Essay About E-Commerce And Chinese Companies

E-Commerce In China
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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