilitate the access of more brands in sustainable way on chinese online sales market but it’s urgent to prepare SME making them operatives on right way to develop elements about management, production, communication, research and strategic planning that could match with new perspective of meeting chinese clients online.

Management: International vision is a must, cross cultural skills needed, awareness about chinese social networks and online scenario cause they represent parallel market.

Production: Tmall and Taobao are global markets inside national market with high performance of success for sales towards well framed targets (different regions, different cultures, different styles)

Communications: managing team that operates into online businesses are sometimes really different than usual ex so enterprises or usual main trading companies which we were familiar to do business with, timing of doing business online needs specific attention, tools used to communicate with chinese counterpart (stop email – ok instant massaging) must be well selected

Research and Strategic Planning: publicity, online communities, competitors and  investments for online presence,  (around 10% of annual investments for maintenance and develop of business from companies in China is for online publicity) needs dedicated team to sustain planned objectives.

If will be able to assist italian companies not only on getting sustainable entry for online platforms but also on providing for them specific skills and preparation to manage diversified tools that such scenario constantly involves, in addition with cross cultural  vision that I think will always represent “distinctive  plus” for people whom wanna doing business in China

 

At the end, passion for cross culture and arts guide me towards new projects

I’m really proud to announce that finally we’ve done it – We’ve created a new platform which we wanna boost new opportunities to make contemporary societies and young artists into mutual comparison to create something of absolutely useful for common contents we’re going to analyze and also really creative about cultural perspectives we want to promote with specific agenda of activities.

LOGO FOTO SWITCH ON

That’s the aim of Switch on Your Creativity – the cross cultural laboratory presented and sustained by Asian Studies Group, the organization which I manage in Italy, focused on didactic and orientation’s services for professionals and careers toward east Asia.

As first edition with patronage of Milano Expo 2015  and support of Punto Enel Milano, where the event will be opened on 19 of february 2014, we decided to create contest about sustainable development in Milan, the city of the next international EXPO, and on introducing that we made european and asian young artists as part of real artistic dialogue about such topic.

With this contest we would to introduce also the first edition of specific exhibition named  with “Award for International Dialogue of Cultures” – many young students from Europe and Asia joined our contest and we think it represents a great occasion to start feeling of being part of the same world, a place where everybody can interact with own vision (and the vision of own group / nation) without forgetting  how important it is today to build common structures of communications and relations.

I think that such start could offer for future occasions a really good reference that it’ll be useful on remind us what kind of project we have managed before, helping us on preparing always attractive solutions.

During this first edition we have guided young artists between 18 – 28 years old into personal research about the meaning of sustainable development: we got really optimistic visions about perspectives of future and global society like something of bright and able to sustain new dimension of common good for everybody  as we got some works full of criticism about environmental pollution or high energy’s consumption like something that we don’t to get but  we absolutely need to feed world’s machine –

energicamente swo

It has been really interesting see how for example european vision always put the individual-action in the center of dimension of development (good or bad it could be) whereas asian vision focused the aesthetic research more into role that societies should take on about human – world / cities – environment relations.

As I said many times it’ s fundamental to understand how such different perception of the role of individual marks out the social charisma of specific nation / society; from such perception we should start to discuss about important topics introduced by global events like next EXPO’s edition will take place in Milan in 2015.

Cross cultural dynamics are always our mission.

See you on 19 of february in via broletto 44 at Punto ENEL.

Welcome on my new personal desk… shared for you

2012-10-18 09.07.05

Buongiorno a tutti! Today is national holiday in Italy and also in several countries in europe and in asia.. and while everybody is looking for nice swim  or relaxing during summer holiday, ‘cause I’ve got terrible cold due the air conditioning system which are provided the maltese “crazy” buses, I’m starting this website (for me it’s also a great part of my relax here !) and I’d like to consider it as my  lovely desk shared with you.. (check the pic of my studio in Milan at the beginning of this post), a place useful to introduce not only my professional profile but also to create new opportunities to share opinions and project’s proposals concerning Europe & Asia. two different worlds.. my passions and  part of my life

I think that many users and friends on FB well know wordpress and will be happy to blogging with me on this space. If you’re not so familiar with WP i suggest you to open an account, it’s free, very quick and it’ll bring you connected with lot of people who love to communicate, to share contents and also some business tips!

Even if I’m proudly italian, (for those things which we always should be proud of being Italians!) i’m more familiar with english on online communication’s issue.. of course I know that professionals and colleagues can follow totally contents in english but sometimes I’m used to introduce some posts to friend or relatives that still have some problems with “the language of global community” so I think I’m going to proceede with double language posting.

Please give me time to make this blog updated, in particular I’d like to introduce to you some training programmes that I will manage for some corporates involved on internationalization’s dynamics on eastern asia markets – I’m going to post calendar about next month’s activities soon!

That’s all for now! you’re really welcome and as usual, feel free to comment and join our discussione on these pages.

Paolo