With the growth of a wealthy middle class in mainland China eager for all kinds of consumer goods- not always available or affordable in the mainland- a new breed of traders has emerged- purchasing agents. These are people who buy goods of all types in Macau and then bring it across the border- sometimes openly, often by smuggling it- and then reap significant profits by reselling the items in China.
On the counter of New Yaohan, the biggest emporium in Macau, you can find many different famous international brands of lipstick. On any given day, some will be purchased and taken across the border to Zhuhai, from where it will be sent by express delivery to customers around mainland China. This is not a unique situation. A small army of purchasing agents is buying up lipstick and other luxury products from such famous brands as Chanel, LV, Dior, and others to meet a growing demand from increasingly affluent consumers in China.
A report by A.T. Kearney shows that just two per cent of China’s population accounts for about a third of the world’s luxury consumption—everything from cosmetics, jewelry, watches and handbags to private jets. According to the 2013 Chinese E-Commerce Market Monitoring Report published by the Chinese E-Commerce Research Center, the scale of market transactions of Chinese overseas purchasing agent market reacheed up to 76.7 billion RMB(US$12.3 billion), a 58.8% jump from the same period last year.
Some of the lipstick at New Yaohan was bought by Tina Chui, a part-time buyer from mainland China who is a student at a university in Macau. Most of her customers are friends or relatives from her hometown, Chengde in Hebei Province. At the beginning, Tina merely bought makeup for her friends. Gradually, more and more friends came to ask for her help.
“Products of some famous brands are not sold in my hometown, a small city in northern China,” she says, “However, most of my customers are between 25 to 30 years old and have high incomes. They are more interested in the high quality of the products than the price. And the price of the same product is lower in Macau because of the low custom duties.”
Customs duties are one significant reason for the high price of imported products in mainland China. According to the Chinese Customs General Administration, the import duties on digital products and watches ranges from 10% to 30%, while the duties on makeup can be as high as 50%. In addition, a 17% added-value tax is also required. All this makes products in Macau much cheaper than in the mainland. Therefore, it creates opportunities for purchasing agents to make money in a kind of legal gray area.
Every two weeks, after collecting the orders from her friends, Tina goes to Avenida de Almeida Ribeiro, a big shopping center in Macau, to buy makeup and perfume. While on her way to the shops, she connects with her customers using a mobile phone. Then she carries between eight and 12 items which are all together worth less than 5,000 RMB (US$801.8), the minimum tax threshold in mainland, across the border. In this way, she doesn’t need to pay the tax when she enters the mainland, leaving her a bigger profit. She is very familiar with the locations and prices based on her experiences.
Another student buyer, Mr. Lau, who did not want his full name used, brings digital products, especially iPhones, to the other side of the border for a considerable commission.
“I will open the original package by myself in advance and put it in my backpack,” he says, “pretending that I am using it myself. As you know, there is a risk in avoiding duties which may lead to being caught by the customs.”
One of the reasons they can operate in this gray area is that the number of the products they bring with them on each visit is within the law and causes no suspicions. Hiring others to transport the products across the border is another trick. One middle-man, whose online name is Xiao Fengzi, prefers to hire part-time buyers to transport commodities.
“Only providing 4% of the original price to hire someone means I can run my businesses safely.” Xiao says.
With the development of the domestic economy, Chinese customers are paying more attention to the quality of products than the price.
“Brands in Macau are more various and complete. And the products there are under such a strict quality regulation that we could hardly buy the fake goods.” said Li Yuexin, one of Tina’s customers, explaining why she prefers the purchasing agency.
The huge customer demand makes this an easy way to earn money. Therefore, a wide range of people, even the elderly, have gotten involved. “Smuggle Street” is located near the border gate, where it is easier to buy milk powders, paper diapers, as well as beverages. Every morning, many elderly people buy these goods and cross the border gate.
“I carry two cans of milk powder from Macau to Zhuhai each time, and make the trip almost ten times a day,” says Mr. Chung, a 50-year-old Hong Kong resident who lives in Zhuhai and did not want to disclose his full name. “It is not necessary for me to pay the cost.”
Unlike student buyers, Mr. Chung is a full-time milk powder smuggler. “I don’t have any educational degree or professional skills,” he says, “so being a buyer is my best choice to make a living.” With a commission of 5 mops (US$0.64) per can, his average income can reach up to 100 mops (US$12.51) per day.
On average, bringing a box of beverages can get a 14 mop (US$1.75) concession, while taking a bar of cigarettes can earn the purchaser 9 mop (US$1.13). Many older residents have more leisure time after their retirement, so they take several types of items to Zhuhai on each time trip, which can help them earn nearly 200 mop (US$25.01) every day. Although the income may be not considerable, it can meet the basic expenses of the elderly.
After being taken out of Macau, most of those items will be repackaged to pretend as ordinary goods in an underground marketplace near the border gate and sold to small-scale local shopkeepers. The rest are transported to every corner of mainland China through express shipping.
“Most of the senders are working as purchasing agents in TaoBao (China’s leading online shopping site, like Amazon),” according to Zhou Chao, the clerk of a big express company in Gongbei.
“Most of packages are sent to Shanghai, Jiangsu Province, Zhejiang Province and Fujian Province, where TaoBao’s business is most popular. In my opinion, the purchasing agency industry in those provinces is growing vigorously due to their residents’ high consumption abilities.”
Documentary Video: Purchasing Agencies Rising in Macau
Paris Wu Yanhui, Phoebe Lin Peiyuan, Jocelyn Li Jing, and Hailey Zhao Haiyi are graduate students in the Department of Communications at the University of Macau.