Chinese “bakugai” which translated as explosive buying at discount stores and drug stores in Japan is mostly done by individual business traders known as social buyers , they are making profits by purchasing Japan produced goods then reselling them to Chinese consumers without paying taxes. It was said that in 2018 the market size brought by these social buyers was 400 billion yen.
However the Chinese government enforced the Electronic Commerce Law in January 2019 and tightened regulations in order to have these resellers pay taxes and obtain business licenses in order to increase tax revenue.
The Electronic Commerce Law has been enforced since January 2019.However, the acquisition of administrative permits and the obligation to pay taxes have led to a decrease in the number of C to C businesses . Sales at discount stores and department stores in 2019 in Japan have fallen by more than 60% compared to the previous year, Japan sees more Chinese visitors but less social buyers.
while the individual business traders who are not compliant will be excluded from the market, However, since demand from Chinese consumers remains unchanged, bigger social buyer merchants are likely to register as companies, pay taxes and become legitimate businesses, while smaller ones will probably close shop.
Before the law as enacted,Japanese companies without a physical presence in china could sell goods to Chinese consumers from overseas without registering as a business in china or paying taxes there. Those days are apparently over. They have to open shops on large Chinese e-commerce platforms through a Chinese distributor of subsidiary.