Features Australia

China’s pantry

The daigou are stripping our shelves of more than baby formula

8 May 2020

11:00 PM

8 May 2020

11:00 PM

Perhaps toilet paper as the first essential on an Australian’s survival list did not fit into the logical part of your brain. The ABC reported pandemic psychology as the symptom causing empty shelves but like the virus, it strained in China.

China is the largest exporter of silky, soft paper, according to the Observatory of Economic Complexity. After 50 million Chinese workers were ordered to stay at home on their flush-with-the-floor toilets, Johann Christoph Michalski, chief executive of Vinda International Holdings, the largest toilet paper producer in Hubei, said demand for supply couldn’t be met due to logistical reasons. The pathogenic buying of TP took off like a North Korean missile across Japan.

Through certain social apps (cough, WeChat, cough) the contagious buying of once undervalued rolls of wonder spread globally. Empty shelves bewildered Australians curious as to what they were not seeing in TP that others were. Disappearing medical supplies would soon make sense. Before this it was baby formula.

These shelf clearers are a highly organised and malignant global syndicate known as daigou. Chinese-profiteers abroad who take from their host country to profit from eager customers in China.

The inception went unnoticed. Chinese internationals bought unique items abroad, mostly cosmetics, (although tanning products were never very popular), and on-sold them through Instagram-style online shops to their customers in China for profit. Good on them. Profit is good.

However, the daigou system escalated from ‘non-harmful’ to ‘advanced and aggressive’ when toxic baby formula rocked China in 2008, resulting in 46 known infant deaths and making roughly 300,000 sick. Daigou, seizing on this opportunity of despair (and realising we didn’t put toxic waste into baby formula), fleeced our shelves and manipulated, distastefully, the can limit, infuriating Australian parents in the process, exporting for profit Australian tins of baby formula to desperate parents in China. Even crew from Chinese warships dropped in at Coles for a few tinnies late last year.

As the Wu-flu spread, daigou moved swiftly from baby formula to basic medical essentials (just before we needed them) to make a tidy little profit in China.

Dr Matthew McDougall, president of the Australia China Daigou Association, told ABC in February that demand for baby formula has dropped as ‘face masks are the hottest item right now.’

How does it spread? An estimated 150,000 daigou work furiously in Australia, mostly via WeChat, on orders for millions of followers in China. Their off-the-books high income pays for university tuition and rent. With Chinese international students working up to 15 hours a day in the trade, despite being legally allowed to work up to 20 hours per week in a tax-paying job, the Victorian Government (aka Belt & Road Danistan) just announced it will contribute $45 million to the existing International Student Emergency Relief Fund, including assistance for students at English Language colleges, which have a reputation as visa-extension-equals-profit factories.

Surely Australian, non-Mandarin speaking students could become daigou? No. Daigou have rapport with their millions of customers. Tens of thousands watch their live shopping sessions, proving the products are from Australian shelves. Customers deal only with Chinese daigou. Australian businesses who have tried to undercut daigous find themselves up a certain creek without a paddle.

What started as cosmetic packages in the post, mutated into a $2.5 billion market via a plethora of Chinese-run logistics companies in Australia who mail as many as half a million packages to China every week. Daigou label parcels as ‘personal use,’ declaring the value at less than $50 to avoid detection. Contacts in Macau or Hong Kong help transmit products through customs without suspicion.

Like a disease, they don’t have their hosts’ interests at heart. In late January, a daigou in America shopped rurally for face masks and celebrated with her online customers: ‘It feels so awesome to buy all the masks! I didn’t leave a single mask for the Americans. Not many Chinese people live here so there are still masks to find.’

Another proudly filmed herself in Lowes, accepting a 50 per cent discount on her bulk-buy because she told the clerk she was donating the masks to China. Later, she had to disappoint customers because she had already sold out.

Daigou lack ethics and economic loopholes plague the industry. Customers pay daigou through WeChat with transactions linked to Chinese bank accounts, off the Australian government’s radar. The Australian Tax Office says that while there are ‘no specific taxation rules’ the expectation is that they would meet income-tax obligations. ‘Whether [those engaging the daigou] are meeting their corporate governance responsibilities in terms of actually understanding this channel – I think they’re not,’ says business management professor Stuart Orr.

As daigou thrive, and Australians go without, some Australians benefit. Blackmore’s CFO Aaron Canning admitted to the ABC, ‘we’re dependent on the daigou in Australia.’ Even our government-owned Australia Post has stores where all their products must be sent directly to China. Analysts estimate that up to 60 per cent of many businesses are made up of the daigou trade. But like a Chinese tongue-twister, it’s impossible to say.

Daigou communicate benefit (and dependency) to their suppliers in a soft CCP-style ‘don’t mess with us’ warning. ‘They’ve made the point to us that they do a hell of a lot of the marketing and the sales for our product in China,’ Mr Blackmore told the ABC. Blackmores know their share price could slip by 25 per cent if they get on the wrong side of the squatting latrine wall. This silky, soft-touch warning pales in comparison to China’s ambassador Cheng Jingye, saying, with facial expressions reminiscent of suffering constipation due to a career in the CCP, that the ‘Chinese public’ might abandon Australian wine, beef and universities if Australia wants to find out where the Wu-flu strained. The second wave – threats – is indeed damaging.

A virus escaped China that decimated our economy because of information China suppressed. Understandably, we want to know how it happened and receive intentional decimating threats. From daigou to ambassador, shared ethics are in single-ply supply. Australia has become a host into which China can reach its collective hand, hopefully sanitised, and feed from. We are infected. Covid-daigou. What will we be supplying next?

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Samuel McClelland is the Director of True Arrow Events

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