Will Losing Its Western Shipping Subsidies Hurt China?

What Happened: As of January 1, 2021, China will no longer be allowed lower global shipping fees under the premise that it should no longer be treated as a developing nation. From that date on, European countries will be able to raise their prices and won’t have to pay subsidies.

This July, the US already raised its prices in a compromise deal forced by the Trump administration. Subsequently, America has already seen a drop in shipments coming from the Mainland, and the move is making Chinese e-commerce platforms, in particular, rethink their logistics operations.

The Jing Take: It is common knowledge that the pandemic led to spikes in online shopping and, therefore, shipping. While this new price deal will reportedly save the US up to $300 million on parcels shipped from China, it is now facing a threat to supply. Meanwhile, across the pond, COVID-19 and Brexit are gearing up to create the perfect storm for Europe’s logistics (with DHL already temporarily suspending services to the UK). Fees might be going up, but deliveries can’t necessarily be guaranteed.

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China’s answer is to shore up its own supply chains, which is part of Xi’s “dual circulation” economic strategy that prioritizes domestic demand and aims to end any dependence on foreign suppliers. E-tail giants like JD.com and Alibaba Group already made excellent gains in logistics during COVID-19. Now, bargain sites such as AliExpress and Wish are taking control of their flow of goods. The party’s 14th five-year plan may not be fully revealed until next year, but these moves have played nicely into China’s hands.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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