China’s new border tax creates translation opportunities

It’s official. China’s new cross-border tax rules just went into effect over the weekend on April 8^th, 2016, and it includes a list of more than 1,100 product categories that will be subject to new import tax duties when crossing into China, whether in suitcases or boxes. Among them are food, baby products, home appliances, cosmetics, clothing and shoes, some of the most popular products that Chinese customers purchase overseas.

At the country’s main international airports in Shanghai and Beijing, travelers reported having to wait for hours to go through custom inspections after the new policy. There were frequent reports in China social media about goods abandoned by travelers who don’t want to pay for the extra tax charge. Over the last two decades, China effectively did away with custom duties at its borders by not rigorously enforcing the rules for travelers bring in suitcases of merchandise bought from overseas trips. Coupled with the high tariffs on imported goods sold inside China, purchasing products of all kinds overseas boomed over the years. In fact, the phenomena had become so pervasive in China’s consumer circles, a new industry sector called “haitao” (overseas purchase) or “daigou” (proxy purchase) arose, where purchasing agents helped Chinese consumers buy products abroad and bring them back in suitcases.

The tax revamp comes amid a cross-border e-commerce boom in China. The country’s growing middle class increasingly desires overseas products, regarded as having higher quality. Although hard data is impossible to come by, it is estimated that China had 120 million outbound visitors in 2015 that spent 104.5 billion US dollars while abroad. That figure means billions of dollars’ worth of imported merchandise is brought into China in suitcases carried over the border by tourists. Among them are “goods hawkers,” people who travel overseas for the sole purpose of purchasing products, bringing them back to China, and distributing the products to Chinese consumers who purchase these goods from Chinese e-commerce sites. The system is an unofficial international logistics operation moving a huge amount of goods into China each year.

However, such practices not only deprived China of valuable tax revenue, they also skewed the country’s import and export balance sheets, resulting in pressures from international trade partners who accused China of exporting more but importing less. Under the new rules, drafted by the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation, all imported goods purchased either online or in overseas stores will be charged at a 17 percent value-added tax and a consumption tax.

The new border tax means more and more Chinese consumers will gradually shift to shopping inside China versus buying them in overseas stores or having them brought in by goods hawkers from abroad. To make the rules more effective, China simultaneously lowered taxes on some imported goods sold within China that go through the regular import/export channels. The two pronged attack will certainly boost sales of foreign products in China and reduce the number of global shopping trips by Chinese nationals.

The net shift of Chinese international shopping behavior towards e-commerce creates ample opportunities for businesses to take actions now that cater to the significant retail growth in the coming years. Among them is the translation and localization industry as more businesses will now require translation service to localize their products en masse to meet the demand of Chinese consumers.

More businesses will be localizing their products in Chinese.

First, in order to offset a drop in sales by Chinese customers overseas, businesses will want to export to China directly. The new tax rules also mean more businesses will be setting up shops in China to sell their products to Chinese customers. As such, there will be many new translation opportunities generated. For example, more business will need to translate their product literature, websites and marketing materials into Chinese compared to past years. With the “haotao” or overseas purchases in the last two decades, business didn’t have to translate in order to sell to Chinese customers because these purchasing agents already spoke English. However, selling directly in China is a different situation entirely as most Chinese consumers do not speak English. More businesses selling in China will create many more translation opportunities in Chinese.

China regulations require it.

For merchandise sold in China, Chinese laws require that all accompanying consumer information be available in Chinese. Businesses got away with only English when shoppers bought the products overseas and then brought them to China on their own. Even though some businesses translated street signs or shopping guides, very few bothered to translate product labels, packaging and user instructions. However, the changed rules means more goods will be sold inside China, greatly increasing the needs for product translation.

More e-commerce site localization.

With the old overseas purchasing trips, businesses didn’t have to localize their e-commerce sites to generate revenue among Chinese customers. Most of the shopping agents or travel guides already speak English so they were able to help purchase the products in overseas stores or English e-commerce sites. Going forward, international businesses must translate their e-commerce sites into Chinese in order to tap into the significant buying powers of Chinese consumers inside China.

Although quality translation does cost businesses money in order to reach Chinese consumers, the return on investment is significant. The industry consensus is that for every dollar spent on translation, businesses are able to generate ten dollars in return as a result of sales revenue growth. This is why the new border taxation policy will create exciting opportunities for the translation and localization industry. At the same time, the responsibility is now on international businesses to take advantage of the opportunity now to localize their products proactively for Chinese domestic market, beating their competitions and achieving rewarding results.