E-Commerce In China

1. Introduction

E-Commerce which encompasses Business to Business (B2B) and Business

to Consumer (B2C) is the use of internet for conducting business. It

has become one of the most significant economic trends in the new

millennium. Although China is just starting to embrace this

phenomenon, it is no doubt that it is becoming one of the fastest

growing e-commerce markets in the world. According to International

Data Corporation (IDC), overall e-commerce value in China is expected

to rise from US$1.7 million in 1997 to US$3.8 billion by the end of

2003 (Bath 2000).

This paper aims to give a clear analysis of the opportunities and

challenges in regards to the implementation of e-commerce in China. In

doing so, the paper will focus on both China�s national environment as

well as its national policies. The analysis is done by utilizing

qualitative data (conference papers, seminar papers and online

journals) and statistical data from reliable secondary sources (United

Nations, China Internet Network Information Center and International

Telecommunications Union).

2. National Environment

The fundamental e-commerce infrastructures examined in this section

include demographics, technological infrastructure, economic and

financial resources, business culture and consumer preferences.

2.1 Demographics

As the world�s most populous nation with approximately 1.3 billion

people, it is no doubt that China has a huge market potential for

e-commerce. The large absolute gross domestic product of US$1305.9

million seems encouraging. Apart from that, the main indicators for

e-commerce imply a rapid growth[1]. These indicators include number of

internet users, personal computers as well as telephone lines and

cellular subscribers. The number of internet users stand at 59.1

million which is approximately 2.8 times the size of the total

Australian population. However, when compared to the total Chinese

population, these numbers become relatively small.

As China is a large country with a low population density,

distribution and delivery problems are rampant (Gibbs, Kraemer and

Dedrick 2003). This is due to underdeveloped infrastructure in the

central and western inner regions in particular. Currently, delivery

of goods purchased online is done only in urban areas through postal

parcel and home delivery[2].

On a brighter note, it is said that there is a high level of IT

literacy in China amongst the younger generation. This provides ease

of access to technology. On the other hand, the resistance of the

older generation towards the use of computers and the Internet might

prove to be a major challenge for e-commerce as China experience the

aging population phenomenon in the near future. This is due to the

prevalence of the one child policy and the increased life expectancy

along with higher standard of living.

2.2 Technological Infrastructure

For a country which has only gain internet access since 1994, China

has been achieving superb growth in this area due to strong support

from the government. The speed of China�s internet infrastructure has

been improving rapidly in terms of international bandwidth to the

internet and domestic connections between China�s internet backbone

providers (Clark 2000). This is mainly due to the emergence of

competition as the government gave approvals to two new internet

backbone providers � UniNet and CNCNET.

On the other hand, Chinese companies are not doing much to improve

their technological infrastructure, Amongst the 15,000 Chinese

enterprises, there are only approximately 10% that has basic IT

capabilities for conducting e-commerce; 70% are half way while the

remaining 20% are just disqualified (Lu n.d.). A major US consultancy

echoed this view by adding that Chinese companies including large

Multinational Companies (MNCs) spend less that 1% on IT per year

(Sliwa 2001). This is a major reason for the lack of successful

e-commerce corporations in China. The high cost of implementing

technological infrastructure is seen as a major hindrance for many

local companies.

Apart from that, banks, merchants and a new breed of payment

intermediaries have started to utilize the inter bank online payment

based on the Golden Card Project (The integration of payment system