China's e-commerce evolution

China's e-commerce evolution

China's government is preparing to accelerate the growth of its already rapidly expanding e-commerce sector by establishing 15 new national e-commerce demonstration bases. These are industry clusters for e-commerce companies and the incubation platforms needed to foster the sector's development.

The Ministry of Commerce started selecting demonstration bases in 2012 with the aim to digitise traditional industries, incubate small and medium e-commerce companies and encourage the adoption of new technology.

There were 112 national e-commerce demonstration bases in China last year with transactions reaching 5.37 trillion yuan (US$790 billion), up 21.6% on a yearly basis. The bases have helped facilitate the establishment or expansion of 58,000 e-commerce and related companies that employ about 1.2 million people.

The 15 new bases will take the total to 127 nationwide, mostly concentrated in eastern and southeastern China, where e-commerce is more firmly established.

With 854 million internet users, China is already the world's fastest growing and largest e-commerce market with a value of $1.94 trillion last year, an increase of 27% from 2018.

A key factor behind China's e-commerce boom is the extensive digital payment infrastructure led by Alibaba's Ant and Tencent's WeChat. As mentioned in a recent column, the People's Bank of China is also piloting its own mobile payment platform using its new digital currency DECP, the digital version of the renminbi.

Alibaba's financial arm Ant is now aggressively expanding in overseas markets, especially in Southeast Asia. Ant has invested in digital payment platforms in Thailand, Indonesia, Myanmar and the Philippines and it has also applied for a digital banking licence in Singapore.

If granted, the digital wholesale bank licence in Singapore would enable Ant to provide loans to small and medium-sized enterprises by using its credit-scoring knowhow and its lower-cost model.

Given all these developments, we can expect a further ramping up of the digital revolution, which has already accelerated as a result of the coronavirus pandemic. During the first seven months of this year, China's online retail sales rose 9% from the same period last year to 6.08 trillion yuan, accounting for 25% of overall retail sales.

By comparison, e-commerce retail sales in Thailand made up only 3% of total retail sales. Even with the Covid boost they are only projected to increase to 4-5% this year. Clearly, Thailand needs to adapt quickly if it wishes to hold its own in this hotly contested market.

Suwatchai Songwanich is an executive vice-president with Bangkok Bank. For more columns in this series please visit www.bangkokbank.com


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