Chapter 6 China’s e-commerce development and policy relevance

Yue Jiang, Lei Zhang and Yunhang Jin* Abstract China’s e-commerce The dollar value of e-commerce transactions in China has increased enormously over the past 20 years, development and supported by improved infrastructure, the rapid growth of mobile telephony policy relevance and increased financing. The market also is characterized by increasing diversity, for example, the growth of e-medical services, the expansion of cross-border e-commerce and the development of online-offline transactions. China’s national government has played an important role in the development of e-commerce through policies elaborated in five-year plans, while regional governments also have participated in planning and adjusting the e-commerce policy framework in light of local conditions.

* The contents of this chapter are the sole responsibility of the authors and are not meant to represent the position or opinions of the WTO or its members. 142 CHAPTER 6

China’s e-commerce US$ 144.81 billion (CNY 999.2 billion) development: past and in 2017, with a year-on-year growth current situations rate of 71.5 per cent.

China’s e-commerce market emerged China’s e-commerce development has 20 years ago. China’s e-commerce experienced four phases (Yin, 2018): transactions increased from only US$ 1.16 trillion (CNY 8 trillion) in 2012 to 1. Germination stage (1997–1999) US$ 4.58 trillion (CNY 31.63 trillion) in During this period, few people were 2018 (Figure 1). In 2018 (the last year informed about the market or for which data are available on the participated in online shopping, and composition of e-commerce), online shopping platforms were in e-commerce transactions of goods and their infancy. The main impact of services equalled US$ 4.44 trillion e-commerce was to assist small and (CNY 30.61 trillion) with a year-on-year medium-sized enterprises (SMEs) to growth rate of 14.5 per cent.1 participate in international business- to-business (B2B) transactions. The In 2018, the transaction scale of demand for customer-to-customer China’s online retail sales reached (C2C) transactions had not yet US$ 1.3 trillion (CNY 9 trillion), arisen. Major e-commerce accounting for 28.5 per cent of the companies during this period were market.2 Sales of e-commerce services Alibaba, 8848 and EachNet. have increased rapidly since their development in 2013. According to 2. Construction stage (2000–2007) Yang (2016), the online-to-offline The internet bust led to a reshuffling (O2O) transaction volume of local of e-commerce firms, as over living services was expected to reach one-third of internet websites

Figure 1: China’s e-commerce transactions have increased rapidly

Source: Research report on market prospects and investment opportunities of China’s e-commerce industry in 2019–2024, China Business Industry Research Institute, 2019, available at: https://www.askci.com/news/chanye/20190722/1129101150117.shtml. CHAPTER 6 143

disappeared. Nevertheless, the end of 2016, Alibaba launched increased acceptance of online a new retail concept, leading shopping led to the rapid e-commerce enterprises to enter the development of C2C transactions. offline market. At present, Alibaba However, there were important has emerged into a relatively mature defects in logistical support for operational mode. In addition to e-commerce, and sales of continuous increases in the variety counterfeit goods were a major issue. of goods and services offered and improvements in logistics and 3. Evolution stage (2009–2015) after-sales services, e-commerce China’s e-commerce market was enterprises are also actively fully developed, and competition expanding their cross-border among e-commerce enterprises online shopping, developing rural was fierce. 3G was officially e-commerce, and providing commercialized in 2009 (Shen and maternal and child medical care, home Chen, 2018). The number of user decoration, local living services clicks for online shopping reached and other services to consumers. 100 million. The business-to- SMEs have joined the platform, consumer (B2C) and market segment platform Tmall went competition is intense. online. Purchases of “The market also clothing, shoes and is characterized Key segments of the handbags, as well as by increasing e-commerce market, of household goods in particular B2C and services, diversity, transactions in rural increased. The for example, areas and cross-border number of internet the growth transactions, are users and firms of e-medical expected to continue providing express services, the to grow. The collection logistics services and analysis of user showed explosive expansion of data, particularly growth, while the use cross-border through use of artificial of mobile phones to e-commerce and intelligence techniques undertake e-commerce the development to mine “big data” to transactions rose of online-offline glean insights into sharply. consumer behaviour, transactions.” is an important and 4. Mature stage (2016 growing market. until the present) China’s e-commerce platform The rapid growth of e-commerce is pattern has evolved into a new stage inseparable from the development of with the emergence of new business internet software and hardware, as models. After several years of well as other infrastructure. In 2018, high-speed growth, the mobile revenue from fixed data and internet shopping market growth rate started services reached US$ 34.5 billion, to slow down in 2016 and the with a period average of US$ 32.6 e-commerce Monthly Active Users billion (Figure 2). Revenue from mobile (MAU) increment also decreased. At data and internet services reached 144 CHAPTER 6

Figure 2: Revenues from fixed data and internet businesses in China have increased sharply

34.5 35 32.8 30.5 30 28.4 27 27. 6

25

20

billion, CNY 15

10

5

0 2013 2014 2015 2016 2017 2018

Development of fixed data and Internet business revenue

Source: Ministry of Industry and Information Technology of the People’s Republic of China (billion CNY), http://www.miit.gov.cn/n1146312/n1146904/n1648355/c6633265/content.html.

US$ 100.95 billion, and accounted had been registered in China.3 for 46.6 per cent of total telecom However, the increase in the share revenue (Shen, 2016). of the population using a mobile phone is expected to slow. The use of mobile phones has risen sharply. As of September 2019, about Firms involved in e-commerce have 1.6 billion mobile phone subscriptions absorbed considerable equity

Figure 3: Financing of e-commerce firms

Source: “E-commerce industry private equity investment and financing statistics: China mobile internet industry private equity investment and financing pattern analysis”, China Business Industry Research Institute, 2019, available at: https://www.askci.com/news/chanye/20190722/1129101150117.shtml. CHAPTER 6 145

Figure 4: Forms of equity investment services, including information in e-commerce firms, 2018 transmission, software and information technology services (3 per cent) and leasing and business services (2.1 per cent). The gross merchandise volume (GMV) of China’s e-commerce in 2018 totalled CNY 152,424.5 billion, again dominated by manufacturing (36.7 per cent) and wholesale and retail trade (22 per cent), followed by information transmission, software and information technology services (7.3 per cent), transportation, storage 34% Angel round investment and postal services (3.4 per cent), 27% A round of financing and leasing and business services 10% B round of financing (2.8 per cent).5 8% Pre-A 8% Others 5% Seed investment 2. Spatial distribution 4% C round of financing The level of e-commerce development 4% Strategy investment varies greatly across provinces in China. In 2018, e-commerce Source: “E-commerce industry private equity investment and financing statistics: China mobile enterprises were mainly located in the internet industry private equity investment and eastern coastal areas, including the financing pattern analysis”, China Business Industry Research Institute, 2019. provinces of Beijing, Fujian, Guangdong, Jiangsu, Shandong and Zhejiang. The total number of enterprises engaged in e-commerce transactions was more than 5,000 per investment and other forms of province, and Guangdong, Shandong financing. Total private equity and Zhejiang reached more than investment and financing peaked at 10,000 each in 2018. From the coast US$ 767 billion in 2015, but had fallen to the inland, the development of to US$ 373 billion by 2018 (Figure 3). e-commerce in the provinces of Anhui, The largest share of financing came Chongqing, Guizhou, Hebei, from angel investors, followed by the Heilongjiang, Henan, Hubei, Hunan, A round of financing and the B round Jiangxi, Liaoning, Shanghai, Shanxi, of financing (Figure 4). Sichuan and Yunnan is only moderate, with the number of enterprises engaged Characteristics of in e-commerce transactions ranging Chinese e-commerce from 1,000 to 5,000 per province. The development of e-commerce in the vast 1. Industry distribution central and western regions and parts Of the CNY 85,597.78 billion in of the northeast provinces is limited, e-commerce purchases4 in 2018, the with the number of enterprises bulk represented manufacturing (44.2 engaged in e-commerce transactions per cent) and wholesale and retail below 1,000 per province. On the trade (39.1 per cent). The rest of the whole, the level of e-commerce market consisted of information development declines as one moves 146 CHAPTER 6

Figure 5: An index of the development of e-commerce across provinces is closely related to the number of firms, 2017

Source: 2017–2018 China E-commerce Development Index Report.

from east to west, which is closely to the e-commerce development related to the level of economic index, but ninth according to the development and degree of number of firms engaged in marketization in each region. e-commerce. In 2017, the e-commerce development indexes of nine provinces The number of firms is not a very were above the average, and the precise indicator of the potential of indexes of two more provinces were the e-commerce market. An index very close to the average (Figure 5).6 has been constructed to measure the level of e-commerce development in 3. Platform distribution each province, taking into account the New e-commerce platforms in scale, growth potential, market China have emerged in recent years. penetration and supporting Alibaba, JD.com and NetEase Koala environment. According to this are the major traditional e-commerce e-commerce development platforms, while WeChat, Pinduoduo index, Guangdong, Zhejiang, Beijing, and Xiaohongshu are promoting the Shanghai and Jiangsu have had the use of social e-commerce, which has highest level of e-commerce intensified competition for the development for some time. While traditional platforms. Alibaba has each province’s ranking in the accounted for more than 90 per cent e-commerce development index is of traditional e-commerce transactions closely associated with the number since 2014. The total turnover of of enterprises engaged in e-commerce Tmall products (owned by the Alibaba transactions, the ordering of provinces Group) reached CNY 2.13 trillion in according to these two indicators of 2018, accounting for the largest e-commerce development is not market share of China’s e-commerce identical. For example, in 2017, industry. Social e-commerce remains Shanghai was ranked fourth according smaller, but its growth has been quite CHAPTER 6 147 rapid. WeChat transactions have information processing, application increased seven times from 2014 systems, technical consulting and to 2019, and Pinduoduo has doubled other outsourcing services).8 its sales since 2017. Xiaohongshu released e-commerce services on First, the 11th five-year plan clearly its platform for the first time in 2015, emphasizes the construction of and its average annual turnover public e-commerce service projects has increased by 100 per cent and promotes the formation and since then.7 development of e-commerce service formats with third-party platform The central government’s services (Mao, 2007). The plan urges plan for the development government departments to make full of e-commerce use of specialized third-party e-commerce service platforms to The Chinese government formulates outsource information processing, data a plan every five years to promote hosting, application systems and other the development of e-commerce. information technology applications. Since 2006, there have been These efforts should help to establish three five-year plans stable and large-scale addressing e-commerce demand for such development, each “The dollar value services. Second, emphasizing different of e-commerce the 11th five-year issues. plan emphasizes transactions the importance of 1. The characteristics in China has popularizing e-commerce and changes of the increased applications to attract three five-year plans enormously greater involvement by The 11th five-year plan over the past 20 SMEs and consumers in 2007 put forward (Qiongni, 2014). The the strategic task years, supported plan urges SMEs to use of developing the by improved third-party e-commerce e-commerce service infrastructure, service platforms, industry for the first the rapid growth comprehensively time. The plan defines of mobile implement outsourcing e-commerce services of various production to include web-based telephony and and business activities, transaction services increased and strengthen their (web-based procurement, financing.” management and sales and related profitability. At the authentication, payment, same time, the plan credit investigation and encourages the development of other services), business outsourcing new services for different levels of services (web-based product design, consumers, focusing on the development manufacturing, management and of mobile e-commerce including new other outsourcing services) and technologies, new applications and information technology system new models, and further enhancing the outsourcing services (mainly web- market penetration of e-commerce based equipment rental, data hosting, applications (Wang, 2007). 148 CHAPTER 6

The 12th five-year plan emphasizes the use of e-commerce platforms various efforts to boost the role of to expand marketing channels by e-commerce in economic and social means of market-based operations development. Key areas include such as equity investment, risk research to accelerate the compensation and interest rate transformation of the e-commerce discounts. The regions should market, efforts to popularize and encourage e-commerce platforms deepen e-commerce applications, to cooperate with manufacturing creation of a strong institutional enterprises to optimize the product and social environment to support supply chain and supporting services e-commerce security and improving and to build a new generation of the efficiency of resource allocation e-commerce platforms closely (Meng, 2017). The plan calls for connected with manufacturing pragmatic steps to support the enterprises. Efforts also are required healthy and orderly development to promote innovations in O2O of e-commerce, a focus on innovation e-commerce applications and to and effectiveness, facilitate the and development of combination of online technical standards. “Key segments of and offline trading, the e-commerce with an emphasis on The 13th five-year plan market, in innovations in business pointed out the models and importance of integrating particular B2C technology innovation. traditional industries into transactions in Finally, the regions e-commerce. According rural areas and should also create to the 13th five-year cross-border O2O e-commerce plan, e-commerce transactions, models and cultivate development should new formats for the be led by “coordination are expected provision of and innovation” that to continue e-commerce services. promote the integration to grow.” of e-commerce into The 13th five-year traditional economic plan provides for fields; steadily promote improvements in the legal framework the integrated development for e-commerce, based on the three of e-commerce in agriculture, principles of simultaneous development manufacturing, logistics, related and standardization, parallel services and other sectors; and competition and coordination. comprehensively drive the Compared with the previous transformation and upgrading of exhortation of “standardizing in the traditional industries. Policies should development and promoting the strengthen the integrated development development by standardizing”, the of e-commerce in manufacturing, new development principle not only agriculture and industry. Efforts should guarantees and maintains stakeholders’ be made to support innovative rights, but also requires them to fulfil enterprises (to demonstrate the value corresponding obligations and of innovations to other firms) and to responsibilities. New ideas are assist manufacturing enterprises in required to promote development CHAPTER 6 149

Table 1: Evolution of the five-year plans

11th five-year plan 12th five-year plan 13th five-year plan

E-commerce Popularize Deepen applications

E-commerce Standardize Open regulation

E-commerce Construction Upgrade platform

Traditional industries Integration

and standardization and to create period of e-commerce development, a more open e-commerce business the 11th five-year plan emphasized environment. The government also the construction of public e-commerce will continue to standardize service projects and the importance development through innovative of popularizing e-commerce approaches to establish an open, applications. With the gradual fair and honest e-commerce market. popularization of e-commerce Efforts to ensure competition and applications, the 12th five-year plan coordination will be designed to emphasized deepening e-commerce protect fair competition and minimize applications in order to improve the administrative interference in the efficiency of resource allocation. market. At the same time, the The 13th five-year plan highlighted government will promote the strengthening the integration of complementary and coordinated e-commerce and traditional industries development of e-commerce and and improving the legal framework traditional industries, online and for e-commerce. offline, as well as e-commerce activities in urban and rural areas. The changes in the plans concentrate The government gives equal emphasis on four aspects over time (see Table 1). to openness and security, and The 11th five-year plan proposed encourages enterprises to actively to construct the e-commerce participate in international market platform, while the 12th five-year competition, so as to develop plan proposed its upgrade. The international e-commerce featuring emphasis in the plans changed from convenient logistics, mutual popularizing e-commerce applications recognition of standards, to deepening them over time. complementarity of production E-commerce regulation in the capacity and market sharing. plans changed from emphasizing standardized principles to emphasizing In general, three five-year plans open norms. Additionally, because have specific emphasis in regard e-commerce development has now to e-commerce based on different entered the mature stage, the 13th development periods. Because five-year plan proposed the integration 2007 witnessed the construction of traditional industries and e-commerce. 150 CHAPTER 6

2. The value of the plans system for the e-commerce market The plans facilitate the upgrade of based on a unified social credit e-commerce platforms. The plans system. E-commerce enterprises take regard e-commerce platforms as a the five-year plans as guides, establish core to improve the efficiency of a traceability mechanism that includes allocation of social resources, and they online product transactions and offline advocate for enterprises to take full service, and gradually develop advantage of the “internet +”. To standardized operations, professional illustrate, firms need to make full use of management, standardized logistics the internet, cloud computing, big data, and scientific supervision. mobile internet and other technologies, with the aim of constantly improving The plans are conducive to creating platform functions to make them more a benign and open e-commerce user friendly. E-commerce platforms environment. The plans propose to should promote the integration of optimize the governance environment multiple resources in the industrial of e-commerce, emphasizing the need chain, including producers, traders, to strengthen the construction of users, financial e-commerce information institutions, logistics infrastructure, and to agencies and technical implement effective service agencies; “Fast logistics is supervision based on eliminate information the foundation internet technology barriers; optimize for the rapid regulations and law. resource allocation; development The development of and realize operation of China’s e-commerce needs coordination and to reinforce industry optimization on the e-commerce.” guidance and create a whole. By upgrading healthy and open e-commerce platforms, environment. The firms could use the advantages of development of e-commerce also internet connectivity and resource needs to abide by the basic principles integration to create more value. of equal emphasis on competition and coordination, adhere to the promotion The plans help to build a standardized of fair market competition and open service system. Standardization of development, prevent and suppress product information and delivery monopolistic and vicious competition, processes is the basis for the efficient and establish an open, fair and honest operation of e-commerce. However, market order through supervision. China is relatively lagging in standardization of product information The plans contribute to deepening and delivery process, lacking a the integration of traditional industries standard process for warehouse and e-commerce. Due to incomplete management, logistics distribution, market competition and asymmetric financing management and contract information, enterprises are faced with management. Plans encourage four major difficulties in production and enterprises to actively participate in operation decisions – what to produce, the construction of e-commerce how much to produce, for whom and regulations and establish a real-name how to produce. The plans proposed CHAPTER 6 151 that e-commerce firms may effectively non-governmental organizations solve the difficulties of what to within the region to promote the produce, how much to produce and for popularization, dissemination whom by integrating online and offline and penetration of e-commerce transaction resources and creating an awareness, knowledge and skills integrated ecosystem of production (Deng, 2013). and distribution, including procurement, sales and logistics, etc. 3. The government can take steps to In order to solve the problem of how support production and processing to produce, e-commerce enterprises supply chains, find and cultivate need to further promote the integration modern online businesses and assist of big data into the traditional industrial with operation and marketing links. A chain, including manufacturing, key principle is to encourage trials operation management and sales and innovation, which allows for services. Through the sharing of mistakes and failures. knowledge and information, e-commerce enterprises may break 4. The government should provide down the boundaries between sectors policy and legal guarantees for and realize intensive production and the development of e-commerce the coordination of production, service, and help solve data security and procurement and sales. The deep related problems. integration of the e-commerce and traditional industries facilitates the Local governments also play an active cultivation of modern online businesses role in boosting the development of and the upgrade of production. e-commerce. Zhejiang province, for example, is a leader in the field of The role of government in the e-commerce in China, and it vigorously development of e-commerce promotes the e-commerce applications of industrial enterprises and Government has the opportunity to encourages SMEs to rely on third- play a leading role in the development party e-commerce platforms to carry of e-commerce in four areas. out online sales. Zhejiang also encourages qualified enterprises to 1. The government promoted the develop online brands and supports development of the basic the rapid establishment of online retail e-commerce infrastructure based on and distribution systems for industrial the development characteristics and products that suit the characteristics realities of local enterprises. of Zhejiang industry.

2. The government helped facilitate Lessons from China’s the popularization of e-commerce. experience of rapid The primary task of government e-commerce development is to carry out a wide range of e-commerce training and 1. Fast logistics popularization activities. In addition, Fast logistics is the foundation for government can guide the the rapid development of China’s spontaneous formation of business e-commerce. There are many logistics associations and other companies in China’s e-commerce 152 CHAPTER 6

market, such as Shunfeng, Yuantong entry of their information technology and Yunda. China’s goods delivery products in international markets systems consist of a “backbone and promote the development transportation network” with high- of e-commerce. speed rail, highways and civil aviation; a “general mainline network” with Endnotes high-grade highways, ordinary speed railways and inland waterways; and a 1 Research report on the development and “service network” with rural roads market prospects of China’s e-commerce and branch railways.9 Developing industry in 2019, China Business Industry countries should strengthen transport Research Institute, available at https://wk. infrastructure and promote competition askci.com/details/410b8e0556bd422 among various courier companies to 3b5085696e00028d0/ improve the speed and quality of their logistics services. 2 China E-commerce Development Report 2018–2019, 2019 Global Electronic 2. Convenient platform Commerce Conference, Xiamen, 8 The availability of a user-friendly September 2019. internet platform is a major feature of the rapid development of China’s 3 See https://www.statista.com/ e-commerce. Consumers can easily statistics/278204/china-mobile-users-by- search for various products and month/ compare their function and price through the platform. Various means 4 E-commerce purchases here refer to the of payment are available, including total goods and services purchased by through online commercial banks, enterprises through online orders. Alipay and WeChat. Upgrading e-commerce shopping platforms is 5 Data from National Research Network essential to facilitating consumers’ Database, available at: data.drcnet.com.cn online purchases. (accessed 13 January 2020).

3. Regulating market 6 Ibid. The rapid development of China’s e-commerce also benefited from 7 “WPP China Social E-commerce White regulating e-commerce, based on Paper”, 2019. international agreements. China continues to fulfil the Agreement 8 Liu, Guiqing, 2007, Highlights of the on Information Technology proposed 11th five-year plan for the development at the WTO Ministerial Conference of e-commerce Shanghai Business in Singapore in 1996. In addition, (08): 28-29. China has participated in the negotiation of the Information 9 “Backbone transportation network”, Product Agreement, and China may “general mainline network” and “service participate in the negotiation of the network” refer to three types of logistics e-commerce agreement. Accordingly, in China based on transport infrastructure developing countries should actively developments and geographical features. join the WTO’s agreement on “Backbone transportation network” e-commerce, which will facilitate the is the most common one, followed CHAPTER 6 153

by “general mainline network” and platform under network environment, “service network”. Zhejiang Gongshang University.

References Shen, D. (2016), “Difficulties faced by e-commerce in China and countermeasures”, Deng, Q. (2013), Research on government Western Leather 38(14): 71. functions in e-commerce ecosystem, Zhejiang Gongshang University. Shen, W. and Chen, J. (2018), “Problems and countermeasures of e-commerce Hui, Y. (2018), Research on national development in China”, Science and happiness effect of international trade, East Technology Economic Guide 26(22): 5-7. China Normal University. Wang, H. (2007), “Prospect of the Mao, B. (2007), “China’s e-commerce development trend of e-commerce based on development focus? Interpretation of ‘the the ‘eleventh five-year plan’ of e-commerce eleventh five-year plan for the development of development”, E-commerce 9: 11-13. e-commerce’”, Internet World 9: 8. Yang, Y. (2016), Dynamic research on the Meng, F. (2017), “China’s e-commerce impact of e-commerce development on development in the 13th five-year plan from China’s export to “One Belt and One Road” the 12th five-year plan”, Informatization countries, Jiangxi University of Finance and Construction 7: 38-40. Economics.

Qiongni, Z. (2014), Model, mechanism and policy of regional collaborative innovation 154 CHAPTER 6: COMMENTS

Comments

QING YE*

E-commerce transactions, including the e-commerce. This chapter discusses cross-border ones, have been growing China’s e-commerce growth in general; rapidly and have transformative effects China’s cross-border e-commerce on the global economy. As Chapter 6 development could also be included and indicates, China’s e-commerce further illustrated. In fact, cross-border transactions have seen a tremendous e-commerce in China began to grow growth in the past 20 years. In fact, significantly in 2011 and has become an China has become one of the largest important part of Chinese foreign trade. e-commerce markets in the world. Cross-border e-commerce transactions, The global value of e-commerce particularly in business-to-consumer reached US$ 29 trillion in 2017, which (B2C) terms, encompass e-transactions, corresponds to 13 per cent growth e-payments and logistics. There are a over the previous year, according to mass of cross-border e-commerce estimates by the United Nations market players in China, including Conference on Trade and Development e-platforms, e-payment operators, (UNCTAD, 2019b). China’s total e-vendors, warehousing operators e-commerce sales value was estimated and express shippers, which jointly at US$ 1.9 trillion in 2017, making it the operationalize massive online third largest e-commerce market after transactions and offline deliveries on Japan and the United States. However, a day-to-day basis. According to according to UNCTAD’s Digital Chinese Customs’ statistics,1 the value Economy Report 2019, China’s total of China’s cross-border e-commerce e-commerce sales value in 2017 trade in goods was around CNY 134.7 represented only 16 per cent of its gross billion in 2018, with an annual growth domestic product (GDP) (UNCTAD, rate of 20 to 30 per cent for the period 2019a). This share was nearly three from 2013 to 2018. It is noteworthy that times less than in the United States exports took the majority share of and four times less than in Japan. It China’s total cross-border e-commerce indicates China’s e-commerce transactions in goods at the level of market still has tremendous potential 83.1 per cent in 2015; however, imports to grow, particularly in business-to- surpassed exports in less than three business (B2B) e-commerce and years and reached 58 per cent of the cross-border e-commerce. total share in 2018.

Statistics typically include both domestic Cross-border e-commerce impacts and international transactions, so it is economies in different ways. For important to single out cross-border example, it: (i) enables diversified

* The contents of this commentary are the sole responsibility of the author and are not meant to represent the position or opinions of the WTO or its members. CHAPTER 6: COMMENTS 155 products from all over the world to be • encouraging enterprises to engage in supplied to consumers; (ii) encourages international trade through small and medium-sized enterprises e-commerce; (SMEs) to participate in international trade; (iii) improves economic • strengthening major e-platforms; competitiveness; (iv) spurs innovation (e.g. many Chinese e-platforms are • enhancing customs and quarantine utilizing “big data” to analyse and procedures; monitor cross-border e-commerce transactions); and (v) creates jobs – • improving cross-border payment there are over 2 million people working services; in the field of e-commerce in China (WCO, 2017). • providing financial support to e-commerce companies; and Chapter 6 divides China’s e-commerce development into four phases – • promoting the functions of trade germination, growth, accelerate and associations. mature – that follow the same logic as that of other scholars.2 Other initiatives Differences mainly occur include encouraging when defining the later “E-commerce e-commerce cooperation stages; if marked by transactions, with countries along the milestones in government Belt and Road, policies, later stages including the increasing the efforts to could also be classified cross-border support Pilot Free Trade as “The Standardization ones, have Zones to deepen reform Stage” and “The been growing and opening up and Globalization Stage” rapidly and have facilitating cross border (Yue, 2017), which is transformative e-commerce. At the compatible with Chapter local level, municipal 6’s government policy effects on the governments in some discussion. The global economy.” cities are encouraged Standardization Stage to explore ways in which covers the period from they can integrate 2008 to 2014, when key policies to different administrative resources and promote e-commerce development in provide comprehensive services in order China were formulated and regulatory to promote cross-border e-commerce. policies for China’s e-commerce had For example, Zhejiang Province has launched by its end. The Globalization established a cross-border e-commerce Stage has developed with the significant work mechanism, with Hangzhou and growth of China’s cross-border Ningbo as the main pilots, for a e-commerce. In June 2015, the Chinese management system and set of rules on government rolled out its strategy to global cross-border e-commerce, foster cross-border e-commerce in a especially a “single window” for document titled “Guiding Opinions to logistical and legal matters. Promote Healthy and Rapid Development of Cross-Border E-commerce”,3 which Critical lessons learned from China’s encompassed the following measures: experience of rapid e-commerce 156 CHAPTER 6: COMMENTS

development can be summarized as Improving access to reliable and follows: (i) creating well-designed affordable ICT infrastructure is essential national strategies and roadmaps for for e-commerce to thrive. Strengthening boosting the development of e-commerce; logistics and transport infrastructure is (ii) refraining from measures that may stifle imperative for both domestic and the development of e-commerce, such cross-border e-commerce facilitation. as streamlining the administrative Poor logistics remain a barrier to procedures for taxing related e-commerce in many developing businesses and enhancing services; countries, and investment in (iii) providing a more conducive infrastructure is often much needed. business environment based on trust, The solution may partly lie in providing fostering entrepreneurship and direct government funding in innovation, and providing access infrastructure investment or adopting to financing for digital start-ups; and private-public partnerships for the (iv) strengthening the protection of deployment of networks, as China did intellectual property in the cross-border in its e-commerce development growth e-commerce industry and cracking down phase. Taking the best practice from on counterfeiting and infringement. the globalization phase of China’s e-commerce development, policymakers Most of the debate on digitalization could explore and harness relevant and development has concentrated opportunities to embrace cross-border on the extent to which countries have e-commerce and create conditions, affordable access to various procedures and resources that enable technologies and whether the cross-border e-commerce to thrive. technologies benefit each country. The digital divide remains a real On a global scale, international concern to many developing countries, cooperation plays an important role. particularly least-developed countries In certain markets, regulatory (LDCs), and many face challenges of requirements regarding cross-border drawing benefits from vibrant digital e-commerce fail to keep up with the trade owing to the lack of adequate dynamics and trends of e-commerce digital capacities. Further studies on in terms of their efficiency and the policy implications of China’s effectiveness, posing substantial e-commerce development can help demands for international cooperation developing countries to engage in and on trade facilitation, customs revenue benefit from the expansion of collection, cybersecurity, etc. Existing e-commerce. In practice, the following trade facilitation solutions, such the key policy areas need to be addressed WTO Trade Facilitation Agreement when formulating national e-commerce (TFA), include provisions that aim to strategies: information and modernize border clearance communications technology (ICT) procedures and streamline processes. infrastructure, trade logistics, legal Such efforts become even more and regulatory frameworks, online important in the evolving development payment solutions, digital skills, public of cross-border e-commerce. e-procurement and stakeholder Implementation of the TFA will improve participation in policy formulation customs procedures and formalities so and implementation (OECD and that shipping time can be reduced, WTO, 2017, Chapter 7). which is critical for small parcels sent CHAPTER 6: COMMENTS 157 from SMEs on the cross-border References e-commerce platforms. Mao, Y. X. and Zhao, L. (2016), Big Data When considering legal frameworks, Age - Business Ethics Frontier Issues, a key question for policymakers is to Northeastern University Press. ascertain whether existing laws and regulations allow for a level playing field Organisation for Economic Co-operation and between e-commerce and regular trade. Development (OED) and World Trade This particularly applies to physical Organization (WTO) (2017), Aid for Trade goods that can be digitized and sent at a Glance 2017: Promoting Trade, across borders digitally. Since the WTO Inclusiveness and Connectivity for General Council adopted the Work Sustainable Development, Geneva: Programme on Electronic Commerce in OECD and WTO. 1998, WTO members have periodically renewed, on a provisional basis, the United Nations Conference on Trade and commitment not to apply customs duties Development (UNCTAD) (2019a), Digital on electronic transmissions. Other Economy Report 2019, Value Creation and cross-cutting issues include an adequate Capture: Implications for Developing legal and regulatory framework on cross- Countries, Geneva: UNCTAD. https://unctad. border data flow, cybersecurity, org/en/PublicationsLibrary/der2019_en.pdf competition laws and intellectual property rights. To facilitate cross-border United Nations Conference on Trade and e-commerce, it is important to develop a Development (UNCTAD) (2019b), “Global global regulatory framework that e-Commerce sales surged to $29 trillion”, supports the growth of digital trade for press release, 29 March 2019. https:// all. This will require an ongoing dialogue unctad.org/en/pages/PressRelease. and a collaborative effort among all aspx?OriginalVersionID=505 countries, from all regions of the world and all levels of development. Wang, B. (2017), “China’s e-commerce network retail industry evolution, competitive Endnotes situation and development trends”, China’s Circulation Economy 31(4). 1 See http://english.mofcom.gov.cn/article/ newsrelease/press/201902/ World Customs Organization (WCO) (2017), 20190202837696.shtml “Cross-border e-commerce in China,” WCO News 84. https://mag.wcoomd.org/ 2 Mao and Zhao (2015) present in six phases: magazine/wco-news-84/cross-border-e- germination, growth, accelerate, mature, commerce-in-china/ outbreak and transformation. From the perspective of industry economic theory Yue, H. (2017), “National Report on cycle, Wang (2017) identified China’s E-Commerce Development in China”, e-commerce evolution in four periods: Inclusive and Sustainable Industrial germination, growth, eruption and Development Working Paper Series WP 17, integration. UNIDO. https://www.unido.org/sites/default/ files/2017-10/WP_17_2017.pdf 3 See https://www.chinalawupdate.cn/ wp-content/uploads/sites/206 /2015/06/E-Commerce-guidelines.pdf