Top 9# Regulatory and Gov Policies Shaping Chinese Markets

1) Regulatory selective pressures at a domestic level: China's domestic industrial production engines were shaped by a "high volume, low-quality, export orientated" paradigm. The importance of this focus is declining, China must shift gears towards higher quality products demanded by its nouveau riche and its emphasis on an economy fueled by domestic consumption. China wants to get rid of its low capacity, low-quality SMEs and develop Chinese "super-manufacturers" with the capacity to compete on an international level. China is looking to force closures and consolidation through enforcement of incrementally more demanding regulations.

2) Protecting trade balance through regulatory strategy: Adoption of international standards for export (or neutral trade) markets and development of tailored regulations and policies for import markets. Where necessary China will align with EU or US standards particularly in areas where these frameworks have also shaped the legislative and regulatory requirements of China's other important trade partners. In areas where China's domestic industry is struggling against import pressures, China will develop new regulations to help maintain parity.

3) Aggressive international expansionism: China is buying out or buying significant stakes in the international enterprise, production facilities, staff and technical capacities etc. If China is going to stoke the flames of economic growth with a focus on imports it wants to make sure its interests are protected.

4) Digitalization of the supply chain and administration: In this area, China is light years ahead of the West. Payment, tracking, traceability, returns, recall, customs administration etc. are all seamlessly integrated. How will China do all this? ...the same way it has done here in Hangzhou where the QR code is king. Scan the QR code, see manufacturer information, date of import, certifications, logistics and cold chain info etc. More importantly, parts of this will be offered to consumers to provide assurances of quality and authenticity.

5) The use of CBEC to channel energy away from gray market import channels: Once Steps 3 and Steps 4 have been realized China will put the brakes on unregulated CBEC and the new system will be an ultra-integrated digital administration system for all imports utilizing a database and cloud-based technologies to track products from origin to retail and back again....The convenience and cost effectiveness of the system will simply outcompete all other systems ....For the sectors and markets that matter....Daigou will die.

6) Domestic capacity building and development of an updated system of mandatory national standards: China has gone through a great deal of administrative restructuring, an update of legislation and development of new regulations covering a wide range of sectors in recent years.

7) Regulatory Selective pressures at an international level: For import markets, China will be extremely selective about the enterprise it allows access to its markets. In the short term, China hasn't had many options, domestic capacities aren't yet able to cater for domestic demand. As such imports both regulated and unregulated have threatened China's trade balance. China has come up with a very smart short term strategy of regulation to guide markets in favorable directions.

8) Channeling social concerns towards economic development: Environmental health and safety concerns amongst Chinese consumers are huge market forces that have touched every sector of China's economy. The quality of air, food, water, and soil are linked with almost every industrial process in China and are huge drivers for Chinese consumer preference. China is addressing concerns while at the same time overhauling many of its industries. Taxes on VOCs, new pesticide regulations, new requirements for construction of waste disposal facilities, new pesticide MRLs in foods etc. are all part and parcel of an overall strategy China is accomplishing multiple goals with single initiatives. Big opportunities in China's green energy sector, soil remediation, pollution control etc....

9) Centralization of Administration and a Shift from Pre- to Post- Market Supervision: In many sectors, China has already centralized administrative power and streamlined decision making. Digitalizing China's system of administrative checks and balances will allow it to finally realize cohesive and consistent supervision and enforcement across the nation and throughout the supply chain.

***If you are interested in any of the topics discussed in this article, are looking to launch a product here in China, or wish to understand Chinese legislative or regulatory policy for the food, chemical, pesticide or cosmetic sector please do no hesitate to contact me on [email protected]