China#Cross-border e-commerce a boon for China's bonded logistics properties
Cross-border e-commerce that enables consumers to buy directly from merchants around the world and save taxes is rapidly gaining popularity in China.
While online shopping growth is emerging as a threat to retail property owners, the new trend is expected to boost bonded logistics property developments, say property consultants.
"Rents of bonded logistics developments [in Shanghai] have been rising in the past four to five years" because supply had not caught up with demand, said Carlby Xie, the head of China research at Colliers International.
The average rent for a bonded logistics facility in Shanghai was about 1.26 yuan per square metre per day last year, according to Colliers' latest report on the outlook of the bonded logistics sector. That compares with an average rent of below 1.10 yuan per square metre per day in 2010.
"Chinese online shoppers buying goods from overseas have the potential to benefit bonded logistics property because e-commerce operators that conduct overseas business may choose to store [frequently purchased] goods in bonded warehouses where they will not incur customs duties," said Rita Wong, an international director of valuation advisory services at JLL. She said examples of this practice had been observed in bonded logistics areas in Ningbo and Hangzhou with firms selling baby and children's goods.
Popular products bought through cross-border sales include cosmetics and skin-care products, women's apparel, baby milk powder and food supplements.
In 2012, the central government rolled out a pilot programme and set up trial zones for cross-border e-commerce businesses to allow consumers to shop on foreign websites and have their orders shipped under the supervision of China Customs.
Qualified e-commerce companies are allowed to buy goods from abroad and store them in bonded warehouses in the pilot zones. Tariff payments are made after the goods are sold to consumers, according to a report by the Fung Business Intelligence Centre.
Before this arrangement, Chinese online shoppers bought overseas goods through agencies or directly from overseas websites in foreign currencies.
Colliers said the new pilot zone system improved the cross-border e-commerce trade by cutting delivery times and avoiding smuggling. The pilot zones have been established in Shanghai, Chongqing, Hangzhou, Ningbo, Zhengzhou, Guangzhou and Shenzhen.
However, Wong said the scale of such trading was still small.
"As to whether this activity will provide a boost to bonded warehouse markets, it is too soon to tell," she said.
Xie said the value of imports from online trading was small but rising.
Research has found that the value of imports was only about 13 per cent, or about 53 billion yuan, of the total cross-border e-commerce trade, with exported goods and business-to-business e-commerce contributing the majority.
"As consumers in China adopt new online shopping habits, this figure will undoubtedly grow" to the benefit of bonded logistics properties, Xie said.
"The rental growth in bonded logistics properties will be faster than non-bonded logistics properties due to the rapid growth of cross-border e-commerce trade."
Investors are free to enter the bonded logistics market as long as they can afford the land price and have the legal entity set up as a logistics firm, according to Xie.
In Shanghai, the major players include Mapletree, Goodman and Global Logistic Properties.