Is entrepot trade stealing your GDP?

Mr. Zhang recently discovered an interesting phenomenon: The electronic products purchased from Vietnam by his company, after simple packaging and repackaging in the bonded area, were re-exported to Europe, which actually contributed 0.3% growth to the local GDP. Behind this lies a little-known truth - entrepot trade is quietly reshaping the regional economic pattern.

When goods are transferred from Country A, transit through Country B, and finally sold to Country C, the added value generated by Country B through logistics, finance, insurance and other services will be included in its own GDP. Different from traditional trade, the core values of entrepot trade lie in:

• No change in the ownership of goods
• No involved in deep processing
• Rely on geographical and policy advantages to create service value

Taking the report of the China World Trade Institute in 2023 as an example, Singapore, a global entrepot trade hub, has 18.7% of its GDP coming from entrepot-related services. This model has three unique advantages:

• Light asset operation: No need for a heavy industry foundation
• High added value: For a chip with a single box value of 10,000 US dollars, entrepot services can create 800 US dollars of GDP
• Strong risk resistance: During the epidemic period in 2020, the decline rate of entrepot trade was 11.2% lower than that of general trade

Ms. Li's cross-border e-commerce team has recently started to use entrepot trade to reduce tariff costs. Through the Hong Kong transfer warehouse, the profit margin of EU orders has increased by 6%. This "curvilinear trade" is bringing:

• Lower terminal consumer prices
• More stable supply chain
• More diversified employment opportunities

In a certain free trade zone, entrepot trade surged by 210% in 2022, but the investment in the real economy declined by 7% during the same period. Experts remind that attention should be paid to:

• Risk of bloated GDP
• Signs of industrial hollowing out
• Narrowing of policy arbitrage space

With the deepening of agreements such as the RCEP, entrepot trade is evolving into "digital entrepot" - through transfer services with blockchain traceability, the contribution to GDP can be further increased by 40%. This may indicate that: The next round of regional economic competition will revolve around "entrepot efficiency".

Does your city have the potential to become an entrepot hub? Welcome to share your observations in the comment section. Forward this article to 3 industry groups, and you can obtain the electronic version of the tax planning guide for entrepot trade.