Amazon Enters Shanghai Free Trade Zone to Boost Offering in China

Amazon.com will set up shop in China's Shanghai free trade zone, the company said on Wednesday, aiming to take advantage of less stringent trade regulations to sell a wider range of products in the country.

The U.S. online retailer's move shows an intent not only to remain in China but to beef up its presence in an e-commerce market dominated by Alibaba Group Holding and Beijing-based JD.com, the second-biggest player.

Amazon signed a memorandum of cooperation to give Chinese customers access to its products from its global supply chain and to help small and medium-sized enterprises in China to export their products to customers in other countries, the company said in an e-mailed statement.

Amazon did not say when the company is likely to begin operations in the free trade zone, which enjoys more relaxed import and export regulations than the rest of China.

The company is also pushing its Amazon Web Services (AWS) cloud computing business in China and said in December that the country will have its own AWS region to improve speeds for its mainly corporate customers.

However, persistent expansion has come at a cost, leaving Amazon with a $126 million net loss in the second quarter, up from a loss of $7 million in the same period last year. The company also forecast an operating loss of between $810 million and $410 million for the third quarter to Sept. 30, up from a $25 million loss a year ago.

'Incredible opportunity'
"I look forward to working with our Shanghai partners to realise the incredible opportunity of developing the best cross-border shopping experience possible for not only customers in China but also around the world and establishing Shanghai as a recognized international cross-border e-commerce centre," said Diego Piacentini, Amazon's senior vice president of International Consumer Business.

But Amazon has also been hit by counterfeit goods that frequently plague companies in China, from fashion to pharmaceuticals and even food and drink.

In March Amazon said it will strengthen regulation of its online sales channels and had closed down a third-party store after state media criticised it for selling fake cosmetics.

Amazon's move to the free trade zone comes nearly a year after the zone was launched, attracting attention from overseas businesses and hailed as one of China's boldest reforms in decades. However, there has been a lack of specific policy details since the initial fanfare.

Foreign banks, such as Citigroup and HSBC Holdings have set up branches in the zone, but many foreign companies have been reluctant to follow suit, citing a lack of clarity on what will and will not be allowed in the zone.

© Thomson Reuters 2014