Professional analysts, investors, and share market watchers are all likely to be confused over the ever-changing regulatory environment in China when it comes to rules around Australian foodstuffs companies physically exporting goods either via cross border shipping or ‘e-commerce channels’.
The companies themselves are also likely to find the changing rules and moving goalposts challenging as they work out what they are required to do in order to sell their goods into China either online or in physical stores.
The issue is further complicated by the role of Chinese daigou shoppers in Australia who buy goods like baby formula in bulk to then on-sell in China either via online shopping sites like Alibaba or Tmall.
Over recent years China has brought in numerous new rules to require companies to have their products quality certified and also other new rules to ensure labelling is in Chinese language where required.
Unless a company has the required licences or meets the required language labelling standards it is at danger of being frozen out of the market. In addition China has been implementing new rules for the governance of e-commerce sales as well.
Today, The Australian Financial Review attempted to cut through some of the confusion around the issues by reporting that some new e-commerce rules requiring additional Chinese labelling on products would be delayed in their implementation in order to give companies more time in their applications for compliant status.
This is potentially good news for those companies in the regulatory firing line such as infant formula businesses Bellamy’s Australia Ltd (ASX: BAL), Bubs Australia Ltd (ASX: BUB), or even vitamins maker Blackmores Limited (ASX: BKL).
News today that the Australian government is set to block Hong Kong-based CKI Group’s takeover bid for gas pipeline operator APA Group (ASX: APA) will not help the political and trade tensions between the two countries.
Nor will the Australian government’s recent decision to block Huawei from constructing the 5G infrastructure needed for a next-generation mobile network.
Investors in stocks with exposure to Chinese consumer demand then are vulnerable to the unpredictable nature of Chinese regulations and should brace for some occasional volatility.
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Motley Fool contributor Yulia Mosaleva has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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