China's biggest e-commerce retailer JD.com will hold onto its stake in troubled Australian dairy group Murray Goulburn, according to a senior executive, as the company looks to form closer relationships with suppliers.
Shen Haoyu, the chief executive of JD Mall which is the company's largest business unit, said he also expects tougher import regulations for foreign infant formula brands.
When asked about Murray Goulburn at a media briefing in Beijing on Thursday Mr Shen said; "We view all our investments as long term".
"The dairy business is very developed in Australia."
Mr Shen said it was "possible" JD would make further investments in Australia as the country had "a lot of good brands in the right categories for Chinese consumers".
JD spent around $20 million buying a 4.6 per cent stake in Murray Goulburn's listed units in July last year.
Since then the units have more than halved and the company is facing a class action for misleading investors ahead of its $500 million initial public offering. POPULAR IN CHINA
Murray Goulburn's Devondale brand of long life milk and its other dairy products are popular in China and big sellers on JD.com and its fierce rival Tmall, owned by Alibaba.
During last year's Singles Day sale, JD said it sold 30 tonnes of Devondale milk powder in 36 minutes.
JD claims the title of China's largest retailer, ahead of Alibaba, after reporting 54 billion yuan ($11.5 billion) in revenue in the first quarter of 2016, up 47 per cent on the same time last year.
JD says Alibaba should be viewed as a marketplace or online mall not a retailer, as it hosts shops rather than selling its own products.
Mr Shen said JD's food and beverage sales were growing faster than its traditional electronics business, but flagged added scrutiny for foreign infant formula brands.
"Vitamins are less of an issue," he said.
"Infant formula will always be more sensitive ... and they [foreign brands] will be required to be compliant with Chinese standards."
In April China flagged changes to its so called "cross border" e-commerce laws, which allowed many foreign brands to enter the country at lower tax rates, with no local labelling and without being registered on the mainland.
Authorities also created a "positive list" of products allowed into China through this cross border channel. GREATER LICENSING REQUIREMENTS
While infant formula was on the positive list, authorities have flagged greater local licensing requirements, but these are not expected to be enacted for another year. The increased tax, which is around 11.9 per cent for food and beverages, is gradually being implemented.
Australia's Bellamy's Organic said it could accommodate whatever new regulations were required in China as it had been dealing with such changes for many years.
"It is still a very fluid situation to say the least," said Mr Shen of the changes to the cross border e-commerce laws.
"There is a lot of uncertainty."
Mr Shen expects cross border platforms will eventually be folded into domestic e-commerce platforms.
"No government will entertain a parallel tax regime and such price arbitrage for a long period," he said.
