Chen wenling: China Has the Best Policy and Market Environment for Cross-Border E-Commerce Development
At present, the world is facing unprecedented challenges due to the spread of the pandemic around the world. The number of confirmed cases will reach 3 million globally, and the United States will reach 900,000 soon. The third wave of the pandemic is moving toward developing countries. Therefore, China needs to come up with a unique solution to develop its economy.
The topic of today’s discussion is cross-border e-commerce, which will be a focus of China’s economy in the future because it is not only one of the biggest growth points of the Chinese economy, but also help China to maximize its market dividend.
In my view, the pandemic will bring five major changes to the business market, which may provide unprecedented opportunities for the development of cross-border e-commerce.
The first change is the transfer of global business order. The pandemic has already spread to 214 countries and more than 100 of them have started lockdowns or stopped production. Basically, life has come to a standstill. Many people have to stay at home and many business activities are moving online. As a result, e-commerce and logistics have developed rapidly. In China’s, e-commerce, mobile payment and express delivery industries have risen against the trend. More importantly, such kind of trend might become the “New Normal” after the pandemic. The online business model, cloud economy and contactless services will usher in a new era.
The second major change is business models. China is ahead of the United States in terms of business model creation and Internet-related innovation. During the pandemic period, new business models played a very important role in China. Using internet celebrities to sell products through live streaming will become a new normal. For example, with 400 million registered users. Alibaba reached 200 billion yuan in sales through live streaming in 2019, and this year it is expected to exceed 500 billion yuan. Another Chinese video-sharing app “Kuaishou”, reached 150 billion yuan in sales last year and currently, it has more than 300 million active users everyday. “Tik Kok” has more than 400 million daily live users. Most of the users are born after the 1980s. 370 million of China’s population are born after 1995, which is a group with great buying potential. China’s business models need to be reformed to adapt to the needs and preferences of this new generation.
The third change is the reshuffle of the business community. Generally speaking, there are about 68,000 small retail stores within 3 kilometers of the economic circle. However, the pandemic hit retail stores really hard and some of them may not survive after the pandemic. On the contrary, new business models such as online shopping and live streaming will develop rapidly and become the “New Normal” in the future. China has 129 Internet unicorn companies and the United States has 121. What impressed me the most is the development of e-commerce in the rural area. The central government has determined to solve the problem of agriculture, rural areas and farmers since the reform and opening-up was launched. One of the difficulties is how to connect the small production of thousands of households with the big market. Now, this problem has actually been solved by rural e-commerce. For example, there is a rural e-commerce platform called Huitongda, which has more than 100 million members and about 120,000 rural online shops. Last year, the sales of this platform exceeded 500 billion yuan. This APP platform gathered hundreds of millions of farmers and created a huge market, allowing all the members to minimize their costs while maximizing their profits. During his fact-finding trip to Shaanxi, President Xi Jinping praised the role played by e-commerce in the rural area. I think that e-commerce has not only connected thousands of rural households with China’s markets, but also give them the opportunity to connect with the entire world.
The fourth change is the way of commercial circulation, including the flow of business, logistics, information, capital and human resource. All the flows can be replaced by the internet except logistics, but we can reduce logistics costs and improve efficiency by designing a better process and applying modern technologies. Apart from solving the sales-related problems on the APP, we also need to make sure that logistics goes smoothly. Great logistics allow us to maintain stability in people’s lives and our society during the pandemic period. Without a strong modern logistics system, millions of people will have great difficulties during the lockdowns.
In the future, logistics will experience significant changes. Firstly, the application of blockchain technology will make better logistics with industrial chain, supply chains, service chain and value chain, which will improve the visibility of the entire industry chain and supply chain. Secondly, the 5G technology will produce faster logistics with the help of information, reduce the detour of logistics processes and hence save costs. Lastly, the next modern logistics revolution will shift from the “Internet of Everything Consumption” to the industrial Internet dominated by circulation.
When the pandemic is over in China, cross-border e-commerce and other e-commerce platforms will be the first one to get out of the predicament with the help of the digital economy.
Last but not least, the way of supply and demand will be changed. Before the breakout of the pandemic, most of the people prefer offline shopping, cash payment and face-to-face services. During the pandemic period, people have to do online shopping everyday, use mobile payment and have contactless services. All the changes will become a “New Normal” in the future. The pandemic has brought us shocks and disasters, but it has also brought opportunities for business reforms, especially cross-border e-commerce and modern logistics.
I think that cross-border and domestic e-commerce platforms will develop rapidly after the pandemic for the following reasons.
First of all, the Party Central Committee and the State Council attach great importance to the development e-commerce platforms. The number of domestic pilot cities for cross-border e-commerce increased from the previous 59 to the current 105. President Xi Jinping has made important instructions to promote e-commerce, especially in rural areas. He also visited some pilot cities and rural areas to investigate e-commerce development.
Secondly, mobile payment has been popularized in China and digital currency is on the way. The People’s Bank of China has begun to promote digital currency so that it can match the national currency issuance, currency circulation, RMB settlement, and RMB internationalization, which will bring a new revolution to payment methods in the future. On the basis of mobile payments, the internationalization of the RMB will be accelerated and a network system based on RMB payment will be formed through cross-border digital currencies and mobile payment. This will be a major breakthrough for us to get rid of the constraints imposed by the US dollar-based payment system.
Thirdly, e-commerce has made significant progress in China’s rural areas. You can find more details on the newly released “China’s E-commerce Report (2019)”.
Fourthly, online retail is experiencing rapid innovation. Some people called it the online global immigration society. In the future, various e-retail formats such as live broadcast, Internet celebrity economy and the short video will be further transformed and bring us more convenience.
Last but not least, China will continue to release its huge market dividend. In the past, China was export-oriented but it now tries to achieve a balance between imports and exports. Some analysts believe that China’s imports of goods will increase by $30 trillion and services will increase by $10 trillion in the next 15 years. The huge size and potential of China’s consumer market are bigger than most of the countries, which is why so many multinational companies choose to stay in China. They can make profits here. Currently, China has 400 million middle-class families and the figure is still increasing. The income of the people is constantly increasing and they will have more purchasing power. China’s huge market dividend will become the resilience of its economic development.
How to build the Guangdong-Hong Kong-Macao Greater Bay Area? How to make better use of the advantages of mainland China, while maximizing the advantages of Hong Kong and Macao? There are not just economic issues, but also long-term security needs. Although Guangdong, Hong Kong and Macao are part of China, they have different systems and customs zones due to historical reasons. We cannot change history, but we can create the future and there are many ways to do so. One of the ways is to develop cross-border e-commerce, new business models, Internet economy and digital economy. We should follow the trend of the times and use the next generation of trade methods to abolish the visible and invisible barriers in the Guangdong-Hong Kong-Macao Greater Bay Area, enabling the smooth flow of business, logistics, information, capital and people. If we can achieve that, everyone will become the beneficiary. No one can stop China’s vigorous development and China will continue to unleash its huge market dividends. This is an opportunity not just for China, but also for the rest of the world.