E-commerce in China

China is the world's largest market for e-commerce. Domestic e-commerce firms have the greatest share of China's market, with foreign companies having a comparatively small presence. The expansion of e-commerce in China has resulted in particular e-commerce patterns like the development of Taobao villages and livestreaming e-commerce.

E-commerce in China is regulated through a variety of means, particularly China's 2018 E-Commerce Law.

## Expansion of E-commerce

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In the early 2000s, China's e-commerce lagged behind that of other major economies.[1]: 2 When the 2008 financial crisis resulted in decreased demand from Western markets, Chinese manufacturers re-oriented towards the domestic market.[1]: 75 Many focused on domestic online marketing, either through creating their own brands or selling to other Chinese online sellers.[1]: 75 In turn, this pivot by Chinese manufacturers increased the quantity and diversity of products available online, leading to a major increase in e-commerce in China.[1]: 75 In 2008 alone, online retail sales in China increased by a factor of 26.[1]: 75

Since 2013, China is the world's largest e-commerce market.[2]: 99 Its domestic e-commerce market was an estimated US$899 billion in 2016.[3] China accounted for 42.4% of worldwide retail e-commerce in that year, the most of any country.[4]: 110 In 2019, online retail sales were 21% of China's total retail sales.[1]: 4 As of late 2022, approximately 850 million Chinese individuals shop online and sectors related to e-commerce employ 69 million people in the country.[1]: 1 In 2023, nearly 50% of worldwide online sales took place from China.[1]: 2

The rapid rise of e-commerce in China is facilitated by mobile payment systems such as Alipay and WeChat Pay.[5] These payment platforms help simplify the transaction process and ensure the security of transactions to win the trust of consumers. Therefore, the mobile payment system has completely changed the daily life of the Chinese people and the future business model.[5] The rise of e-commerce has in turn facilitated the rapid adoption of digital payment and mobile wallets.[1]: 2

The expansion of Chinese e-commerce has also prompted the growth of an efficient express delivery industry.[1]: 158 As of 2020, express delivery companies served 98% of all Chinese townships and half of all villages.[1]: 158–159 In that same year, Chinese express delivery accounted for 83 billion parcels, which was more than half of the global total.[1]: 158

E-commerce contributed substantially to China's COVID-19 pandemic response by facilitating fast delivery of personal protective equipment, food, and daily use consumer goods during lockdowns.[1]: 159

Since 2020, cross-border e-commerce has expanded significantly and Chinese sellers have increased their presence on non-domestic platforms like Amazon.[1]: 192

The expansion of e-commerce in China is an example of leapfrogging development.[1]: 4 Although China was a latecomer to e-Commerce in comparison to other major economies, it has now grown beyond them in both total market size and on a per capita basis.[1]: 4

## E-commerce patterns

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Domestic companies like Alibaba, JD.com, and Pinduoduo have the largest share of China's e-commerce market.[2]: 99 Foreign companies like Amazon and EBay have not gained significant shares in the market.[2]: 99

In 2015, the State Council promoted the Internet Plus initiative, a five-year plan to integrate traditional manufacturing and service industries with big data, cloud computing, and Internet of things technology.[2]: 44 The State Council provided support for Internet Plus through policy support in area including cross-border e-commerce and rural e-commerce.[2]: 44

E-commerce in China is primarily platform based.[1]: 6 China's major e-commerce platforms do not sell their own products, but instead host tens of millions of third party sellers which are often small enterprises or microbusinesses.[1]: 4 The vast majority of sellers are individuals doing business.[1]: 89 The majority of e-commerce sales in China are non-branded products or lesser known brands.[1]: 4

The expansion of e-commerce in China has resulted in the development of Taobao Villages, clusters of e-commerce businesses operating in rural areas.[4]: 112 Because Taobao villages have increased the incomes or rural people and entrepreneurship in rural China, Taobao villages have become a component of rural revitalization strategies.[6]: 278 E-commerce also benefits rural people more broadly through the consumption effect of lowering costs of living and therefore enhancing purchasing power.[1]: 19 By bringing economic benefits to remote and economically challenged villages, e-commerce decreases cross-regional inequalities in China.[1]: 159 In 2015, the Ministry of Finance allocated 2 billion RMB to establish e-commerce centers in some of the least developed areas of China.[1]: 128

An analysis by academic Lizhi Liu published in 2024 finds that cities with economies traditionally reliant on natural resources (such as Daqing and Yulin) rank among the Chinese cities with the lowest level of e-commerce development. Liu describes this as an example of resource curse.[1]: 97

The increase in e-commerce in urban areas has led to loss of sales for brick and mortar stores.[1]: 158 In turn, this has led to an increase in the "new retail" concept, which seeks to tie online and offline shopping experiences together, for example by allowing customers to try products in offline "experience stores" that they can then order online.[1]: 148

Some local governments have created e-commerce platforms in an effort to facilitate sales of local products.[1]: 43 With the exception of the business-to-business platform Yiwugo.com (created by the Yiwu city government and a state-owned enterprise), these platforms have not been commercially successful.[1]: 43

Livestreaming e-commerce in China was initiated by fashion e-commerce platform Mogujie in 2016.[7] In the same year, it was picked up and gradually made popular by Alibaba, who turned live commerce into a fixture in its annual Singles' Day shopping festivals.[8] The livestreaming trend has particularly benefited sales of agricultural products through e-commerce, with streamers presenting live tastings.[1]: 160

Chinese e-commerce spending peaks every year during Singles' Day, which is the world's largest online shopping event.[1]: 1

## Regulatory framework

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According to a 2024 book by academic Lizhi Liu, the e-commerce boom in China occurred because of weak government institutions, not despite them, with gaps in government institutions resulting in the development private institutions for contract enforcement, fraud detection, and dispute resolution with the government acquiescing to or encouraging the development of these institutions.[1]: 81–123 The lack of formal regulatory institutions led to significant development of private e-commerce institutions dealing with contract enforcement, anti-fraud, dispute resolution, and inexpensive loans.[1]: 6–7

Significant development to China's regulatory framework governing online transactions occurred after e-commerce had boomed.[1]: 3 The government was generally hands-off in its regulatory approach until 2020.[1]: 17 A period of intense regulatory scrutiny and action followed from 2020 until mid-2023.[1]: 17 After that point, the government decreased its regulatory intervention and issued policies more supportive of the e-commerce sector.[1]: 17

In 2004, China passed an Electronic Signature law which was based largely on the United Nations model.[2]: 99 The law encouraged the use of electronic signatures in e-commerce.[2]: 99

In 2015, the State Administration of Taxation prohibited local tax authorities from inspecting e-commerce businesses.[1]: 16 Online sellers are obligated to pay taxes as brick-and-mortar businesses do, but because of their generally small size, comparatively fewer online sellers meet the revenue threshold to pay taxes.[1]: 89

China passed its E-Commerce Law in 2018 following five years of significant debate among numerous stakeholders.[2]: 99 Chinese policymakers encouraged wide participation in the legislative process, including seeking input from a wide variety of non-state actors including private tech businesses.[2]: 99 In Article 7, the E-Commerce Law states that "the state shall establish a collaborative administration system" in which e-commerce industry associations, e-commerce businesses, and others jointly participate.[1]: 77 The law describes e-commerce platforms as important market entities and states the principle that "the state regulates the platforms, and the platforms regulate online businesses".[1]: 76 Among other provisions, the law states in Articles 58 through 63 that platforms should establish online dispute resolution systems among other online institutions.[1]: 77 It requires that online sellers register with the state and provides exceptions designed to facilitate small scale business, such as registration exceptions for those selling self-produced agricultural products or family handicrafts.[1]: 89 The E-Commerce Law, along with other regulatory provisions relevant to e-commerce, is part of the broader mandate of the State Administration for Market Regulation.[2]: 114

The E-Commerce Law, along with the Consumer Protection Law, require e-commerce platforms to take proper action if they are aware or should be aware of fraudulent online behavior by merchants, including the sales of fraudulent goods.[2]: 207 If merchants are found to have sold counterfeit goods, the Consumer Protection Law imposes a penalty of three times their value to compensate consumers.[2]: 207 If platforms have prior knowledge of counterfeit goods being sold, then the E-Commerce Law makes them jointly liable with merchants engaged in sale of such goods.[2]: 231 These risks also prompted platforms to take a stricter view towards shanzhai products.[2]: 231

In the event of contract disputes over e-commerce, the question of jurisdiction can be uncertain.[1]: 108 The Civil Procedure Law states that contract disputes shall be "under the jurisdiction of the people's court of the place where the defendant has his domicile or where the contract is performed".[1]: 108 Chinese courts have taken different views about whether "the contract is performed" where the e-commerce buyer or the e-commerce seller are located.[1]: 108 Courts also rely on platform user agreements, which sometimes state that the court of the defendant's domicile have jurisdiction.[1]: 108

In 2019, the city of Hangzhou established a pilot program artificial intelligence-based Internet Court to adjudicate disputes related to e-commerce and internet-related intellectual property claims.[9]: 124

China prohibits the practice of review brushing, which is regarded under e-commerce laws and regulations as a form of false advertising.[2]: 197

## See also

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* Conversational commerce
* Digital economy
* Internet in China
* Shein
* Taobao
* Timeline of e-commerce
* Tmall
* Types of e-commerce
* Vipshop
* Xiaohongshu
* E-commerce in other Asian counties:
* E-commerce in India
* E-commerce in Pakistan
* E-commerce in Southeast Asia
* E-commerce in Sri Lanka
* E-Commerce elsewhere in the Global South:
* E-commerce in Mexico

## References

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1. ^ a b c d e f g h i j k l m n o p q r s t u v w x y z aa ab ac ad ae af ag ah ai aj ak al am an ao ap aq ar as at Liu, Lizhi (2024). From Click to Boom: The Political Economy of E-Commerce in China. Princeton University Press. doi:10.1515/9780691254111. ISBN 9780691254104. JSTOR jj.14527541.
2. ^ a b c d e f g h i j k l m n o Zhang, Angela Huyue (2024). High Wire: How China Regulates Big Tech and Governs Its Economy. Oxford University Press. doi:10.1093/oso/9780197682258.001.0001. ISBN 9780197682258.
3. ^ Millward, Steven (18 August 2016). "Asia's ecommerce spending to hit record $1 trillion this year – but most of that is China". Tech in Asia. Archived from the original on 19 August 2016. Retrieved 4 May 2021.
4. ^ a b Hu, Richard (2023). Reinventing the Chinese City. New York: Columbia University Press. ISBN 978-0-231-21101-7.
5. ^ a b Liu, Rong; Wu, Jifei; Yu-Buck, Grace Fang (2021-01-01). "The influence of mobile QR code payment on payment pleasure: evidence from China". International Journal of Bank Marketing. 39 (2): 337–356\. doi:10.1108/IJBM-11-2020-0574. ISSN 0265-2323.
6. ^ Yang, Saidi; Wang, Puqing; Zhou, Deyi (2021). "Transformation and Development of Taobao Village in China Based on "Zhijiang Mode"". Proceedings of the 2020 3rd International Seminar on Education Research and Social Science (ISERSS 2020). Paris, France: Atlantis Press. doi:10.2991/assehr.k.210120.053. ISBN 978-94-6239-316-5.
7. ^ Sun, Henan. "Chinese fashion e-retailer Mogu banks on live streaming to revive fortunes". KrASIA. 31 August 2019. Retrieved on 14 December 2021.
8. ^ Arora Arun, Glaser Daniel, Kim Aimee, Kluge Philipp, Kohli Sajal, and Sak Natalya. "It’s showtime! How live commerce is transforming the shopping experience". McKinsey & Company. 21 July 2021. Retrieved on 14 December 2021.
9. ^ Šimalčík, Matej (2023). "Rule by Law". In Kironska, Kristina; Turscanyi, Richard Q. (eds.). Contemporary China: a New Superpower?. Routledge. ISBN 978-1-03-239508-1.