Amazon.com (>> Amazon.com, Inc.) will set up shop in China's Shanghai free trade zone, state media 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 signals its intent not only to remain in China but to beef up its presence in an e-commerce market dominated by Alibaba Group Holding [IPO-BABA.N] and Beijing-based JD.com (>> JD.Com Inc(ADR)), the second-biggest player.
Amazon signed a memorandum of cooperation "to develop cross-border e-commerce in the Shanghai free trade zone", state news agency Xinhua said, adding that the company will use the zone to expand its import business through the introduction of "Amazon's full global product line into the Chinese market".
Xinhua did not say when the company is likely to begin operations in the free trade zone and Amazon representatives in China and the United States were not available for immediate comment by telephone or email.
The company is also pushing its Amazon Web Services (AWS) cloud computing 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 (75.71 million pounds) loss in the second quarter. The company also forecast an operating loss of between $810 million and $410 million for the third quarter to Sept. 30, representing a sharp increase from its $25 million loss a year earlier.
"Amazon must seize this strategic development opportunity" in the Shanghai free trade zone, Xinhua quoted Amazon's senior vice president of International Consumer Business, Diego Piacentini, as saying.
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 that it had closed down a third-party store after state media criticised it for selling fake cosmetics.
Amazon's reported 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, that hype has cooled amid a lack of specific policy details since the initial fanfare.
Foreign banks, such as Citigroup (>> Citigroup Inc) and HSBC Holdings (>> HSBC Holdings plc) 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.
(Reporting by Paul Carsten and Sui-Lee Wee; Editing by David Goodman)