Australia’s new haul of Chinese online goods helps tame inflation

As businesses globally fret about sky-high US tariffs reviving rampant inflation, in Australia the redirection of cheap Chinese goods is expected to provide relief for consumers and policymakers worried about stubborn cost pressures.

Alibaba's Taobao and JD.COM are the latest Chinese e-commerce platforms to enter the Australian market, seeking to tap into the bargain-starved country's appetite for online deals.

The expected flood of cheap goods from China, on top of a recent slowdown in inflation, is among several reasons the central bank felt confident enough to cut interest rates this week.

In an economy such as Australia's that manufactures few finished products domestically, Taobao is finding new markets outside its core Chinese-speaking consumer base.

“I don't shop a lot, but if I do buy something I will buy it online. If I can get it cheaper through Taobao, 100% I'll buy from them,” said Jodi Clarke, a therapist in Melbourne, whose first purchase on the site included three lookalike Hermes Kelly bags for A$129 (R1,488).

China's factories are rushing to reach more new markets overseas as the domestic economy slows, with US President Donald Trump's sweeping tariffs making it much more difficult to access the US, the world's largest consumer market.

Frederic Neumann, chief Asian economist and co-head of global research at HSBC, said the expansion of Chinese e-commerce platforms overseas will intensify disinflation pressures, specially for consumer goods.

“What the world is facing is a growing inflation divergence between the US and other economies, with prices climbing in the former and stabilising, if not outright declining, in the latter,” said Neumann.

While the flood of Chinese goods has raised alarms in manufacturing-dependent countries in Southeast Asia, Australia's overwhelming reliance on imports for many household items diminishes most of the concerns.

The Reserve Bank of Australia (RBA) judged recent global trade developments to be disinflationary in net terms for Australia, one of the reasons it opened the door to more interest rate cuts on Tuesday.

“Because Australia has a higher share of Chinese products in most parts of its import basket compared with other economies, the redirection of tariff-affected exports is likely to place additional downward pressure on Australian import prices, specially in the short term,” the RBA said in its quarterly economic update this week.

Australia bought A$110bn (R1.1-trillion) of goods from China last year, easily its biggest trading partner. Chinese trade data for April showed exports to Australia jumped 9% from the month before while shipments to the US tumbled almost 18%.

The RBA also noted cheap goods from China are unlikely to displace much Australian production and could even benefit industries reliant on imported inputs, such as clothing retailers.

Goldman Sachs has estimated the redirection of Chinese goods into Australia, particularly in toys, furniture and clothing, could subtract 20 to 50 basis points from headline inflation over the next year or two. The forecasts were made before China and the US agreed to pause steep tariffs this month.

Headline consumer price inflation held at 2.4% in the first quarter, comfortably within the RBA's target band of 2% to 3% and having come down from the 7.8% peak in late 2022.

Chinese e-commerce platforms are not new in Australia, with Temu capturing big chunks of online sales, but their broadening appeal to Australians comes as they wrestle with lingering cost-of-living pressures.

Singapore-based online fast-fashion retailer Shein, which sells clothes made in China, earlier this month held a pop-up store in Sydney and launched its first Australia-focused brand, Aralina.

Alibaba had been a low-key cross-border player until last year when it started investing aggressively to boost global sales, including in Australia. Its main competitor JD.COM also launched its Australian site in March.

The push was initially designed to reach more Chinese buyers overseas, but Trump's tariff chaos thrust the e-commerce sites into the spotlight, with Taobao offering an English version of the app.

Taobao is promoting sales in English for the annual “618" shopping festival on June 18, one of China's largest. It offers free shipping to Australia for clothes worth more than 249-yuan (R613.23).

Consumers interviewed by Reuters said Taobao's app is easy to use and has translation functions to help communicate with sellers. High shipping costs can sometimes be a hindrance, but in some cases it is cheaper than buying locally.

The site's growing profile in English-speaking communities has elevated the “Taobao haul” trend on TikTok in markets such as Australia.

Australian consumer Jessica Cox shared her first Taobao experience on social media, which included purchases of imitations of AirPods Max headphones. She also bought a Dyson vacuum cleaner and New Balance shoes, which were on the way.

“I thought I'd give it a try as a lot of people were saying they are pretty close to being mirror fakes,” she said.

“I thought, what do I have to lose?”

Reuters