China Postpones New Tax Rules on Imported Consumer Goods

Tighter tax rules on imported consumer goods bought online have been postponed in order to dissuade people from going abroad to shop， according to a Ministry of Commerce spokesman.

China has postponed tighter taxation on im- ported consumer goods bought online for another year — to the end of 2018 — in order to encourage consumption， the Ministry of Commerce said recently.

The State Council decided to hold off on enacting the new tax regime designed to “regulate” foreign products bought through cross-border e-commerce platforms.

The New Tax Regime

The plan， which was first announced in April 2016， would make it more difficult for people to avoid paying taxes — or obtain relatively low tax rates — on many consumer items such as healthcare products and cosmetics.

The new tax regime was already postponed once before. In late 2016， the government announced that it would postpone enacting the rules until the end of 2017.

Ministry of Commerce Spokesman Gao Feng said that the decision was based on the fact that online imported goods have boosted supply and consumption in the domestic market. These imported goods have also encouraged Chinese consumers who would have otherwise gone abroad to shop to instead spend their money at home.

Xu Ping， president of Henan Bonded Group， said that the extension of the transitional period shows that the current taxation policy is working， and its wise not to rush a new policy that could hurt the market.

However， some worry that uncertainty over the tax policy may weigh on businesses. Xue Jun， vice dean of Peking University Law School， said another one-year delay will make trading companies more anxious， causing them to make speculative， short-term business decisions， he said.

Luxury Goods Sell for 50% Higher in China

Chinese consumers on average pay a 55% premium over prices in France for luxury watches and jewelry， and a 40% markup on luxury handbags.

Luxury goods sell for 50% more in China than in France and Italy， and 20% more than the global average， a Deloitte study has found.

But emerging markets — including China and Russia —continue to drive growth for the sector.

Compared with France， Chinas highest premium is for watches and jewelry， at 55% more expensive on average， while bags were the lowest， at 40% pricier.

“This presents a clear arbitrage opportunity for travelers from Asia， and maintains the pre-eminence of European brands home markets as shopping destinations，” according to the Global Powers of Luxury Goods report， published by international accounting firm Deloitte Touche Tohmatsu Ltd.

Tourism presents significant opportunities for growth. Almost half of luxury purchases are made by consumers who are traveling in a foreign market — 31% of sales — or at the airport， where 16% of purchases are made.

But uncertainties caused by global developments —including Brexit， the new U.S. administration and terrorist attacks in several European cities — have “deterred many potential Chinese buyers from traveling to key shopping destinations in the U.S. and Europe，” Deloitte said.

Consumers in emerging markets continue to drive luxury market growth. In China， Russia and the United Arab Emir- ates， 70% of consumers surveyed said they have increased their spending on luxury goods over the past five years， while the percentage was only 53% in more mature markets such as Europe and the U.S.

In China， the slowing economy and the central governments crackdown on luxury gifts in the corporate sector have slowed market growth. Nevertheless， demand remains steady， as the countrys middle class expands， disposable incomes increase， and the population continues to buy higher-quality products.

Despite the premium that Chinese consumers pay， luxurygoods prices are generally being adjusted downward in the country， to “bring them in line with global markets.” These adjustments， Deloitte said， are “encouraging more Chinese consumers to purchase luxury brands in their domestic market.”

Globally， however， the 100 largest luxury companies saw their sales drop 4.5% to $212 billion during the fiscal year ending June 2016， driven largely by weak growth of major economies and high debt levels in emerging markets， Deloitte said.

Among the top 10， Hong Kong-based Chow Tai Fook Jewelry Group Ltd. saw the steepest decline， of 11.9%， to $7.3 billion during the period.

“The Hong Kong market is still affected by the strained relations with the mainland， with many wealthy Chinese tourists staying away and choosing to travel to other Asian cities for their shopping，” the report said.

Gucci Goes Online to Conquer Chinese Market

Guccis new online store will cater to the many Chinese customers who dont live in one of the countrys largest cities.

Smaller-city fans of luxury goods will no longer have to travel long distances to buy the latest Gucci handbag， now that the Italian brand has developed an online store that caters to the Chinese market.

The store， which offers full collections of handbags， shoes， jewelry and ready-to-wear apparel， allows Chinese customers to shop “without the restrictions of store locations or business opening hours，” the company said in a statement.

Catering to the local market， Guccis online store supports Chinas two most-popular digital payment tools — Ant Financial Services Groups Alipay and Tencent Holdings Ltd.s WeChat Payment — which account for a combined 90% of online payments made domestically.

The move will help balance the mismatch between the location of Guccis physical stores and their target consumers. According to consultancy McKinsey & Co.， 80% of luxury stores are located in the 15 Chinese cities with the largest gross domestic products， while only 25% of buyers reside there. Two-thirds of luxury purchases made by Chinese people actually take place outside the country.

Gucci will use Chinas leading private courier， SF Express Co. Ltd.， and rival China Post Group Corp.s Express Mail Service， or EMS， to deliver the products， which will reach customers within four days.

While some luxury brands have been reluctant to go digital in an attempt to maintain exclusivity， Gucci was an early pioneer of e-commerce services and has been aware of the benefits of online shopping services for years.

It launched its inaugural e-commerce site in the U.S. in 2002， and it now is available online in 29 countries across Europe， North America and the Middle East. Guccis online presence has been undergoing an overhaul since 2015 under the influence of creative director Alessandro Michele and CEO Marco Bizzari， with the revamp of the companys ecommerce site last year and the launch of several social media campaigns such as artist collaborations on Instagram and behind-the-scenes content on Snapchat.

Guccis revenue in the first quarter surged a record 51% to 1.35 billion euros （$1.54 billion）， with online sales rising 86%， driven by online sales in North America and Western Europe， where their e-commerce stores were first launched.

Guccis expansion into China is timely， as the company is entering a market where online shopping is rapidly becoming a way of life.

Although online retail sales only accounted for 17% of the total retail revenue in China during the first five months of the year， online sales rose 32.5% to 2.46 trillion yuan（$361 billion） in the same period， much faster than the 10.3% growth seen in online and offline retail sales combined， National Bureau of Statistics data showed.