Enterprising middlemen, overseas warehouses help drive China’s e-commerce exports

BEIJING – Mr Pi Jiawen, 25, knew nothing about e-commerce when he started selling mobile phone accessories online last September. Today, the former construction project supervisor earns between 30,000 yuan (S$5,574) and 40,000 yuan a month in net profits from buyers outside China.

He sources his wares – the latest from earbud cases to screen protectors – at Shenzhen’s Huaqiangbei, the country’s largest electronics wholesale market. He then sells them on TikTok Shop, where he receives about 100 orders a day from users of the popular short-video app’s online marketplace. 

The items are sent directly from factories in Shenzhen to one of TikTok’s warehouses in China, and the platform takes care of forwarding the goods on to buyers in the Philippines, Thailand, Singapore, Malaysia and Vietnam.

“It is not difficult to become an e-commerce seller, and you can learn the ropes fairly quickly,” said Mr Pi, who is based in Jiangxi and started turning profits in his third month on the job.

Many of his friends are looking to get into the business, he told The Straits Times. “The domestic market is overly juan (involuted), with too much competition and very low profit margins. You can earn much more selling overseas.”

Spurred by these enterprising middlemen, as well as a rise in home-grown e-commerce platforms that connect domestic producers and sellers with more consumers abroad, exports from China through online sales have surged in recent years. 

In 2023, China’s cross-border e-commerce exports grew 19.6 per cent year on year to reach 1.83 trillion yuan.

In June, the government released policy guidelines to step up such exports – a source of growth for the economy.

It broadly outlined more support for cross-border e-commerce businesses, including through smoother financing channels. It also called for strengthening infrastructure and logistics systems – especially warehouses overseas that facilitate the speedy delivery of goods.

Overseas warehouses are useful because they allow sellers to have a supply of goods in the destination country, ready to be dispatched when orders come in. Consumers are more likely to place orders when delivery times are short, said Mr Tino Chen, who is based in Shenzhen. The 35-year-old sells household items to the Brazilian market and uses warehousing facilities there.

The push for more cross-border e-commerce is a bid to tap foreign demand so that Chinese suppliers can continue to produce and grow, said Mr Li Jianggan, founder of Singapore-based venture builder and research firm Momentum Works, who writes frequently about China’s tech and e-commerce scene.

“You have all this supply in China, and you don’t have demand, and you need to find (an outlet) for this supply,” he added.

The e-commerce drive, industry players say, will engender more competition among Chinese businesses for a share of the overseas market.

They are seeing not just more middlemen, but also an increasing number of producers who sell directly to consumers on various platforms.

This latter trend was exemplified with the rapid rise of discount retailer Temu, now the second most popular shopping app in the United States after Amazon. Many of Temu’s products are sourced directly from Chinese manufacturers and sold to consumers in more than 70 countries around the world.

E-commerce expert Zhang Zhouping believes that going forward, the industry will see a shift towards more Chinese producers selling directly on e-commerce platforms, instead of relying on middlemen to do so.

“As economic growth slows around the world, everyone needs value-for-money goods,” said Mr Zhang, who is the chief researcher at Zhejiang-based e-commerce think-tank Bense Zhiku. “Ultimately, people will need to compete on price, and it is at the source factories that prices are lowest.” 

To get ahead of this, some middlemen say they are partnering factories to develop and sell products – pooling their expertise so that both parties can compete effectively on the global stage.

As China steps up e-commerce exports, its proliferation of low-cost goods – while delighting bargain-hunting consumers abroad – has come increasingly in the crosshairs of foreign politicians and producers, who worry that their industries are being disadvantaged.

In the US, lawmakers are scrutinising a duty-free provision that e-commerce platforms such as Temu, Shein and AliExpress have benefited from, which allows packages valued under US$800 (S$1,080) and bound for consumers to enter the US without tariffs.

The European Commission is reportedly slated to suggest scrapping its own version of this tax-free provision, for which the threshold is €150 (S$219), the Financial Times reported this week.

And the Brazilian government in June signed into law an additional 20 per cent tax on low-value international packages valued at up to US$50.

For now, Chinese sellers whom ST spoke with are undeterred, saying that they will adapt to trade frictions as they arise.

“These are problems that we (as sellers) cannot resolve. At most, we will just change markets, change lanes, and continue to fight on,” said Mr Jimmy Jiang, 28, a Fujian-based seller of beauty products to the US.

And Temu, whose business model had hitherto centred on small packages sent duty-free from China, has since March been promoting the use of warehouses in the US, said Momentum Works’ Mr Li. This is even though shipping a large volume of goods from China to these warehouses will incur import taxes.

“I think (Temu) also knows that if all its goods are shipped from China to the US without being taxed, they will face some political pressure,” he said.