China to Assess New Supervision ModeI during CBEC Transition Period

China will assess new supervision models for CBEC but would not forgo registration or filing requirements for products under the pre-market approval system.

Within two months, China has made a series of abrupt changes on importing requirements for CBEC commodities, including bringing them under the tax system for general goods, formulating a “positive list”,requiring products such as cosmetic, infant formula,health food, medical foods, etc. to be registered prior to import and requiring part of products listed in the positive list to have the “Customs Clearance of Entry Commodity” (CCEC). CCEC is a passport for goods entry to China, which constitutes a great regulatory barrier for a number of CBEC dealers as they are unable to provide full documentation for application of a CCEC and meet other requirements, like Chinese labels. These new policies have exerted huge negative impact on CBEC trade demonstrated by the statistics showing that within a week of implementation, the CBEC imports at Zhengzhou, Shenzhen and Ningbo showed a reduction in trade of 70%, 61% and 62% respectively compared with before.

In light of this authorities issued facilitation &transitional measures for CBEC to make provisions for the fact that:

When the positive list was released, it didn’t include some hot products, like liquid milk, fresh food,health food, etc. One week later, the positive list was appended to include these products;

For products not listed in the positive list but already in the bonded warehouses or have been shipped to China before 8 April, they are allowed to be sold until sold out;

The biggest concession was announcement of a one year grace period for CBEC. Two huge regulatory barriers namely requirements of “registration” and“CCEC” are removed until 11 May 2017. Although,one year may not be enough for completing product registration, it is still a great relief for many in the industry.

On 25 May 2016, the Ministry of Finance expressed that the purpose of this buffer policy is for the smooth transition of CBCE tax and other new regulations.Meanwhile, MOF indicated the government to explore a new supervision model for CBEC development. The exact plan the government will use to regulate this huge business channel after the grace period ends are still in mystery. It’s not likely that the authority will completely abandon pre-market requirements for some product categories, such as cosmetic, health food,food for special medical purposes and infant formula.While promoting the growth of CBEC is important, the protection of a competitive market is also extremely important.

China Gearing up to Ban Repackaged Cosmetics

China looks set to ban the sale of repackaged cosmetics,according to industry commentators, a move which will shut down the widespread practice of repackaging and remarketing products in the country.

A resource on regulatory information in China has reported that the change is set to come into full effect in the near future, with some brands having already been stopped from repackaging cosmetics by CFDA.

The change is likely to have an enormous impact on the production of cosmetics in China, which currently makes full use of the process of repackaging to cut losses and costs.

Third party companies, OEMs, involved in the packaging of products in China are set to be hit the hardest by the upcoming changes.

Licence swap

The change comes as part of the ongoing move in the country towards a new licensing system for cosmetics products.

Until January, brands were required to obtain two licences to be eligible for product registration (the National Industrial Manufacture Licence and the Hygiene Licence for Cosmetics Manufacturers): under the new system, they will require just one, the Cosmetics Manufacture Licence.

Once accredited with the new licence, brands will no longer be able to repackage cosmetics, the CFDA has said,though the industry is still awaiting clear guidelines and any official announcement to be released by the regulatory body.

Holding fire

As a result of the currently unconfirmed nature of the regulatory change, those brands which have not yet applied for the new licence are now hesitant to do so.

The regulation news outlet notes that brands and third party service providers may need to hold fire with any repackaging plans, and await clear guidelines from the CFDA.

“For the OEMs that obtained the new license and cosmetic brands that intend to continue or start subcontracting repacking, for now it may be advisable to suspend repacking projects and wait for clear provisions made by the CFDA,” the outlet reports.

China ImpIements New LabeIing Requirements for Sunscreens

On June 1 2016, China Food and Drug Administration(CFDA) promulgated and implemented a regulation named “Requirements for Sunscreens Labeling”,revising the labeling requirements relating to SPF and PFA.

The most significant change to the new regulation is the permission of marking SPF ＞ 50 and PA ++++ on labels. In the past, cosmetics can only be indicated by SPF ＞ 30 and PA +++ even if the actual measured value is higher, which doesn’t align with the international standards.

Industry to Take the Lead on China Beauty ReguIation

China is gearing up to shift responsibility for cosmetics and personal care regulation away from external and governmental bodies, giving it instead to the industry itself.

China is moving to a model of regulation more in line with that seen in Europe, allowing for greater in-market control.

China shifts

The changes will come in the form of legislative updates, with the primary tier of China’s beauty legislation,the Cosmetic Hygiene Management Rules, set to be amended in line with recently drafted principles which shift regulatory responsibility to the industry.

This is set to speed up the accreditation process in China, which has been historically a lengthy and protracted process and has attracted criticism from industry players, both domestic and international.

Secondary legislation is said to be moving in the same direction, meaning imported cosmetics could come to be subject to the same, newly industry-regulated process.

Meanwhile, the recently updated standardisation of cross-border e-commerce for beauty continues to be enforced by the country’s Administration of Quality Supervision, Inspection and Quarantine (AQSIA).

In line

Perhaps motivated by the currently sluggish economic climate, it seems that China is making a concerted effort to streamline its beauty and personal care industry and bring it in line with other major world markets.

Indeed, earlier this year the country announced its intention to continue modifying its e-commerce tax policy, in a move which looks set to prove particularly beneficial for cosmetics players. Discounted value-added and consumption taxes are expected to be expanded nationwide and replace a special tax for bonded imports.

China Cosmetics Maker Branches out into Baby Gear as Two-ChiId PoIicy Takes Effect

Shanghai Jahwa, a leading Chinese cosmetics group, has agreed the acquisition of British baby bottle brand Tommee Tippee, in a move which will enable the beauty player to respond to the expected rise in demand for baby items.

The company explained that the USD 197 acquisition will allow it to develop its innovation capabilities, taking on research and development expertise from the newly acquired brand.

“Mayborn, Tommee Tippee parent company, enjoys great reputation and regard among the peers, given its stable sales performances and strong R&D capabilities” Jahwa reportedly said.

More children, more opportunity

The domestic cosmetics player, which owns many popular brands including Herborist and Maxam and has never before acquired a non-cosmetics company,explained the shift in strategy.

“Following China's new policy that encourages married couples to have two children as against one in the past, we are bullish on the long-term growth of the baby products sector in the China market” Jahwa stated.

China changed its one child policy effective from this January in light of the ageing population in the country,allowing couples to now have two children. Jahwa’s response suggests companies are being quick to adapt to the opportunities created by the change in law.

Branching out

The acquisition indicates Jahwa is keen to make a decisive change in direction from its traditional sole mainstay of beauty, and position itself as a wider-reaching FMCG player.

“The two sides will be able to create an international business platform of baby care products.

Jahwa isn’t the only company in China taking steps to diversify its product offering and range, according to industry commentators.

Jahwa’s move is part of an ongoing trend by Chinese companies acquiring premium foreign consumer brands,expanding their businesses overseas and bringing highquality foreign products to China.

10 Trends of Chinese Consumers in Cosmetics

The cosmetics industry in China has been quickly growing over the last years due to the huge development of the Chinese economy.

Chinese consumers are changing their purchase behaviors in the cosmetic sector

In 2013 the total sales of skin care products and makeup products in China accounted RMB131.4 billion and RMB18.8 billion respectively.

Chinese women are very interested in improving their appearence and cosmetic products have become an important part of their daily life. That is the reason why Chinese women are constantly purchasing beauty products.

There are some aspects such as the rapid economic growth and the huge development of beauty industry in China that have contributed to changes of cosmetics consumer behavior.

Greater preference for international brands

Chinese cosmetic consumers buy more foreign products than local products. The reason is that international brands represent high quality and high status.

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Chinese consumers buy international brands because of their quality. However, this is not the unique reason,because they believe that purchasing foreign products is a symbol of their high economic and social status.

Thanks to e-commerce platforms, Chinese consumers have a greater access to a huge number of foreign brands and a vast variety of products.

The Chinese cosmetic shoppers’ behavior has changed over the last years. They are more sophisticated and have more knowledge about brands and products and therefore,they are unwilling to spend more money on foreign brands when they are able to find a domestic product with similar benefits at a lower price.

New interest to national products

These days, Chinese cosmetic consumers are more and more interested in local beauty brands, especially for those that include traditional practices and ingredients on their products.

For instance, Herborist and Inhober, the first and second largest China’s brands in the cosmetic sector are becoming more popular among Chinese consumers.

Another reason is that Chinese brands understand their cosmetic needs and requirements. For example, as opposed to Western people, Chinese beauty consumers are looking for skin-whitening or brightening products. In this kind of products, Chinese brands are ahead of the competition.

Chinese consumers are not loyal

It is not a secret that Chinese cosmetic shoppers like to try several brands and products to compare them and also because most of them buy products according to offers and promotions. That means they aren’t brand loyal.

In addition, another reason that contributes to low brand loyalty is that they also change products according to the season.

Women are easily affected by discounts

The reality is that Chinese cosmetic shoppers are very influenced by offers, discounts and promotions even if they don’t know the brand or they don’t need those products.

According to a research, around 56% of Chinese women bought uneeded beauty products as a result of a discount.

Preference for natural products

There is a real preference in China to purchase cosmetic products which use natural ingredients because they believe that natural products are more efficient.

Besides, they prefer cosmetics that include Chinese traditional medicine that is associated with quality, safety and efficiency by Chinese consumers.

Searching information on search engines

Chinese online cosmetic shoppers consider search engines as an important part of their purchasing process,especially Baidu.

Baidu is the China’s largest search engine with over 600 million users monthly and 80% market share.

Before making their purchase decision, Chinese cosmetics shoppers carry out a deep search on Baidu to collect information about the brand, the product, the functions and effectiveness of the product and where to buy it.

Social media platforms play an important role

Cosmetic companies have adapted China’s social networks as part of their marketing strategy in order to attract and engage consumers.

Chinese shoppers have a strong demand to interact and communicate with brands. They are very demanding shoppers and want to be heard by brands. In addition,they would like to receive personalized information about the products, the brand, special events, promotions and discounts.

Through Weibo, QQ and WeChat, consumers are able to interact with their favorite brands and receive those information. Also, social networks allow consumers to share their opinions and comments about the products and brands.

Besides, Chinese consumers use social platforms to collect information about products before make their purchase decision. It is a fact that they trust more in comments of other consumer that in the information which provides the brand via its official accounts and adverts.

Online sales channels

Due to internet penetration and the e-commerce development, many cosmetic consumers are changing their purchase channel. Nowadays, Chinese shoppers are more willing to buy cosmetic products online instead of physical stores.

The most favorite e-commerce platforms for Chinese cosmetic consumers are Tmall.com, Lefung.com, Jumei.com and Tiantian.com.

The hottest products

Within the beauty category, facial mask are the most popular products both online and offline, followed by moisturizer, facial cleanser, eye cream and lip care.

Over the last years, facial masks have experienced strong growth in the Chinese market.

In 2013, Chinese consumers spent US$25.9 billion on cosmetic products. They consider beauty puchases as investments in their private life and their social success.

The cosmetic market in China has a huge potential and understanding Chinese consumer behavior is mandatory in order to attract and engage them.