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China Craves Foreign Goods. Students in Australia Supply Them.

By JACQUELINE WILLIAMS and XIUZHONG XUMAY 2, 2017

Uki Shao, 18, at a Chemist Warehouse in Melbourne, Australia, last month. Ms. Shao, a business major, describes herself as the “best daigou at my college.” Credit Asanka Brendon Ratnayake for The New York Times
MELBOURNE, Australia — Zhang Yuan’s business started with favors for relatives: an aunt who wanted baby formula, a cousin looking for Ugg boots. She was a college student here in Australia, and every dollar helped, so she mailed the items back to China and charged a bit of a commission.

But then, through word of mouth, her business just kept growing. Between classes, she would shop for whatever was popular that week: vitamins, brand-name jewelry, a fake erectile dysfunction drug called Kangaroo Essence. And when she could not find a more lucrative job after graduation, she stayed in Melbourne and in the booming gray market for selling Australian goods to Chinese consumers.

Her business now employs two buyers, two packers and two people in customer service, with offices in Melbourne and Hangzhou, her hometown in eastern China. Taking orders online, she sells mainly to health-conscious and well-to-do women and says she makes more than $300,000 a year.

“The Chinese have always had blind adoration for foreign things,” said Ms. Zhang, 25. “So rather than paying for expensive, made-in-China products that might lack safety, why wouldn’t they buy high-quality Australian ones at lower prices?”

A Chemist Warehouse in Melbourne. Mario Tascone, the chief operating officer of the company, said the daigou preferred its stores because they offered competitive prices and could fill large orders. Credit Asanka Brendon Ratnayake for The New York Times
Even as the world has come to rely on Chinese products, Australian goods have become hot commodities in China, and tens of thousands of young Chinese who are students at Australian universities or recent graduates have built a cottage industry to meet that demand.

The thriving trade — fueled by Chinese anxiety over counterfeit goods and product safety at home — reflects the growing economic interdependence between China and Australia, with all the opportunities and challenges that come with closer ties between a wealthier nation of 24 million people and a rising regional power of more than 1.3 billion. China is now Australia’s biggest trading partner, and Chinese investment in Australia set a record last year.

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The students, who call themselves daigou, or purchasing agents, are highly attuned to Chinese tastes and move quickly, sometimes creating spikes in demand in Australia and clearing out stores of specific products before shopkeepers know what hit them. Some analysts estimate that daigou sent as much as $600 million in Australian products to China last year.

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But their success has also drawn scrutiny, with officials in both China and Australia examining whether they are paying required taxes and complying with other regulations.

The business is in many ways a byproduct of China’s huge interest in a different kind of Australian product: international education, considered one of the nation’s top exports, worth $15 billion a year. Nearly a third of the 450,000 foreign students in Australia are from China, and the figure is growing.

Peter Cai, a fellow at the Lowy Institute, a think tank in Sydney, said the students had become a powerful force helping Australian products break into China. “Just through the daigou’s own personal networks, they enable a new market for a small- and medium-sized business in Australia,” he said.

“I think we’re almost entering a new phase of the China-Australia economic relationship” requiring greater understanding of the Chinese market, he added, and the students provide that understanding.

Chinese purchasing agents first appeared in Europe, buying and shipping luxury goods like handbags for China’s growing middle class. But the trade has shifted to Australia in recent years as the Chinese student population in Australia has expanded and consumers in China have grown more anxious about food and product safety.

Worries over infant formula, for example, surged in 2008 when six babies died and more than 300,000 children fell ill from drinking Chinese milk products that had been tainted with melamine, a toxic chemical. Many in China turned to imported milk powder in response, but reports of distributors or retailers adulterating it with Chinese formula prompted consumers to directly seek supplies from overseas.

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Zhang Yuan checking the Taobao shopping app to see what products are in demand and at what price in China. “The Chinese have always had blind adoration for foreign things,” said Ms. Zhang. “So rather than paying for expensive, made-in-China products that might lack safety, why wouldn’t they buy high-quality Australian ones at lower prices?” Credit Asanka Brendon Ratnayake for The New York Times
“There’d be huge amounts of infant powder, 900-gram cans, that were being bought off the supermarket shelves here and put in mailbags and sent to China via students,” said John Droppert, a senior analyst at Dairy Australia, an industry group. “Pallet loads were just disappearing because people were putting it in the post and sending it to China.”

Chinese students in Australia say as many as eight in 10 of them are involved in the daigou business. Some are just trying to make ends meet with occasional sales. Others have managed to build significant export businesses. They mail their products to customers in China or ship them to Hong Kong, where traders can carry them across the border to avoid mainland tariffs.

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“Shopping for others is like buying for myself; it gives me the same pleasure,” said Uki Shao, 18, a business major in Melbourne who described herself as the “best daigou at my college.” She sells brand-name items like Pandora jewelry, Michael Kors accessories and Aesop lotions and said her main challenge was persuading customers that her products were not fake.

“Sometimes, I have to take a video and post it on WeChat to show I’m in Australia,” she said, referring to the dominant messaging app in China, which the students also use to process payments.

The trade has grown so fast in recent years that Australian companies now hold events to meet with Chinese students and show them their products. Many work with retailers in China, too, but they are careful not to bypass the daigou in Australia, whose endorsements and personal networks they covet.

Van Diemen’s Land Company, the Tasmanian dairy giant, began shipping thousands of liters of fresh milk to China every week but said in February that it intended to work closely with “the all-important daigou channel” to promote sales.

Photo

Ms. Shao at her apartment in a suburb of Melbourne. She said that her main challenge was persuading customers that her products are not fake. Credit Asanka Brendon Ratnayake for The New York Times
The students can often be found in the aisles of Chemist Warehouse, a major drugstore chain, with smartphones in hand, ticking off items on shopping lists while filling suitcases full of products such as concentrated cranberry extract, marketed by the Australian natural health company Blackmores as promoting urinary tract health.

Mario Tascone, the chief operating officer of Chemist Warehouse, said the daigou favored the company’s stores because they offered competitive prices and could fill large orders. The chain also sells directly on the Chinese e-commerce platform TMall, but many customers prefer to place their orders with students.

“They trust the daigou more,” said Scarlett Liang, 18, an accounting and economics student at Trinity College in Melbourne. “They want to be convinced of the authenticity of the product.”

The larger daigou businesses often buy in bulk directly from a manufacturer like Blackmores at a discount and then sell supplies to smaller student operators at a markup.

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Express delivery companies that specialize in shipping to China are now dotted throughout major Australian cities to keep up. One of the more popular companies, Chang Jiang International Express, which describes itself as a “direct train from Australia to China,” sends about 400 tons of products to mainland China each month, according to its operations manager, Lu Wang.

Recently, fresh fruit has been in demand. “Each year in cherry season, the Chinese start asking for more Australian cherries,” said Angel Nie, 20, a student who studies politics at the University of Melbourne.“They’re very expensive, but the Chinese say, ‘I just want fresh and full-of-vitamin cherries.’”

But Ms. Nie said she dropped out of the business last year because she was not paying taxes, never obtained any licenses and worried it was “kind of like smuggling.”

Because most payments are processed on WeChat and other Chinese platforms, the authorities in Australia rely on students to declare the income themselves. Some daigou also offer lower prices by evading Chinese import duties, and there are occasional reports of arrests in China.

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“There’s quite a few that have grown into quite substantial operations, and there’d be quite a lot where they’re perhaps flying under the radar,” said Paul Drum, the head of policy at CPA Australia, the national association of accountants.

Last year, the Agriculture Department said it was investigating individuals suspected of shipping infant formula to China without meeting export requirements. Small exports of baby formula are legal, but shipments over 10 kilograms must come from registered export companies with health certificates and meet Chinese import regulations, a spokesman said.

Daigou on student visas in Australia are also permitted to work only 40 hours every two weeks. Running an informal export business in excess of those hours may violate the terms of their visas, according to Rachel Drew, a partner at the law firm Holding Redlich.

But Ms. Zhang expressed confidence that the market would continue to expand even as regulators caught up and Australian companies established new channels to sell directly to Chinese customers.

“Everyone’s got family and friends, and therefore their own customers,” she said. “That’s why there are so many daigou around.”
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