Potentials and Perils of E-Business in China

Potentials and Perils of E-Business in China

James G.S. Yang (Montclair State University, Montclair, New Jersey, USA)
Copyright: © 2014 |Pages: 13
DOI: 10.4018/ijebr.2014100103

Abstract

The E-business market in China is growing at an exponential rate. In 2013, the business volume is expected to reach $285 billion which surpasses the level in the U.S. As a result, there is a gold rush to China to participate in the market. This article discusses the potential but also points out the perils. This paper also focuses on the competition in the Chinese E-business market, and reveals that the Chinese online business is almost completely monopolized by only one seller, Taobao, which accounts for 81.2% of the whole E-business market. This article further considers the tax burden of the Internet commerce transaction which found that the Chinese government imposes a value-added tax at a rate of 17%. This rate is much higher than the sales tax rate at 7% in the U.S. Additionally, this article investigates the problem of counterfeited products and infringement of intellectual property rights. It discovered that this problem is rampant in China. The losses in international trade amount to $360 billion a year. Eighty percent of the counterfeited products were originated in China. The problem is extremely serious. Moreover, this article offers many planning strategies for operating an E-business in China. Despite the perils, this article concludes that the benefits of running an E-business in China outweigh the risks.
Article Preview

2. E-Business Volume In The Past

In the U.S., the E-business started to emerge in 2001. At that time, the E-business volume was a meager $35 billion a year according to the data from the U.S. Department of Commerce [U.S. Department of Commerce, 2013]. However, it immediately took off at a growth rate of 25% a year. In 2008, the nation was hit by a financial crisis. The E-business was a victim too. In 2010, the E-business market resumed its growth. In 2012, the E-business volume had reached $225 billion [U.S. Department of Commerce, 2013]. In 2013, the E-business volume is expected to reach $252 billion [Evans, 2013]. The growth rate was maintained at a steady 16% a year. Evidently, growth of the E-business market has been slowing down considerably. This fact may indicate that the E-business market in the U.S. is now matured and stabilized in the near future. This observation is quite interesting in planning the E-business strategies for the future.

Another point of investigation is whether the E-business plays an important role in the whole retail market. The yard stick can be measured by its market share. In 2001, the market share was only 1.1% in the U.S. [U.S. Department of Commerce, 2013]. In 2008, the market share was 3.6%. By 2012, the market share had reached 5.2%. In 2013, the market share is expected to grow to 5.6% [Evans, 2013]. This fact shows that the E-business market share was never slowing down in history. Instead, it grows rather steadily, though slowly. This observation is also interesting in planning the E-business strategies too. The growth rate provides a clue as to what volume of E-business can be expected as long as the whole retail sales size can be estimated.

As compared to the U.S. side, the Chinese E-business market was not started until 2008. At that time, the E-business sales volume was as little as $17 billion [China E-commerce Research Center, 2013]. By 2012, the sales volume had exploded to $202 billion. This volume has almost caught up with the U.S. side. The growth rate is as high as 55% a year. This level has far surpassed the U.S. side. In the year of 2013, the E-business volume on the Chinese side was expected to reach $285 billion. This level will undoubtedly surpass the U.S. side. The growth rate in 2013 will slow down to 41%, but it is still much higher than the U.S. side. This fact clearly shows that the E-business market on the Chinese side has much greater potential than the U.S. side. This aspect certainly serves as guidance in planning the future E-business strategies.

With respect to the aspect of degree of importance of the E-business relative to the whole retail sales, the market share in China has also been steadily increasing from 1.3% in 2008 to 6.3% in 2012 [China E-commerce Research Center, 2013]. The market share is even expected to rise up to 7.2% in 2013. In any viewpoint, the Chinese side is higher than the U.S. side. This fact clearly demonstrates again that the volume of the Chinese E-business will, beyond any reasonable doubt, surpass the U.S. side in the immediate future. This observation serves again to formulate E-business planning strategies in China. The data are summarized in Table 1.

Complete Article List

Search this Journal:
Reset
Open Access Articles: Forthcoming
Volume 15: 4 Issues (2019): Forthcoming, Available for Pre-Order
Volume 14: 4 Issues (2018)
Volume 13: 4 Issues (2017)
Volume 12: 4 Issues (2016)
Volume 11: 4 Issues (2015)
Volume 10: 4 Issues (2014)
Volume 9: 4 Issues (2013)
Volume 8: 4 Issues (2012)
Volume 7: 4 Issues (2011)
Volume 6: 4 Issues (2010)
Volume 5: 4 Issues (2009)
Volume 4: 4 Issues (2008)
Volume 3: 4 Issues (2007)
Volume 2: 4 Issues (2006)
Volume 1: 4 Issues (2005)
View Complete Journal Contents Listing