Emerging Outsourcing Trends in China's Retail Industry Post-Pandemic

Mar 29 2023
SBA Stone Forest

As China enters the post-pandemic era, experts predict that the retail sector will experience a surge in consumption. With the lifting of government restrictions, the retail industry has already seen a significant increase in activity, and experts attribute this to policy support and a rebound in consumer confidence.

According to the National Bureau of Statistics of China, China's total retail sales of social commodities will experience a year-on-year growth rate of 6.5-7.5% in 2023 as the economy continues to recover. Additionally, the growth rate of online retail sales of physical goods is projected to increase by 11.8%, and the proportion of online retail sales, in relation to overall retail sales, is expected to reach 28.4%.

The data presented in this diagram was derived from the National Bureau of Statistics of China and analysed by the Macro Economy Research team of China Merchants Securities.

As logistics operations return to normal and demand for online shopping increases, online retail growth is expected to continue. As a result, retailers in China are likely to accelerate their expansion.

In this context, companies will need to consider two key factors: stimulating growth and controlling costs. To achieve growth, businesses must focus on various elements, such as products, channels, marketing, and opening new stores. However, rapid expansion can present significant financial challenges, including complex and time-consuming reconciliation due to multiple locations for new stores, and urgent tax filing deadlines for all branches. To effectively manage these challenges and allow companies to focus on their core businesses, external professional teams can be engaged to provide additional support and expertise.

BPO Services

Our services are designed to support companies during their expansion by providing the following:

  • Assisting with the initial setup of entities in each location, ensuring alignment with local resources and facilitating the establishment of branches or stores.
  • Providing National Accounts Management, which centralises all accounting and tax compliance services in one location with a single point of contact.
  • Offering onsite support services to help companies address short-term or long-term labour shortages.
  • Travel and Expense ("T&E") review processing and AP processing: Collect Fapiao/Contracts/T&E documents from all client locations and review them in accordance with the company's policies and compliance requirements.
  • Centralised tax filing processing: Collect information on input VAT and output VAT to streamline tax filing procedures.
As the retail market is highly competitive, companies must also prioritise cost control measures to remain profitable. Business Process Outsourcing (BPO) is a popular trend among companies seeking to reduce costs in their accounting and finance teams. By outsourcing repetitive and time-consuming tasks, companies can restructure their internal teams to focus on higher value tasks or increase staff skill sets. Additionally, they can optimise headcounts to achieve greater cost efficiencies.

Advantages of BPO:

  • Streamlined communication with a dedicated project manager overseeing procedures and timelines.
  • Higher efficiency with quick response times and strict adherence to service level agreements (SLAs)
  • Higher quality output ensured through key performance indicators (KPIs).
  • Significant cost reduction of approximately 20%, eliminating the need for recruiting and training new staff.
  • Ability to focus on core business areas while outsourcing repetitive and massive tasks.

China Updates

Accounting & Taxation

• The Ministry of Finance (“MOF”)'s Accounting Department updated three ‘questions and answers’ on the implementation of accounting standards for enterprises on January 3, 2023. The update covers rules for inventories and long-term equity investment. In the Q&A regarding inventories, an explanation was provided on how to conduct accounting treatment for second-hand cars purchased by a car dealer for resale.

• The preferential tax policy for separate tax calculation for equity incentives of listed companies remains effective from January 1, 2023, to December 31, 2023. Resident individuals who satisfy the relevant criteria and obtain equity incentives such as share options, stock appreciation rights, restrictive shares, share incentive, etc., can exclude them from their consolidated income of that year. The tax shall be computed separately on the full amount by applying the consolidated income tax rate table.

• Import duties, import VAT, and consumption tax will be exempted for goods (excluding foodstuffs) declared for exports under the cross-border e-commerce customs regulatory codes (1210, 9610, 9710, 9810) within one year as of January 30th, 2023, and then returned to China in their original conditions within six months from the date of export due to reasons of sluggish sale and return of goods. Export duties levied at the time of export are allowed to be refunded, and VAT and consumption tax levied at the time of export are subject to the relevant tax provisions governing the return of goods for domestic sale.

Human Resources

• The Shanghai government has implemented a one-time employment subsidy policy effective from February 1, 2023, until December 31, 2023. Employers who hire individuals registered as unemployed for more than three months and college graduates for the year 2023 in Shanghai, and sign labour contracts for more than one year with compliant social insurance contributions, will receive a one-time employment subsidy of 2,000 yuan per person from the government.

Corporate Governance

• On February 17, 2023, China Securities Regulatory Commission (CSRC) released 165 rules and regulations on the implementation of registration-based stock-issuing system. This system is a significant reform in the Chinese capital market and covers all aspects of issuance conditions, registration procedures, sponsorship and underwriting, major asset restructuring, supervision and enforcement, investor protection. Notably, the conditions for stock issuance have been streamlined and optimised, with the competent authority solely responsible for examining the information and materials provided by the applicant for fulfilling the obligation of information disclosure.

Contact Us

Tan Lee Lee
Head of China

Rita Boyle
Director, Business Advisory, International Desk

Yeo Lee Soon
Director, China Business Advisory, Singapore