New E-Commerce Rules for China

Although the use of the Internet has increasingly be¬come more preva¬lent in China, the same could not be said with e-commerce, as people continue to be wary and hesitant to make purchases online. This would be a significant blow to an industry trying to penetrate the market of Chinese debit card hold¬ers numbering from 80 to 100 mil¬lion and enticing them to buy any of the myriad goods offered by e-stores through online means. Tap¬ping into this highly potential lo¬cal market would be a tremendous boost economically for Internet store entrepreneurs as well as the overall Chinese market.

Recent changes in Chinese policies and rules on e-commerce can result in better reception among Chinese Internet users previously unwilling to purchase prod¬ucts online. These new policies offer better security and protection for consumers.

Issues and Challenges for E-Commerce in China

China is second only to the United States in terms of volume of Internet and network users as evident in the increasing and improving Internet-related environment and applications. The number of Internet-ready comput¬ers has more than doubled over the years and continues to grow rapidly, supported by better Internet infrastruc¬ture such as increased bandwidth capabilities and better wireless capacities.

Despite the stratospheric increase of Internet users in China, the proliferation of e-commerce is not as prev¬alent as expected, covering only 12.54 percent among to¬tal Internet services, as compared to e-mail and Internet gaming use. This attributed much to issues pertaining to e-commerce policies, security, credit, flow of products, and the overall Chinese consumer habit.

The importance of the Internet in relation to the Chinese economy was highlighted during the Boao Fo¬rum for Asia in 2009, with an emphasis on the impor¬tance and potential of e-commerce. However, there are still hurdles that prevent this from materializing. Primary elements to this effect involve the prevalence of PCviruses, a lack of an Internet-payment credibili¬ty system, as well as an online certification system for online businesses resulting in the untold millions or 80 percent of Chinese Internet users wary of putting their financial and personal information online. Many are avoiding Internet transactions in general.

Aside from that, the lack of industry regulations have resulted in the proliferation of fraud, gambling and il¬legal entertainment activities online. prompting the Chinese government to pursue and implement stricter rules and policies to allow only legitimate players in the e-commerce arena.

The following describes other issues and challenges that e-commerce and other Internet transactions face in China.

* There are no standard rules in Chinese e-commerce.

The industry is currently at an initial stage and there are still no established legal systems to safeguard the in¬terest of consumers and the general Internet-using pub¬lic. The emergence of e-commerce players is developing too fast for policies and ordinances to be promulgated that would be favorable or acceptable to both online and traditional industries.

* There is a monopoly of Chinese telecommunications and a lack of industry standards.

The Internet industry relies heavily on sound tech¬nology applications and infrastructures. However, due to the monopoly of the telecommunications industry, Internet technology development is left behind. Lack of bandwidth capacity, slow transmission speeds and high price tags of Internet access characterize China’s Internet in-frastructure and this has also con¬tributed to differences in industry standards.

* The cost of investment in e-commerce is high in relation to current output returns.

E-commerce, in order to be successful and profitable, requires wide assimilation to social strata and the Internet com¬munity. Despite the figures reported about increasing figures of Chinese PCowners and Internet users, these figures are still a mere fraction of the total number of families and potential Internet users in the country. In conjunction with other issues related to online purchas¬es in China, this lack of infrastructure and users would result in minimal consumer purchases.

* The Chinese consumption habit is still rooted in traditional practices.

Many people who are used to traditional consumer habits and practices, would be wary of purchasing on¬line, opting to try things first before committing any purchases. As such, the Internet is relegated to com¬munication and information gathering purposes and not for making purchases through online stores and e-commerce sites.

Bright Instances in China’s E-commerce Industry

Despite the slow and often disrupted local e-com¬merce industry in China, the outlook is not as bleak as it appears. The biggest opportunities for e-com¬merce for China appear not to come from within but from overseas channels, particularly from the Euro¬pean market. This prompted the government to put in more support for bigger export initiatives by provid¬ing more premiums to business entities engaging in this area.

Chinese goods continue to be in demand in several markets, many of which were a result of business-to-business purchases in wholesale through e-commerce portals. This is why many upcoming entrepreneurs and business entities in China are bypassing traditional over¬seas middlemen from Hong Kong and other areas, re¬sulting to Chinese products such as ornamental wares being sold in markets as far as Europe or Brazil.

Despite these current victories in the world arena, the same could not be said in the local e-commerce in¬dustry in China. The potential of tapping a wide market locally is enormous, thus requiring the need for more robust regulations and guidelines to set everything in place. Boosting this industry would not only have big economic implications from local sources but it would also boost the image and credibility of Chinese Internet stores in the Asian and world markets that have not yet availed of such Chinese services.

New E-Commerce Rules in China and How it Will Affect Internet Stores

Effective July 1, new policies was implemented by the State Administration for Industry and Commerce of China. These policies, aptly named “Interim Measures for Management of Network Commodity Trade and Related Services” specify that entities wishing to engage in online sales of goods and servic¬es in China through the Inter¬net should provide e-commerce platform operators with their real identities, which include their verified names and confirmed physical addresses.

Part of these measures require businesses and enter¬prises to provide proper business registrations, licenses and other pertinent information to establish their true identity as a legitimate business. Individuals and busi¬nesses who can comply with these requirements not only will be allowed to set up their own e-commerce stores but their online stores will be given the right to carry certification badges for their websites, reassuring the public of their legitimacy.

Another important element in these new policies includes the checking and verification of products pre¬sented in these Internet stores for any potential trade¬mark or copyright infringements of registered brands. Measures would be implemented by inspecting bodies to penalize offending websites, including the potential shutdown of the e-commerce site by the local Chinese authorities.

In line with this, business owners should undergo signed agreements with the certifying bodies and e-commerce platforms to establish the rights of the e-commerce site owners as well as their obligations, par¬ticularly in the commitment to provide quality products and services. If the Internet stores could not comply with these requirements, they will be eventually shut down.

Such arrangements would be beneficial for the general consumers end eventual clients of these e-commerce sites and Internet stores. These policies will protect Internet users from unscrupulous individuals trying to swindle buyers from their hard-earned money or providing inferior products which are far different from what would be featured in their Internet stores and e-commerce sites. Aside from that, illegal entities or business operating in illegal industries will be shut down and eliminated, leaving legitimate business enti¬ties to continue providing quality products and services to the public.

With these security channels and consumer pro¬tection, the general public and most Internet users in China would eventually be attracted to explore the e-commerce realm. They would be more secured in pro¬viding financial information to verified sites in order to purchase various goods and items from the Internet. As more policies and structure are established, more and more Internet users all ready and able to purchase on¬line would turn to these online channels for their goods and other items they need.