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Little parcels keep China’s factories humming

The little parcels of everything from socks to phone chargers sent from China directly to individual consumers in the rest of the world have put a shiny bow on the country’s exports, one the West could soon rip off.

The European Union is drawing up plans to impose customs duties on low value goods customers buy online through retailers including Shein and Temu, the Financial Times reported citing three people familiar with the matter. U.S. authorities are also increasing oversight over a loophole that allows these firms to skirt import duties.

Overall, cross border e-commerce grew 20% year on year in 2023, according to China’s customs data. The booming trade accounts for 7% of the goods the People’s Republic sends overseas. Demand for other items is more muted. Exports power nearly one-fifth of GDP but rose a mere 0.6% to 23.8 trillion yuan ($3.38 trillion) over the same period.

It marks the success of what Beijing identifies as a new strategic industry. Since 2015, the country has developed 165 special industrial zones nationwide to ship China-made products directly to overseas online shoppers. Beijing also published draft rules last month to promote the construction of warehouses abroad. It’s spurring deals too: JD.com 9618.HK is one of the potential suitors for British delivery firm Evri.

This surging export is an obvious target for policymakers in the West who worry that China will flood the world with cheap goods to keep factories in its slowing economy humming. The number of parcels containing goods worth less than $800 entering the United States surged to one billion last year from 410 million in 2018, according to U.S. customs data. Up to 70% of these packages arrived from China.

Yet controlling this trade is more complicated than slapping tariffs on high-value bulky items like electric vehicles. The statistics probably understate the size of it, so any crackdown could have a bigger than expected negative impact on consumption in countries trying to erect barriers against China. Non-Chinese companies such as Amazon AMZN.O are benefiting too. Ripping the bow off China’s exports will make things less pretty for everyone.

The European Union is drawing up plans to impose customs duties on cheap goods sold online by Chinese retailers including Temu, Shein, and AliExpress, the Financial Times reported on July 3, citing three people briefed on the matter.

The European Commission will suggest scrapping a current 150 euros ($162) threshold under which items can be bought duty free, the report said.

China’s cross-border e-commerce rose by 19.6% to 1.8 trillion yuan ($248 billion), or 7% of total exports in 2023, according to General Administration of Customs. Cross-border e-commerce includes goods sold directly to foreign customers via online platforms.
Source: Reuters Breakingviews (Editing by Una Galani and Aditya Srivastav)

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