Fund manager Geoff Wilson sold out of vitamin maker Blackmores and dairy group a2 Milk this week, fearing Chinese authorities would tighten informal import channels, which are a popular way of bringing consumer goods into the country.

Mr Wilson, who runs the listed Wilson Asset Management, which has $1 billion in assets, said both companies are heavily reliant on the so-called “grey” or “suitcase channel” for sales into China and were therefore vulnerable to any crackdown.

This channel usually involves the mailing of goods to China from offshore agents, often avoiding duties and is perceived by consumers to lower the risk of counterfeit products.

“We are still a believer in the Chinese consumer story, but we are worried about the regulator,” said Mr Wilson via phone from Sydney.

“There is just too big of a risk that the regulator will crack down, so we have sold out of Blackmores and a2 [Milk], our Chinese consumer stocks.”

Late last year the Chinese government announced draft laws to tighten restrictions on imported food being sold to consumers via websites or social media accounts based offshore.

China’s e-commerce sector

At present foreign food products sold via China’s booming e-commerce sector are largely exempt from local regulations, but the central government appears determined to close this loophole and bring the e-commerce sector into line with traditional retailers.

If the draft law is implemented in its current form, it will see more stringent checks at mainland ports, a requirement for Chinese labelling and tougher food safety protocols.

This could force foreign companies to register their products in China, rather than selling directly from offshore.

While both Blackmores and a2 Milk have registered products in China, consumers often prefer to buy them from offshore as they believe there is less risk they will be tampered with or are fake.

Mr Wilson’s fund returned nearly 26 per cent last year, compared to a 0.4 per cent increase in the benchmark S&P ASX 200. This was largely due to positions in Blackmores and a2.

Blackmores shares have risen nearly threefold over the last year, while shares in a2, dual listed in Australia and New Zealand, have gained 260 per cent over the same period. Both companies have benefited from growing demand from consumers outside China.

Blackmores will report its half-year results this Thursday.

Even as Mr Wilson quit the two companies, on Wednesday The Australian Financial Review reported he had a stake of 4.6 per cent, costing more than $14 million, in the struggling listed fund AMP Capital China Growth Fund (AGF).

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