Supported by favorable tax policies and subsidies, China’s cross-border e-commerce industry has seen rapid global growth since 2022. However, analysts warn that this surge brings significant concerns, including tariff evasion, product dumping, and the protection of private data.
According to Chinese Customs data, in the first quarter of this year, China’s cross-border e-commerce imports and exports amounted to 577.6 billion yuan ($81.27 billion), a growth of 9.6 percent. Exports were 448 billion yuan ($63.03 billion), and imports were 129.6 billion yuan ($18.23 billion).
In 2023, China’s cross-border e-commerce developed rapidly, with total exports exceeding 1.8 trillion yuan ($250 billion), a growth of 19.6 percent.
The state-run People’s Daily reported China’s cross-border e-commerce is entering an “accelerated growth” phase, making “global buying and selling” smoother.
Tax Rebates
This rapid growth can be largely attributed to policy support aimed at promoting export trade. Beijing has consistently provided tax incentives, subsidies, and relaxed administrative requirements to support the development of cross-border e-commerce.Since 2014, cross-border e-commerce has been included in the Chinese premier’s Government Work Report for 11 consecutive years, recognized as a new driving force for boosting foreign trade growth. According to state media, the regime has established 165 cross-border e-commerce comprehensive pilot zones. In these pilot zones, e-commerce retail export goods enjoy governmental subsidies such as tax rebates.
Economist Davy J. Wong told the Chinese-language edition of The Epoch Times that while most countries offer some level of export incentives and subsidies, the international norm is that these benefits should not harm the interests of the receiving countries.
Mr. Wong believes China’s “practices violate the principles and spirit of fair international competition and typically lead to sanctions from the affected countries.”
According to the Shanghai Taxation Office, the regime started the export tax rebates policy as early as 1985 to enhance its competitiveness in foreign markets by eliminating double taxation on exported goods. Through multiple tax reforms, Beijing revised the tax rebate policy to allow a zero tax rate for all export products with limited exceptions starting from March 20, 2020, according to a report by China Briefing, a magazine by a foreign investment consulting company.
Mr. Wong further claimed that Chinese cross-border e-commerce companies also exploit loopholes such as the U.S. de minimis rule, which exempts imports valued under $800 from duties and taxes. He alleges that they break down shipments into smaller parcels priced as low as $3.99 or $4.99, and these companies flood the U.S. market with low-cost goods. “This practice not only bypasses tariffs but also undermines the local markets for small goods and light industrial products in the West, causing devastating impacts without contributing to local tax revenues.”
“In 2018 and 2019, during the U.S.-China trade war when tariffs on Chinese goods were increased, they used these methods and various subsidies to penetrate the U.S. market and circumvent tariff barriers,” he added.
Economist Li Hengqing said that after the collapse of China’s real estate market, property values have plummeted, causing a rapid decline in ordinary people’s wealth. In this situation, Beijing needs to find alternative strategies. One significant opportunity is to capture international markets and export excess domestic production capacity to various parts of the world.
Frank Tian Xie, a business professor at the University of South Carolina Aiken, believes, “The issue of excess capacity for small commodities is not that severe, and its impact is relatively minor. However, the problem becomes very serious with larger capacity excesses, such as in the automotive and electric vehicle sectors, due to the significant initial investments and large production scales.”
“You could say it is a desperate self-rescue measure, but in reality, it is about profit at the expense of others. By exporting unemployment to other countries, they are harming others while focusing solely on making money for themselves,” Mr. Xie further claimed.
Threat to Private Data
Temu, a Chinese-backed e-commerce platform, topped the most downloaded apps and games of free iPhone apps in 2023, promising users to “Shop Like a Billionaire.” The platform faces two class action lawsuits alleging the app embeds “spyware and malware on user’s phones to collect sensitive personal information,” giving Temu access to “literally everything on your phone.”Mr. Li believes that while protecting personal information is a common practice, the CCP “frequently and unrestrainedly accesses other people’s information without any oversight.”
Mr. Wong alleged that Chinese cross-border e-commerce platforms have always quietly collected user data. “It is an indisputable fact that a large amount of Chinese big data is obtained, misused, and sold in a manner that disregards any limits, regulations, or legal awareness, infringing on user privacy.”
In 2017, the Chinese Intelligence Law stipulated that “any organization and citizen shall support, assist, and cooperate with national intelligence work according to the law.” On April 26, 2023, China’s latest revision of the Counter-Espionage Law expanded the powers of national security personnel to “review and retrieve data, summon individuals, and inquire about property information” for those suspected of espionage. It also requires any Chinese citizen and organization, such as postal, courier, telecommunications, and internet service providers, to “provide necessary support and assistance.”
Mr. Wong believes that Chinese e-commerce platforms will be even more unscrupulous toward Westerners. “These platforms will definitely compromise the data security of a large number of European and American users by leaking, misusing, and selling specific personal information and banking information, severely threatening the safety of European and American residents and, of course, affecting national security as well.”
