Jiang Xiaojuan highlights Chinese e-commerce's role in supporting the real economy
E-commerce and the real economy complements rather than substitutes each other, said former senior official and academic, highlighting e-commerce's role in stimulating China's overall growth.
Hi, this is Jia Yuxuan from Beijing. On Sep. 2, JIANG Xiaojuan, President of the 中国工业经济学会China Society of Industrial Economics, Professor at the University of the Chinese Academy of Social Sciences, and former Deputy Secretary-General of the State Council, delivered a speech titled "Promoting the Development of International E-commerce: Opportunities and Challenges" at the 13th China E-Commerce Convention.
Held from September 2nd to 3rd, the convention was co-hosted by the Ministry of Commerce and the Beijing Municipal People's Government, organized by the E-commerce and Information Technology Department of the Ministry of Commerce and the Beijing Municipal Bureau of Commerce, and managed by ebrun.com and the Beijing E-commerce Association. The transcript of Jiang Xiaojuan was originally published by ebrun.com.
Jiang believes that the role of e-commerce in China is not just about the development of e-commerce itself, but also plays a significant role in China's foreign trade and contributes to the overall development of Chinese industries.
Online and offline commerce complement rather than substitute each other, she argues, in that the efficiency of digital platforms and logistics companies in China reduces trade costs and introduces brand iteration, thereby rapidly creating and delivering products that meet these needs while consumer interest lasts. Meanwhile, China's extensive manufacturing sector with a lengthy industrial chain complements the growth of e-commerce by enhancing its length and scale.
Jiang also provides evidence of how e-commerce stimulates growth by revolutionizing trade models, expanding market reach without physical presence, promoting online-offline integration, and leveraging intelligent technology.
Jiang acknowledges challenges in governing the rapidly evolving e-commerce landscape due to the rapid changes in e-commerce models and a constant influx of new products on e-commerce platforms, highlighting the role of platform self-governance, using examples like Amazon and Alibaba, in maintaining order and promoting growth in the global e-commerce sector.
Promoting the Development of International E-commerce: Opportunities and Challenges
Ladies and gentlemen, good afternoon!
It's a great pleasure to be here to discuss "Promoting the Development of International E-commerce: Opportunities and Challenges."
In recent years, China's international e-commerce sector has seen rapid development, with a growth exceeding 16% in the first half of 2023. E-commerce, leveraging digital technology, not only optimizes international trade and production processes, reducing transaction and production costs, but also optimizes supply and demand matching, efficiently allocating resources across borders. It plays a significant role in China's foreign trade and two-way transnational capital flows. Furthermore, the importance of e-commerce in China extends beyond its own growth; it plays a crucial role in driving the overall development of Chinese industries.
The continued development of the e-commerce industry chain relies on the presence of a strong and sustainable real economy. In China, the manufacturing sector is extensive and features a lengthy industrial chain. This structure allows the growth of e-commerce to significantly foster the growth of the domestic industry chain, enhancing its length and scale.
It's easy to see that a scarcity of Small and Medium-sized Enterprises (SMEs)—e-commerce's primary clientele—or their constrained size, could seriously impede e-commerce's capacity to stimulate industrial growth. However, China has a particularly dense cluster of domestic SMEs. This concentration supports the proliferation of e-commerce, and thereby significantly contributes to the broad and extensive development of China's domestic real economy.
The chart on the left represents the proportion of the manufacturing industry in the global context, with China's contribution represented by the red line, nearly 30%, surpassing the United States, Germany, Japan, and the United Kingdom. This highlights the pivotal role of China's manufacturing sector, in conjunction with e-commerce, in propelling the domestic economy. On the right, the chart displays the global distribution of various domestic industries, with China's share denoted in blue. Only when there is a comprehensive and voluminous domestic industry can e-commerce drive a lengthy chain domestically. Therefore, Chinese e-commerce is not just about online transactions; it significantly drives local industries. E-commerce stimulates growth through several key mechanisms:
Innovation in Trade Models: E-commerce revolutionizes trade models, minimizing transaction costs and fostering the ongoing advancement of foreign trade. It enhances buyer loyalty through the introduction of novel products, seizing growth avenues in the fast-paced consumer goods sector.
Expansion Without Physical Presence: E-commerce allows sellers to extend their market reach globally without the necessity for physical establishments, largely facilitated by major multinational online platforms.
Online-Offline Integration: By blending online and offline strategies and broadening the industrial chain, e-commerce promotes the global growth of SMEs within a dual circulation framework.
Leveraging Intelligent Technology: E-commerce employs advanced technology to broaden its service scope. This expansion is not limited to the consumer sector (2C) but also encompasses the merchant sphere (M) and the entire industrial chain. Consequently, e-commerce has experienced rapid growth and plays a significant role in driving the domestic industry.
Digital platforms are transforming trade models, challenging the common perception that online and offline shopping are merely substitutes. These platforms excel in identifying emerging consumer demands. It's not just about transferring in-store offerings to the internet; rather, it involves the rapid development and marketing of new products that cater to evolving preferences. Major e-commerce companies in China excel exactly in this aspect.
This schematic outlines JD.com's whole-chain global trade operation, highlighting its advanced digital logistics capabilities, a distinct strength for Chinese enterprises. The ability to ship items from China to the United States for as little as $5 often astounds international observers.
This cost-effectiveness stems from the sophisticated algorithms used by digital platforms and logistics companies in China. They optimize shipping by calculating the most efficient routes for orders from various locations. Further, they strategically consolidate orders at specific points or amalgamate different orders destined for the same location, substantially cutting down on logistics expenses. This high level of efficiency in logistics not only reduces trade costs and enhances operational efficiency but also plays a crucial role in tapping into new consumer demands globally. In the current fast-moving consumer goods landscape, data from 2020 shows that over one-third of the top fifteen selling items on JD.com underwent brand iteration. This high rate of brand renewal and introduction of new brands is a key catalyst for consumption.
In this scenario, traditional brand loyalty may not suffice to retain consumers, given the constant influx of new brands on e-commerce platforms. Instead, consumers are gravitating towards platforms that consistently introduce innovative products, trusting these platforms to offer fresh and appealing items.
In an environment characterized by rapid product turnover, e-commerce platforms leverage their in-depth understanding of consumer data to continuously present new products that align with consumer interests and willingness to purchase. This strategy fosters stronger allegiance to the platform itself, rather than to specific products or brands. Consumers remain engaged with a digital platform, confident in its ability to comprehend their preferences and consistently provide desirable products. SHEIN, operating in overseas markets in the apparel sector, is a prime example of creating new consumer demands through rapid product iteration.
This new approach involves organizing the entire industry chain's production capacity in a novel cloud factory model to meet consumers' potential demands as quickly as possible. These are newly created demands, not simply transferring offline demands online, making it a truly incremental e-commerce model.
Many multinational digital platforms enable Chinese small and medium sellers to go global. For instance, Chinese sellers account for three-quarters of new sellers in Amazon's four core markets. They sell globally, but the lack of local small and medium-brand manufacturing capacity ultimately drives domestic sellers to expand internationally. In the Amazon market in the United States alone, the proportion of new Chinese sellers increased from 28% in 2019 to 63% in 2021 (unofficial data). The U.S. Amazon market has become an important new channel for exporting Chinese products and an efficient platform for Chinese enterprises to enter the American and European markets. The combination of online and offline promotes the globalization of SMEs. I visited Yiwu City in June. The Yiwu small commodity market has 75,000 physical seller stores, connected to over two million SMEs. During the pandemic, Yiwu's overseas market faced significant challenges, but it quickly adapted using platform capabilities in a dual circulation switch.
This capability is essential not only during the pandemic. Small orders, characterized by instability in both domestic and international markets, often require a switch between the two. Traditionally, switching production lines between domestic and international markets demanded products of the same quality and standards. However, in the era of cloud platforms, production is already organized by order.
The quantity of the two types of markets on the cloud platform is crucial. Regional international trade entities, when integrated with online platforms, become highly effective and adaptable in a dual circulation system. They can successfully establish an authentic, open, and comprehensive international trade service platform, catering to both global and Chinese buyers at a low cost. This approach, featuring a timely, flexible, and continuously reorganized production line, effectively meets the varying demands of both domestic and international markets.
In the age of intellectualization, various new e-commerce models are emerging, leveraging market and supply-demand data, and using big data to anticipate potential needs. Speed has become synonymous with competitiveness in this era. It involves the rapid synchronization and transfer of information across the platform chain, utilizing big data for decision-making on purchases, inventory restocking, and product promotions for consumer brands. This nascent approach is showing promising results.
For instance, a company in Yiwu, named "CuJia," is pioneering this intelligent e-commerce model in product design. This model enables the production of hundreds of new, distinct yet similar products in a short period, surpassing traditional human design capabilities. Salespeople and merchants have a wider range of choices, enhancing flexibility and responsiveness.
Regarding cross-border e-commerce, the challenges I previously mentioned are mainly governmental. The swift evolution of e-commerce models and the continuous introduction of a vast array of new products pose significant challenges to traditional governance models, necessitating adaptations to keep pace with these rapid changes in the e-commerce landscape.
First, Complex, cross-regional transactions increase the difficulty of supervision. Digital platforms in e-commerce involve various stages such as product display, settlement, payment, delivery, taxation, and supervision, often spanning multiple countries. Each of these processes must adhere to the diverse legal frameworks, cultural norms, and quality standards of the involved countries. This complexity is not necessarily a matter of right or wrong, but rather reflects differing international standards.
Second, the diversification of illegal practices. This includes counterfeit goods, high-quality imitations, products of the same quality but under different brands, smuggled items, and so-called 'e-commerce exclusive products.' These exclusive products often involve modifications like smaller packaging or reduced features, leading to lower prices. Counterfeit products are increasingly being produced through online-offline collaborations, which complicates governance efforts.
Lastly, credibility is highly valued now. Consumers often rely on the number of reviews and the proportion of positive feedback before making a purchase, with particular attention to negative reviews to gauge potential issues. Issues of credibility extend beyond product authenticity to include serious concerns such as fake reviews and ratings, order brushing, illegal account associations, and other fraudulent methods of reputation building on platforms. These practices represent new forms of dishonesty in online trade and pose fresh challenges to traditional offline governance methods by governments. The rapidly evolving nature of these issues further strains the ability of governmental supervision to adapt and respond effectively.
International e-commerce involves multi-country cooperation and is particularly complex. Under the WTO framework, many of the over 60 cooperation clauses on e-commerce have not been agreed upon. Emerging issues like data flow and localization further complicate matters. In my opinion, the efficiency of government governance cooperation in international e-commerce is relatively low, with limited content agreed upon. Governments face the challenge of developing agile and flexible regulatory frameworks while enhancing cooperation. Negotiations within the WTO on various aspects, including electronic transmission, customs tariffs, electronic authentication and signatures, and online consumer protection, are particularly challenging, even for non-security sensitive issues. For instance, the validity of electronic signatures is crucial for conducting e-commerce transactions. If electronic signatures cannot be authenticated, how can e-commerce transactions be conducted?
Currently, the order in global e-commerce is mainly maintained and formed within the global systems of large platforms. Self-governance by platforms is an important measure to maintain the order of global e-commerce. Amazon, for example, independently certifies online merchants and products and combats counterfeit products. In 2021, Amazon dealt with over 3 million counterfeit items. Indeed, it has the digital processing ability, including image recognition and computer recognition. By maintaining order in its realm, it creates favorable conditions for international e-commerce.
Similarly, Alibaba.com addresses the issue of new online sellers lacking reviews and credibility. It utilizes offline e-commerce data to profile and credit these merchants, offering insured orders for new buyers and sellers. This approach not only shortens the customer acquisition cycle for newly online merchants but also significantly aids in promoting domestic products internationally. Such initiatives underscore the vital role of platform self-governance in maintaining order and fostering growth in the global e-commerce landscape.
Thank you, everyone.