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Crackdown on online retailers, fresh blow to China-US economic relations: China Daily editorial

chinadaily.com.cn | Updated: 2024-04-08 20:42

Online shopping platform Temu, a subsidiary of PDD Holdings, offers deep discounts on a range of products. [PHOTO by CHEN YIHANG/FOR CHINA DAILY]

The United States will reportedly crack down on what it claims to be a trade "loophole" that Chinese online retailers such as Temu and Shein have allegedly been exploiting to sell products from China-based factories directly to US customers at low prices, without paying duties and with little scrutiny.

What is being targeted is a trade rule known as de minimis in Section 321 of the Tariff Act of 1930, under which imported packages valued under $800 receive tax exemptions and less oversight from US Customs.

Packages from Temu and Shein, most of which are valued under $800, account for nearly half of all de minimis shipments, which has resulted in the two Chinese companies enjoying a huge tax break. That has given them an unfair advantage over US retailers, their critics claim. The US Congress introduced bills last year seeking to make changes to the century-old trade practice, and on Friday the Department of Homeland Security said it will enhance law enforcement by improving the screening of packages to "prohibit illicit goods from US markets".

"We are dedicated to ensuring a fair and level playing field for American businesses," said DHS Secretary Alejandro Mayorkas in a statement.

Yet, the fact that so many successful Chinese companies are being targeted in the US, one after another, cannot but raise questions over the real motives behind the rising restrictions. The latest targeting of Chinese companies comes hard on the heels of the US House of Representatives voting in favor of a crackdown on the short video app TikTok last month, using national security concerns as the pretext.

Human rights have also served as ammunition for such attacks. In a report last year, the US House Select Committee on China accused Temu, owned by popular Chinese e-commerce giant Pinduoduo, of possibly violating a US law that blocks imports from the Xinjiang Uygur autonomous region. "There is an extremely high risk that Temu's supply chains are contaminated with forced labor," it said without offering any evidence to back up its allegation.

The two Chinese online retailers have achieved success in the US not by employing underhand practices as their accusers claim, but rather by utilizing technological advances and savvy business operations. By pricing items reasonably and despatching them quickly, the two companies have won the loyalty of customers. As a result, Shein's share of the US market overtook that of fashion giants Zara and H&M during the pandemic, while Temu has been one of the most downloaded apps in the US and has secured a strong position in the country since its launch in 2022, with more than 80,000 Chinese suppliers fueling its vast e-commerce platform.

The two companies have transformed the global online retailing landscape by allowing Chinese manufacturers and merchants to sell to the rest of the world. But in doing so, they are, of course, posing huge challenges to their US counterparts, including Amazon. Which may explain the difficult situation in the US the Chinese companies now find themselves in as the mentality of US politicians is: if we cannot compete with them, outlaw them.

But that attitude bodes ill for the health of the Sino-US economic relationship, which both sides have vowed to try and improve. It will also do a disservice to the US economic strategy focused on investing in the country's economic strengths. The US economy has long flourished on openness to trade and investment.

As US Treasury Secretary Janet Yellen said, the Sino-US economic relationship is among the most important in the world. Responsibly managing it is essential. That means eschewing politically motivated attacks on Chinese companies.

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