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China’s new import rules making exporters nervous

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Last week China introduced a “positive list” of products allowed to enter the country through its trial free trade zones and sold through e-commerce platforms.

The new reforms, introduced without warning, have sent shockwaves through the Australian export community.

Shares in Blackmores and other China-focused consumer stocks, like Bellamy's Organic and Murray Goulburn, were battered by the unexpected change.

Some of Blackmores products were not on the approved list, causing its share price to tumble by 20 percent in less than a day.

And though infant formula has been included on the approved list, a2 Milk and Bellamy’s are nervous.

Both companies are facing pressure on their share prices due to fears of further regulation.

One of those big fears is Chinese labelling.

The Chinese government may introduce compulsory Chinese labelling for all infant formula sold on the mainland.

Tighter controls over foreign products

That means Bellamy’s and a2 would be required to label their tins in Mandarin – like local brands. And that could lead to reduced demand for their products in China.

Though not finalised, the new rules signal China’s plans to tighten controls over foreign products sold to consumers via the Internet.

While China, with a population fast approaching 1.4 billion, can be a highly lucrative market, it is also a very complex one – often posing major challenges for exporters.

Regulations in China change often and can shift without warning.

Kate Walker and Margaret Harris are co-founders and directors of The Clean Food Co. say to do business in China, you need to be committed to the long game.

Too many brands have been burnt by short-term trading opportunities only to find their brand devalued through flash sales and heavily discounted trading, they told Fairfax Media in a recent interview.

Lack of transparency

It can take up to two years and cost more than $100,000 to register a single product for sale into China.

But cross-border e-commerce had allowed companies a way around this costly and time-consuming process.

Julian Beaumont of Bennelong Australian Equity Partners told Fairfax Media that China is renowned for its lack of transparency.

This means investors are still figuring out what the full impact to their investments will be.

"This lack of transparency has always been a feature of business in China, and this feature lends itself to a greater level of risk for businesses operating there," he says.

Economists fear changes to the regulatory system will continue in China in coming months.

That could lead to further pressure on key stocks – and further share price falls.

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