What: Vietnam becomes the latest Southeast Asian nation to challenge Chinese e-commerce giants, forcing Temu and Shein to halt operations amid stricter regulations and growing concerns over tax exemptions and local market protection.

Why it is important: This regulatory action represents a significant shift in how Southeast Asian nations are balancing digital trade opportunities with local market protection, potentially setting precedents for other emerging economies grappling with cross-border e-commerce challenges.

Vietnam has suspended operations of Chinese online retailers Temu and Shein for failing to register their e-commerce services with local authorities by the November deadline. The suspension comes as Vietnam's government and domestic businesses voice concerns about the impact of deep discounting by Chinese platforms and potential counterfeit sales. The trade ministry has ordered Temu to halt operations until it completes registration procedures, while both platforms are working to comply with local regulations. This regulatory action coincides with significant policy changes, including new legislation requiring VAT payment by foreign e-commerce platform operators and the potential elimination of tax exemptions for low-cost imported goods. The move affects Temu, which only began Vietnamese operations in October, and Shein, which has been active in the market for at least two years. This development follows similar challenges faced by these platforms in other markets, including Indonesia, where regulators have requested app store blocks to protect local merchants.

IADS Notes: Vietnam's suspension of Temu and Shein operations aligns with a broader regulatory shift observed throughout 2024 in the global e-commerce landscape. In April 2024, major economies began reassessing their approach to cross-border e-commerce, with the EU considering the elimination of its EUR 150 de minimis threshold and the US reviewing its USD 800 threshold for Chinese imports. This trend gained momentum when the EU imposed stricter regulations on Temu under the Digital Services Act in June 2024, threatening substantial penalties for non-compliance. The protective stance towards local markets was further exemplified in October 2024 when Indonesia requested the removal of Temu from app stores to shield local businesses. These actions coincide with broader market pressures in the e-commerce sector, which saw declining values despite increased sales volumes, suggesting that regulatory measures are significantly impacting the operational models of cross-border e-commerce platforms.

Temu, Shein suspend Vietnam operations amid crackdown on e-commerce platforms