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Australia and New Zealand companies whiplashed by China import regulations

Published 06/04/2017, 04:00 pm
Updated 06/04/2017, 04:10 pm
© Reuters.  Australia and New Zealand companies whiplashed by China import regulations
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* Regulatory uncertainty slows informal "daigou" trade

* Informal buyers working through inventory - Comvita exec

* Bellamy's, Blackmores, Comvita among firms affected

By Charlotte Greenfield

WELLINGTON, April 6 (Reuters) - New Zealand and Australian produce suppliers are taking a hit as daigou, individuals who unofficially export their goods into China, reduce purchases of their products amid Beijing's constantly changing stance on cross-border e-commerce.

Scott Coulter, the chief executive of New Zealand honey producer Comvita Ltd CVT.NZ , which this week issued a profit warning, said daigou are instead working through stockpiles built up during a speculative bubble over the past two years.

"They're concerned about what the future might look like," Coulter said in a telephone interview with Reuters on Thursday. "They're just not committing to the amount of inventory that they were previously."

Daigou, unofficial shopping agents who transport goods into China from abroad either in personal luggage or by post, have become powerful exporters and their activities are increasingly scrutinised.

There was panic among daigou a year ago when China raised taxes and ramped up its policing on goods bought on overseas e-commerce platforms, but a lack of follow-through on that crackdown allowed the industry to flourish.

A Chinese Commerce Ministry statement on March 21 supported that by indicating a more relaxed stance, with smaller shipments being treated as "personal" packages.

Shares in Australian milk company Bellamy's BAL.AX jumped 15 percent and vitamins firm Blackmores BKL.AX gained 13 percent on that statement, as anecdotal data suggested strong daigou growth.

But Comvita's experience of selling its luxury Manuka honey, prized in Asia for its reported medicinal qualities, shows the seemingly never-ending boom-bust cycle for exporters relying on grey channels into China.

The company's shares plummeted more than 17 percent on Wednesday after it slashed its forecast net profits for the year ending June to NZ$9 million ($4.88 million) from NZ$20-22 million estimated in February. despite the brief bump, Bellamy's shares are trading down 33 percent so far this year. Blackmores stock has gained 5 percent after heavy losses of more than 50 percent in 2016.

Coulter declined to say what proportion of his company's sales went to China via informal routes, but said it was a big channel.

Coulter said he now believed it would take until next year or possibly longer for the daigou market to return to early 2016 levels. In the meantime, Comvita has struck a deal with official distributor Shenzhen Comvita Natural Food Co Limited that begins on July 1.

"We know that longer term the Chinese are likely to push more products through formal channels," Coulter said.

($1 = 1.4339 New Zealand dollars)

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