TradePromotion

Status Quo and Opportunities of China’s Digital Economy

2018-11-26 10:41:10

China ranks first in the world in e-commerce, mobile payment, smart logistics, and jobs created by the digital economy. In 2017, the country logged RMB 29.2 trillion in e-commerce turnover, accounting for some 40% of the global e-commerce retail market; its mobile payment market was valued at RMB 99 trillion; 40.1 billion packages were handled by domestic couriers, taking up over 40% of the world’s total; 37 million jobs were offered by e-commerce and related sectors.

China is exploring the ways to boost its digital economy. Over the past few years, domestic R&D input has recorded an annual growth of 11%, coupled with a 2.13% annual increase in R&D grants. In this regard, China has hit the list of moderately developed countries. Given the expansion of its “Internet +” sectors, China stays ahead of the curve in e-commerce, mobile payment, and the sharing economy. In 2017, the 5.52 million jobs created by the digital economy contributed 55% of China’s GDP. A world leader in the digital economy and innovation, Alibaba catapulted a host of domestic and foreign SMEs into the global innovation and value chains. Driven by the wave of mass entrepreneurship and innovation, an average 18,000-odd companies were founded each day, lifting the total number of new startups to over 100 million. Traditional consumption gets a facelift in reaction to the mushrooming of new models. As online retail sales register an average annual growth of above 30%, consumption now contributes more than 60% of economic growth.

The further opening-up of domestic market and the acceleration of digitization will not only connect all Chinese consumers to imported goods and fulfill their longing for better life, but also earn China a greater role in globalization and promote inclusive global trade. Overseas brands and merchants will find huge opportunities for cooperation and development in a market with the following characteristics:

1. Growing share of the global market: Stable economic growth enables domestic consumers to earn and spend more. In 2017, China’s total retail sales of consumer goods amounted to RMB 36.6 trillion (or USD 5.43 trillion), up 10.2% YoY, accounting for roughly 25% of the world’s total. Ten Chinese cities, including Beijing, Shanghai, Guangzhou and Shenzhen, have made it onto the list of the world’s Top 100 consumption hubs. Domestic retail market promises to maintain its above-par growth in the years to come.
2. Maturing structure of imports: Since 2015, China has cut the tariff of certain consumer goods for five times. The enlarging medium- to high-income group has become the mainstay of consumption market, while tier-three, tier-four, tier-five cities and rural areas have constantly built the consumption environment and capability. Medium- to high-end commodities represent an increasing share of consumption. Given the unprecedented access to information, a substantial shift has occurred from traditional to new consumption models - and from goods to services. Although trade in goods figures as prominently as ever, focus has been shifted to content, quality, and shopping experience.
3. Burgeoning of cross-border e-commerce: Issued in 2014, the far-reaching policies on cross-border e-commerce retail import have provided “Chinese plans” for inclusive trade. In 2016, Thai latex pillows sold like hot cakes in China. Raw latex from Thailand, therefore, witnessed a three-fold increase in purchasing price. A skincare category, Ampoules was little known outside Spain until 2017 when it became an instant hit in China. That year, its Singles’ Day sales topped domestic performance for months, touching off a new round of development and innovation in the global beauty industry. In 2018, beauty equipment turned out to be the lucky dog. Listed on the Tokyo Stock Exchange in July, TMG, a Japanese R&D company, ascribed in the prospectus its skyrocketing performance to China. Nowadays, the honey of Australian villages, black tea of Sri Lanka, dates of the UAE, bath salt of the Dead Sea, coffee of Rwanda and even fresh air of New Zealand are swarming into the expanding market, which not only meets local needs for consumption upgrade and diversification, but also makes overseas SMEs more committed to business development, product innovation and livelihood improvement.
4. Mushrooming of comprehensive pilot zones: In 2018, China announced the establishment of 22 cross-border e-commerce comprehensive pilot zones, lifting the total number of such zones to 35. Cross-border e-commerce retail import penetration ratio shot from 1.6% in 2014 to 10.2% in 2017. Meanwhile, consumers of imported goods are rapidly growing in size. Tmall Global, for instance, saw a 900% increase in the number of consumers from 2014 to 2017. The post-90s, especially the post-95s, are the mainstay of consumers. Shopping experience is much better, with the average receiving time of bonded imports halved from 9.22 days in 2014 to 4.49 days in 2017.
5. A hotbed of digitization: For overseas brands and merchants, cross-border e-commerce and “new retail” are conducive not only to market expansion and penetration, but also to their involvement in nationwide digitization. Against the backdrop of innovation-driven development, they are putting consumers first and building omni-channel digital business by virtue of new technologies, new formats and big data. And that will give them a big boost in China and beyond.