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| Is e-com change coming to China? |
January 6, 2002 |
By Geoff Dennis
China is to the ecommerce game, but with a population of more than a billion and a tech-savvy sector that grows daily, many point to the country as the next Internet boomtown.
There are more people connecting to the Internet and wireless technology is now becoming increasingly popular. Research firm eMarketer said China’s advanced manufacturing sector will greatly aid business-to-business ( B2B) developments.Manufacturing will account for more than 89 per cent of the country’s ecommerce revenues, ballooning from US$1.5 billion in 2001 to US$21.8 billion in 2004. Many predict China to be the fastest growing economy in Asia, although it will account for only seven per cent of Asian ecommerce by 2004.
On the minus side of China’s equation is the fact that many of its citizens are very poor. The government has also been fearful of change and the country was recently ranked 51 out of 60 countries for “e-readiness” by the Economist Intelligence Unit.
But China’s entry into the World Trade Organization (WTO) should help open doors to e-com success. If the WTO has its way, foreign participation in China’s high-tech sector will be loosened, plus foreign investment in telecom and Internet ventures will be allowed.
That’s significant, but an even bigger boost could come in the form of a monumental change in government policy. In 2002, reformist leaders are expected to replace their old, conservative counterparts in government, inheriting a country that’s desperate for change.
“Next year’s change in leadership in China will underscore a great shift in that country’s outlook on the Internet economy,” said French Caldwell, research director at Gartner Research in Stamford, Conn. “There are still questions, though. How do you encourage investment in the high-tech industry? And are people willing to take risks? China was not willing to take risks because there were few rewards, but change is coming.”
Caldwell said China has a wealth of intellectual capital, but navigating the country’s bureaucratic maze can be near impossible for companies that want to tap into its growing love affair with the Internet and wireless technology. By 2011, China is predicted to be the second-largest adopter of third generation wireless technology with 247 million users, behind only Europe.
The focus on wireless technology is a great way of “franchising the digital culture in China,” Caldwell said. It’s a way of gathering the population around a cheap and reliable technology that will grow into a market for emerging technologies in personal Internet devices.
Gartner expects China’s high-tech industry to suffer from a lack of foreign investment due to the country’s “hostile security posture toward the West” despite joining the WTO. But if the reformers indeed influence China’s Communist government to fully embrace the global economy, Caldwell said this will certainly lead to “economic liberalization.” If the reformers lose, there’s a looming threat that China could devolve into an isolationist economy.
Aside from the possibility of hundreds of high-tech companies flooding Chinese borders, the upcoming 2008 Summer Olympic Games in Beijing is also expected to help spur change. Investment in Old- Economy upgrades, such as public works, will set things in motion.
“The 2008 Olympics is a tool for opening China up,” Caldwell said. “There’s a window of opportunity of seven to eight years, but if there’s no reform made there will be a high-tech implosion. This will certainly be the acid test.
“The potential is tremendous. China’s been held back for so long by a conservative political situation that this indeed will take some time. You can’t reform that country overnight.”
COUNTRY PROFILE
Total population (in millions) 1,2731.1
Population 14 (in millions) 978.7
Population in urban areas (1999) 31%
PCs per 100 inhabitants (1999) 2
Telephone lines per 100 inhabitants (1999) 9
Cell users per 100 inhabitants (1999) 7
ISPs (1999) 3
Internet users (in millions) 11.6
Internet users as % of pop. 14 1%
Compounded annual growth in users,
2001–2004 37%
Total e-commerce (in billions) US$1.61
Compounded annual growth in e-commerce,
2001–2004 145%
B2B e-commerce (in billions) US$1.52
B2C e-commerce (in billions) US$0.97
Source: eMarketer, 2001; US Census Bureau, 2001;
World Bank, 2000; CIA World Fact Book, 2000;
Webstats
ChinaOnline http://www.chinaonline.com
Economist Intelligence http://www.eiu.com
eMarketer http://www.emarketer.com
Gartner http://www.gartner.com
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