Under great pressure! Chinese cross-border e-commerce companies such as Temu have forced overseas companies to cut production by half

Cross-border e-commerce platforms originating from China are known for their high-quality products and low prices. In the current economic downturn, almost no one can escape the temptation of "low prices".

However, gains are often accompanied by losses. With various advantages such as supply chain, Chinese cross-border e-commerce platforms have been booming in overseas markets, which has brought considerable pressure to various local companies, especially small and medium-sized enterprises.

A survey by the Korea Federation of Small and Medium Enterprises ( KBIZ) on 320 small and medium-sized enterprises affected by Chinese e-commerce platforms showed that 80.7% of small and medium-sized enterprises in South Korea had "decreased sales or were worried about possible declines in sales."

A South Korean company specializing in the production of infant and toddler toys said that the company recently cut its production by half due to a sharp drop in sales; the reason for the reduction in sales and production was the influx of ultra-low-priced toys on Chinese e-commerce platforms such as Temu into the South Korean market.

According to data released by the Korea Customs Service, the total value of goods imported directly from China to Korea last year reached 2.359 billion U.S. dollars, up 58.5% year-on-year; the number of imported goods increased by 70.3% year-on-year to 88.85 million pieces. Most of the imported goods are low-priced home appliances and furniture, which has brought considerable pressure to small and medium-sized enterprises in Korea.

The head of the KBIZ economic policy department said that if South Korea cannot respond to China's low-priced goods as soon as possible, then starting with South Korean daily consumer goods companies with limited production and sales capabilities, and eventually all small and medium-sized enterprises will be affected.

It is reported that in terms of product pricing, many Korean local companies find it difficult to compete with Chinese products. Traditional imported goods need to go through various taxation procedures, and prices will rise accordingly, so the impact on the market is relatively limited.

However, there is no taxation link for goods purchased directly by consumers through e-commerce platforms. Korean customs law stipulates that direct goods with a value of less than US$150 are exempt from customs duties and value-added tax, and most of the goods on platforms such as Temu fall into this category. Therefore, these goods are more competitive.

A South Korean industry insider also said that no company wants to operate at a loss, and competing with goods sold on Chinese e-commerce platforms means losing money. The head of the KBIZ Economic Policy Department also said that the government should take action to protect the entire industry.

At present, relevant departments in South Korea have already taken action. Recently, the Fair Trade Commission, South Korea's antitrust agency, issued a statement saying that it has drafted some amendments to the "E-commerce Consumer Protection Act" and will require large foreign e-commerce platforms to hire local agents. The statement emphasized that companies whose domestic business sales and number of users exceed certain standards must designate domestic agents, and the threshold has not yet been determined.

China's cross-border e-commerce

Overseas Markets

pressure