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Eversheds comment: New rules to boost Chinese e-commerce welcomed by businesses with ambitions for China expansion

  • United Kingdom

    21-11-2013

    Following new guidelines from the Chinese Ministry of Commerce designed to boost e-commerce in the country, Nigel Stamp, partner and head of the Asia technology group at global law firm Eversheds comments:

    “The announcement today that China’s Ministry of Commerce has released new guidelines that are designed to boost spending in its e-commerce sector is hardly surprising, as China’s leaders look to unlock the full potential of this largely untapped and potentially huge market, which is already due to outpace that of the United States by the end of this year.

    “China’s working population are incredibly tech-savvy, but China’s consumers have developed at a much faster rate than the country’s retail infrastructure. The country is yet to develop a consumer credit market and cash remains the most common method of payment. Investment is therefore urgently needed to modernise the sector and fill this market gap.

    “The huge benefit and potential for growth in the e-commerce sector is not simply due to the size of the Chinese population. Incomes are still much lower in mainland China as compared with Hong Kong or the West. This is likely a reason for the popularity of e-commerce; the price difference of a product is what is deemed significant and Chinese consumers are not interested in enhanced shopping experiences or any value-added services; they are simply seeking the best deals when looking to make purchases, and the Ministry of Commerce is looking to exploit this fact.

    “Western retailers should also welcome this announcement and watch the sector closely in the coming months. Until recently, setting up e-commerce sites in China has presented numerous difficulties for foreign enterprises. Some of the problems are as follows. First, it was thought that e-commerce sites would need to be backed by a physical store presence in the country in order to overcome the difficulties in transporting goods into China from overseas. Second, the so-called “Great Firewall of China”, which blocks access to many foreign sites, notably Facebook, meant that retailers faced substantial obstacles in making their sites compatible with Chinese sensors. Third, the requirement to first obtain a Chinese business licence in order to operate a .cn URL is a process that can take up to a year and requires the set-up of a local Chinese bank account.

    “However, things are changing and the recent failure of notable western brands to establish footholds through physical presence in China, including German electronics firm Media Markt, has suggested an increasing tendency for foreign companies to see e-commerce as the only viable option for doing business in the country. The shift online has already happened in the electronics sector, where Chinese shoppers prefer to purchase online.

    “It isn’t just electronics that is opening up to western retailers; earlier this month the online fashion retailer ASOS launched its Chinese site, a venture regarded by its competitors as a serious testing of the Chinese e-commerce market.

    “This is an encouraging development and one that we will be looking to have serious discussions about with our clients in the retail sector.”

    Disclaimer

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