CHINA - DISTRIBUTION AND SALES CHANNELS

In recent years, China has liberalized its distribution system to provide full trading and distribution rights for foreign firms in most industry sectors. New laws removed earlier restrictions on size requirements for trading and distribution firms, thus paving the way for competition from small businesses.

While the outright prohibition of foreign-invested firms to import, export, and distribute goods in China has improved, the licensing and approval process remains difficult, time consuming, and highly opaque. A standard business license is typically issued by municipal Administrations of Industry and Commerce. Distribution rights for these industries are often approved by a higher-level authority, such as a municipal or provincial Commission of Commerce. This effectively adds another layer of bureaucratic hurdles that U.S. companies are required to navigate.

Special trading zones like the China Pilot Shanghai Free Trade Zone (FTZ) launched in 2013, and the FTZs in Tianjin, Fujian, and Guangdong, are experimenting with regulatory reform and sectorial pilot projects that can involve increased distribution and sales channel opportunities for international firms.  In principle, all the FTZs are supposed to have the same rules with each one having their own specialty (Guangdong, support trade with HK and Macau; Fujian, promote trade with Taiwan; Tianjin, increase economic integration in the north between Tianjin/Beijing/Hebei, and Shanghai – renewed focus on innovation).

While international businesses have expressed disappointment in the speed and breadth of regulatory reforms, they have praised the FTZ administrators for increased responsiveness and communication in some industry sectors, particularly with respect to customs clearance.

Sales channels available to foreign companies selling in China include trading companies, distributors, and local agents. Trading companies with import/export rights help facilitate customs formalities; distributors build sales channels and handle stock and inventory; and local agents retail products to consumers.
 

The distribution in China has witnessed the rapid transformation and upgrade of the retail industry. With the huge potential of the big consumer market, many manufacturers and retailers have tried their best to expand their distribution network as well as improving supply chain efficiency in recent years. The Chinese government has also launched multiple initiatives to support the distribution sector in order to boosting domestic consumption.

The Rapid development of retailers put a lot of pressures on the traditional wholesalers and distributors. They have to face adaptation to survive in this new era of distribution industry. Nevertheless, given the vast geographical span and huge regional differences, distribution in China remains a complicated task.