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China’s future in cross border and e-Commerce

Neeraj Singh Manhas

September 22, 2021

6 MIN READ

China’s future in cross border and e-Commerce
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The advent of globalization and the internationalization of trade has prepared the path for e-commerce to spread from inside countries to around the world. Cross-border e-commerce (CBE) is a sort of e-commerce in which products or services are sold to buyers in other countries using e-commerce websites.

Because of the breadth of globalization, the yearly growth rate of CBE, which is 17 percent, has outpaced the growth rate of entire Business to Consumer (B2C) e-commerce, which is 12 percent.

Cross-border e-commerce in China began in 1998 when a few foreign trading enterprises used cutting-edge internet technology to conduct sales.

The start-up that revolutionized the face of Chinese e-commerce was founded in 1999. Alibaba.com, founded by Jack Ma, began as a B2B platform that promoted trade between local manufacturing and foreign firms.

As more Chinese people traveled abroad for jobs or study in the mid-2000s, a new profession called DaiGou arose. DaiGou refers to transactions in which Chinese nationals living overseas sell foreign products to Chinese consumers at a small markup.

They used a variety of sites, including Taobao.com and WeChat. DaiGous has long supplied the demand vacuum and continues to perform online sales.

Over 10,000 conventional international enterprises will go online for the first time in 2020. Many experts believe that the CBE will continue to push foreign commerce in China because the market is still underutilized and policy incentives have yet to be realized.

Companies like YMatou.com entered this sector in 2009, as these forms of transactions gained prominence and demand.

CBE in China began to rise dramatically in 2013. This occurred as a result of the widespread acceptance and use of smartphones.

This made it easier for businesses to reach out to consumers and for consumers to use their services. Over 5000 CBE start-ups were created in China between 2014 and 2015, including Kaola.com and Vip.com.

Today, China, the world’s largest e-commerce market, has $34 billion in purchases in the CBE sector (as of 2020).

However, in comparison to the United States (34%), and the United Kingdom (45%), it accounts for only 1.53% of total e-commerce sales. This means that the CBE market in China still has a lot of room to develop.

Although the market was expanding and becoming an important part of the technology-driven economy, the industry’s long-term development required the supervision of laws and the support of policies.

As a result, beginning in 2007, several government bodies issued policies and proposals to promote CBE in China. Following that, in 2014, China’s General Administration of Customs announced a new set of CBE regulations.

This was China’s first official acceptance of the CBE model. This created numerous chances for foreign enterprises looking to market their products in China.

As merchants’ online sales have increased, recent changes to the CBE laws were implemented on January 1, 2019, to make them more resilient.

These schemes greatly aided the process. They reduced labor and logistical expenses, expedited the product return procedure, and announced the establishment of 46 more cross-border e-commerce comprehensive pilot zones, among other things.

Streamlining the return procedure allowed corporations to transfer items in bulk to Chinese warehouses before selling them to customers, and more pilot zones meant that enterprises would have more places where tax rates are lower.

The industry has benefited from the new policies. According to customs data, CBE retail imports increased by more than 17% year on year in the first three quarters of 2020. Cross-border e-commerce in China is rapidly expanding.

One of China’s digital system’s undeniable strengths is its usage of mobile money. In 2016, China’s mobile payment system surpassed $5 trillion.

Even during the COVID19 era, China’s CBE sector accounted for 31.1 percent of its foreign trade. CBE has evolved into an important component of China’s foreign trade.

Over 10,000 conventional international enterprises will go online for the first time in 2020. Many experts believe that the CBE will continue to push foreign commerce in China because the market is still underutilized and policy incentives have yet to be realized.

One advantage of cross-border E-commerce is that it allows consumers to purchase things online without having to pay taxes.

Furthermore, with cross-border E-commerce, multinational brands can sell without the need for Chinese company licenses.

China accounts for 42 percent of global e-commerce (the U.S.A. is now only 24 percent ). This is achievable due to the capabilities of China’s digital system (sources from McKinsey Global Institute).

One of China’s digital system’s undeniable strengths is its usage of mobile money. In 2016, China’s mobile payment system surpassed $5 trillion.

Alipay controlled 54% of the mobile payment market, while WeChat Pay controlled 40%. Recently, it has become evident that the distinction between Alipay and WeChat Pay is fading.

Furthermore, the significant investment in mobile payment by Baidu, Alibaba, and Tencent is helping to enhance this position in China.

(Neeraj Singh Manhas is a Doctoral Scholar in International Relations at Sardar Patel University in Gujarat)

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