How China turned a problem into an opportunity: the CBEC way.

Nov 3, 2021

In the early 2000s, the Chinese Government decided to turn into an advantage what had been until that moment an issue for the economic and import framework of the country: the massive introduction of Western branded goods in China by locals or Chinese travelers. In fact, Chinese people working, studying, or traveling in foreign countries were very used to buying and bringing branded western goods to their relatives and friends in the mainland. This widespread demand led to many people ending up in rewarding but illegal sales mechanisms, fostering and widening the black market and counterfeiting activities around almost any kind of item, whether coming from abroad or otherwise. Because of all this, a wise tool was introduced by Chinese authorities to counteract this trend and practice, which boosted the national economy, fought illegal sales, and satisfied local demand of goods all at once: the Cross Border E-Commerce (short for CBEC).

CBEC is a separate, official, and state-sanctioned trade channel for imported goods. CBEC offers an excellent and facilitated market access route for foreign brands, and when it comes to medical devices and nutraceuticals, this means circumventing animal testing and some seriously strict regulatory and notification requirements needed to import products into China.

CBEC allows you to sell foreign goods within third-party e-commerce platforms, approved by the Chinese government, and allows getting in touch directly with the consumer. As a matter of fact, it’s a pure B2C sale model applied by the State with a flat, single, and a preferential tax rate of 9.1% (applied to the company) on every purchase made by a Chinese customer. The relatively low and simple fiscal application is indeed another key point of the CBEC’s success. In the practice, companies ship their goods to some duty-free warehouses in China, and once a customer buys something, the electronic custom makes the product (legally) enter into China and sends the request to the Logistic Company which dispatches and delivers the goods to the buyer in two-three days. Because delivery timing is a sticking point for the success of online sales, in the past year’s Chinese authorities increased the number of authorized stock points in China to improve the market penetration of CBEC platforms by customer satisfaction. The covid-19 pandemic boosted online sales everywhere in the world but in China, this meant even more of an unexpected growth which was already continuous in the past years and truly consistent. The e-commerce giant platforms reported revenues increased by 22% in 2020 ending up in a global business turnover of 13.7 billion euro in the last year. The opportunity for foreign companies could seem something not to be missed but great results and expectations definitely come (at least in this case) only with great investments. Entering into the B2C world means breaking even at months 24, 36, or sometimes later in time, and relying on a deep, trusted, and conservative business case analysis is more than crucial. Many factors influence its outcomes such as the category of product, the sensitivity of the Chinese patients to that need, and the overall cultural framework, besides the presence of competitors and the current growth status of the reference market. CBEC established with no doubt a new Silk Road between the East and West for any sort of goods, but when it comes to nutraceuticals and medical devices products, it surely allowed new therapeutic and sometimes more efficient health pathways to reach a country where traditional medicine is still widespread in the population, making technologies and private pharmaceutical research outcomes more accessible.