A new food safety regulation issued by the Beijing Municipal Government has officially taken effect on Monday. The new regulation strengthens on tighter supervision and control of street food vendors and online food retailers, as well as on harsher punishment for violators.

A screen grab showing baby formula products trademarked by Hero Nutradefense. [Photo / cntv.cn]

However, the regulation's draft stirred public concerns by banning baby formula online trade, but it was eventually amended to only allow online stores that possess both Business License and Food Circulation Permit to run the deal.

Dairy industry analyst, Song Liang, at productivity promotion center of commercial circulation says the amendment was inevitable since online shopping platform has become an important way of purchasing baby formula in recent years.

"According to our figure, last year's baby formula sales volume in China is around 50 billion to 60 billion yuan, and online sales take up about 10 percent."

Song Liang says that selling and purchasing baby formula online is going to be the future trend, since the cost is lower for both companies and customers, and it opens a window for big brands to expand its market in the country. Song gives further explanation.

"The circulation cost of selling baby formula through online shopping platform is very low, merely 30 percent of that of store sales. In result, the price of baby formula per can can be reduced by 40 yuan. Another thing is that many foreign brands find it hard to get a proper retailer in China, online shopping platforms provide a perfect choice with low entry cost and risk. As for big brands that have already secured a position in China's market, they can further expand their market into third and forth tier cities and towns with the help of express delivery service."

Earlier in March, Tmall, a major Chinese online shopping platform, has announced its cooperation with overseas baby formula companies to sell their products to Chinese consumers online.

However, many worry that the new food safety regulation will lead to closures of online stores fail to acquire the licenses, and with less competition, the online stores remain in the market will mark their price higher.

Song Liang says the worry is unnecessary and the new regulation has more positive effects.

"There had been a lack of standardization in baby foods online trading. There are problems like information asymmetry between sellers and customers, and there are stores selling fake products. The regulation can largely solve such problems. For legal sellers, the regulation protects their rights by keeping illegal competitors and fake products out of the market. For buyers, the only possible reason for a rise in price is supply shortage. And I think the price will most likely remain stable. "

In recent years when food safety issue raised concerns among the public, people have been complaining about the lack of harsh punishment on violators. The new regulation made a breakthrough. Feng Yuan, director at the Beijing Food Safety Office, gives a brief introduction.

"In the regulation we stipulate that once a food producer and a seller were found guilty of violating the law and put into prison, they are then forbidden from food industry for the rest of their life."

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