Dongguan cross-border e-commerce surges

Since being designated a national-level pilot zone for cross-border e-commerce just over a year ago, Dongguan has seen its international online trading business take off. According to official data, total cross-border e-commerce trade in Dongguan hit RMB 37.01 billion in 2018, more than double (+113%) 2017’s total.

It was only in July last year that Dongguan was formally approved as a national cross-border e-commerce “comprehensive pilot zone”, giving it some additional relief from red tape. That was after just five years of development, which involved developing trading systems, customs clearance supervision, and construction of special bonded parks. 

This year, the trend has continued, despite the slowdown in the external trade environment. Official data shows that in the first eight months of this year, the city’s e-commerce trade volume was RMB 26.97 billion, up 12.0%.

That is a small fraction of Dongguan’s overall trade numbers, indicating how much upside potential there is. The city traded more than RMB1.3 trillion overall last year. (To be clear, the difference is that cross-border e-commerce is direct trade between a buyer and a seller, conducted online.)

Officials are upbeat, pointing out that Dongguan’s underlying manufacturing structure, which is geared toward exports, makes it highly competitive in the development of cross-border e-commerce. “There are more than 200 countries and regions represented in Dongguan, and more than one-third of the products sold online worldwide are manufactured in Dongguan,” said an official from Municipal Bureau of Commerce, quoted by local media.

Private enterprise agrees. There are now more than 10,000 cross-border e-commerce companies in the city, spread out under the umbrellas of the biggest names in Chinese e-commerce: Netease Kaola (sold recently to Alibaba), Pinduoduo, Yunji, Onion, Youzan, Rainbow and, of course, Alibaba and JD.com. 

Half of those have set up here in the past year.

More than 4,300 categories of goods are shipped through Dongguan’s e-commerce parks, but they are mainly in three groups: mobile phones and parts; plastic products; and hardware. 

Policy reform has played a vital role in the surge. A vital step was doing away with the requirement for companies to get import license approvals on each shipment. This is fine for bulk importers, but not for your average SME that is selling goods, literally, out of their garage. This is the biggest potential shift of cross-border e-commerce: allowing mom ‘n pop shops to sell direct to consumers in the world, the same way they currently do within China.  

They wouldn’t be able to do it without some heavyweight help in logistics, however. Dongguan Qiying is one of the biggest. The company now handles 500,000 to 800,000 packages a day, and during last year’s “Double 11” (11-Nov) Day, also known as “Singles Day”, that number hit 14,456,632.

Dongguan Qiying was one of the first in the Humen district, the bonded port area situated on coastline, approved at the national level to operate bonded logistics and related import and export trade. The towns of Changan, Tangxia, and Shijie are all getting in on the act, however, and e-commerce fairs are a regular feature on the local event scene. 

Alibaba is moving in with high ambitions. On October 8, the e-commerce giant signed an agreement with the local Bureau of Commerce to help build Dongguan into a “smart city”. 

All of this is having a disruptive effect on traditional supply chains, but is also cutting out middlemen and helping Dongguan’s manufacturers upgrade their technology, raising their margins. 

To date, Alibaba data shows that there are more than 50,000 enterprises in Dongguan registered on its platform. They generated around RMB 2 billion of online sales last month, across a wide range of segments: packaging, clothing, machinery, rubber and plastic, and electrical and digital gadgets. The company is currently focused on Shatian, where it is building a massive new distribution warehouse, scheduled to start operating in the middle of next year.

Where is all of this e-commerce going? According to data from the Dongguan International Mail Exchange Bureau, since the beginning of the year, 62.3% of packages were sent to Europe, 21.7% to the Americas, 11.7% to Asia, 4.0% to Oceania, and 0.3% to Africa.

The biggest single-country destinations were: 

US: 17%

France: 8.8%

UK: 7.7%

Germany: 6.3%

Japan: 4.8%.

What are they buying?

3C electronics: 30.9%;

Clothing and accessories: 19.4%

Furniture: 12.6%

Beauty products: 5.5%

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