The Future of E-Business in China
With a population of 250 million people, China is seen as potentially the most important future market for e-business. Whilst the market has reached saturation point in the United States, there is still plenty or room for growth in China for both Chinese and international organisations. However, despite a rapid increase in Internet based shopping in the country, e-business is still not contributing a significant amount to the countries Gross Domestic Product (GDP). A range of reasons for this has been suggested by several writers who have researched the nature of the Chinese Internet industry and they have concluded that it was a combination of culture and lack of business infrastructure that were the cause.
This piece of work sets out to examine why the Chinese have not fully embraced the concept and what actions would need to be taken by the Chinese Government to encourage use of the Internet to further grow their already buoyant economy. By using a sample population of Chinese students studying in England, it was possible to compare there-commerce habits whilst they had been living in China with how they used the Internet since moving to England.
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The research concludes that whilst the future of e-business is bright for China in terms of increasing access to Internet facilities, there are several areas of the national culture and organisation that preclude the Chinese people from making full use of its facilities. This paper concludes that should the Chinese Government not take more deliberate action to overcome these barriers, the Chinese e-business market may take a long time to become internationally significant.
With a land area of 9,596,960 square kilometres, China is the fourth largest country in the World behind Russia, Canada and the United States. It is made up of twenty three provinces (amongst which it includes Taiwan), five autonomous regions and four municipalities. It has varied terrain and climate due the area it covers and is rich in natural resources such as coal, iron ore and petroleum. The estimated population in July 2004 was 1,298,846,624 over70% of whom are aged between fifteen and sixty four. The population is growing at a rate of 0.57% and life expectancy averages nearly 72years. There are six common languages spoken including Mandarin,Cantonese and Shanghai ese, and there are also many dialects and minority languages. The country has a high literacy rate with over 90%of those of fifteen or over being able to read and write (all data author unknown February 2005).
For many years, China was seen as one of the world’s leading civilizations. During the first half of the 20th Century, however, the country experienced famine, civil unrest and international war .Following the Second World War and the establishment of the People’Republic, a dictatorship was put into power by the Communist Party which exercised strict control over its citizen’s lives. The picture changed in 1978, when Eng Dialoging took over the leadership and introduced major changes to the economic processes in the country.
Economic decision making was decentralised and the whole marketplace was reformed including giving villages responsibility for their local agriculture. International market were opened up and China became major economic force. This proved very successful for China and in the following twenty years, output increased by four hundred percent(Fish man 2005). However, it is also noted that this mixture of socialism and capitalism systems has been said to have led to the worst of both types in terms of bureaucracy and a laissez faire attitude,with a rising income gap between the poor and the wealthy and increasing levels of unemployment (author unknown February 2005).
On initial inspection, the Chinese economy today seems to have remained healthy. In 2003, the Chinese economy grew by 8.5% year-on-year. This makes it second-largest economy in the world. As well as being the fourth-largest exporter, it is also the main receiver of foreign investment. It also has one of the cheapest labour forces in the world;the average wage is $1 per hour, whereas in the United States it is $13per hour (author unknown Money Week January 2004). However, it is suggested in the same article that risks exist from international sources – the possibility of trade embargos from the United States and the ever present risk of a war with Taiwan – as well as domestic ones –possible government actions to counteract excessive money supply and high level of non-performing loans being managed by the major banks(author unknown Money week January 2004).
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Furthermore, the end of 2004and beginning of 2005 and have seen increased incidents of power blackouts due to supply being unable to cope with the levels of demand(author unknown February 2005). Overall, though, the economy is expected to stabilise at a moderate growth level. The objectives of the Chinese Government for 2010 are to double the Gross National Product figure of 2000 leading to a higher standard of living and a market economy of a socialist nature (Author unknown/date unknown Asian info).
E-business, or e-commerce as it is also known, is abroad term used to define transactions that occur through the use of the World Wide Web. Schneider et al identify three main elements:business-to-consumer (B2C) transactions whereby individuals purchase items through company web sites; business-to-business (B2B) transactions where businesses transact with other businesses through web sites and thirdly, purchasing activities that are supported through business transactions and processes that occur through the web (Schneider et al2001).
For the purpose of this piece of work, the emphasis will be on the business-to-consumer (sometimes also known as business-to-cash) aspect of e-business.
The concept of e-business was unknown until the mid 1990’s and its development is, by necessity, closely linked to the development of the Internet. Its history has been one of boom, bust and boom again with the well publicised bust of at the turn of the century leaving many unsure of the future health of the concept. Statistics show the rapid growth of e-business as a method of doing business from the introduction of the first sites such as Amazon.com, Dell computers and CD Now in 1996. By 1998 the United States population was spending $5billion on the Internet to buy goods and services with the Internet service provider, AOL, claiming that a fifth of this was through their shopping channel alone. Christmas 1998 saw a 230% increase in on line sales over the previous year. By 1999, sales had reached the $9 billion per annum mark (Johnston date unknown). Worldwide Internet retail sales, increased by 24% to $35.87 billion in 2001 from $28.91 billion in 2000 and by a further 44% in 2002 to $51.48 billion (Lang 2002).
This incredible rate of growth can be explained by looking at the benefits of e- business to the sellers and the buyers. The benefit to businesses of offering their goods and services on the Internet is considered to be one of economic good sense. Schneider et al summarise sit as “electronic commerce can increase sales and decrease costs”(Schneider et al pp. 12 2001). Advertising is cheaper than using traditional media and a significantly larger and international audience can be reached. Organisations can reduce or eliminate their customer facing sales staff and utilise the Internet instead. Schneider et calcite the example of the computer company, Cisco, who claimed in 1998,that by carrying out 72% of its business over the Internet rather than employ customer facing staff, they had saved $500 million (Schneider metal pp.12 2001).
The benefits to the consumer include having a wider range of choice in products and price, availability to browse twenty-four hours a day and instant access to detailed product information and comparisons. People living in remote areas have the same range of suppliers as someone living in a capital city. The tools of Internet access are also increasing with access available through mobile phones and digital television.
There is an estimated 200 million users of the Internet worldwide with the largest share being in the United States – 40% (Syrians et al2004).
The Chinese call the Internet Hugo ling wang which translates literally as “connect” “all others” “network” (Intuits pp. 2 2004).
The growth and current usage of the Internet in China produces interesting statistics because of the sheer size of the population which currently stands at 1.3 billion (Fish man 2005). It was reported in 2000 that in the previous four years, the number of Chinese people using the Internet had increased from 100,000 to 20 million, placing it at third in the world ranking (Heft 2001). The first survey of e-commerce in China was conducted in 2000 by the Ministry of Information Industry. It found that sales in the first quarter of 2000alone were more than those for the whole of 1999 (cited in Ernest et al2000). There is estimated to currently be 31 million subscribers to broadband Internet providers in China, representing an increase over79% over the past six months (Biz report 2004). However, only 6.7% of the Chinese population use the Internet, less than half the world average of 12% (Biz report 2004).
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The figures for buying on line are equally low with only 31.9% of Chinese Internet users using the facility compared to 82% of Internet users in the United States (Hunter et al 2004). The majority of e-business in China is business-to-customer in nature, a trend that is the opposite of the general global market where business-to-business transactions have overtaken business-to-customer ones (Ernest et al 2000). There are three main Chinese owned web portals of which Sina.com is the biggest (The Economist 2005) the other two being Netease.com and Sohu.com (Zinzius2004). Whilst most Chinese web sites are owned by private Chinese citizens, there is an increasing tendency for American companies to purchase them with Yahoo, for example, recently buying a China based search engine, 3721 Networks (The Economist 2005).
The Chinese Government exerts significant control over Internet companies as was seen when they banned a mobile phone fortune telling advertisement run by Sina.com (The Economist 2005). State owned and controlled servers monitor all Chinese based and international communications on the chinese Internet and there has been a case of an individual being imprisoned for “posting subversive information” (Zionism pp. 3 2004).In 2000, the level of access to computers was extremely low with only1% of the population using the Internet (author unknown Asia Today2000). The majority (65%) of state-owned enterprises had less than 30computers for every 100 employees, as computerisation of functions wa snot widespread (Ernest et al 2000).
For the private personal computer user the speed and cost of on-line access do not compare favourable with the leading e-commerce countries. For example, in the United States, unlimited access to the Internet is available for between 1%and 2% of the average monthly income. In China, access is available for an hour a day for a cost of 20% of an individual’s monthly income(Ernest et al 2000). Until recently, the telephone system in China was dominated by China Telecom, but the introduction of market competition from companies such as China Unisom is yet to exert pressure to reduce service charges (Hunter et al 2004). The high costs and slow service combine to make the concept of browsing shopping sites difficult,expensive and therefore unattractive to the consumer.
However, compute rand specifically Internet usage continue to increase. A report by the China Internet Network Information Centre showed that 79.5 million people in China were net users in 2003, a rise of 34.5% from the previous year (BBC news date unknown). However, it is still not a large market, accounting for only 1% of China’s GDP as compared to the United states where it makes up in excess of 10% of the total trade volume(Heft 2001). Effendi et al report that the number of people with Internet access was likely to grow to 25% of the population by 2006amounting to 250 million people (Effendi et al 2004).
The development of e-commerce in China is seen as being key to the continued health of its economy. Chinese economist Pan Understated that the "development of Internet and E-commerce is not only an advanced technology that Chinese enterprises can use in internal reform, it also can promote the nation's economic restructuring,becoming a decisive factor behind China's economic competitiveness in the 21st Century” (Heft pp. 65 2001).
There are several reasons given for the question mark over the growth of e-business in China. One is the historic trend of paying for goods in cash on delivery - a system referred to by Hunter et al as“Order Online, Pay Offline” (Hunter et al pp 258 2004). Credit is not widely used or available and there are strict limits on the amount of money that can be spent on-line and the types of goods that can be purchased (Ernest et al 2000).
Effendi et al refer to this as being perpetrated by the financial institutions who make “debt unavailable,unknown and unacceptable” (Effendi et al pp. 298 2004). Stygian metal’s research corroborated this view as 93% of their respondents rated the payment on line system as 3 or higher on a scale where 1 was extremely encouraging and 5 was extremely discouraging (Stygian et al2004). Hunter et al’s research supported this and points out that whilst the number of bank cards produced in China rose from 140 million in 1999 to more than 350 million by mid 2001, the majority of these were debit cards and whilst 25 million were classed as credit cards,their use was more aligned to a debit card than the Western countries definition of a credit card (Hunter et al 2004).
The Chinese also have the same concerns as other Internet users when it comes to security concerns both from the buyers and sellers point of view. Ernest et al suggest that this is only “exacerbated…by the abundance of counterfeit and low-quality products already on the market” and they go on to suggest that “China must devise both technological and legal tools to deal with these kinds of problems”(Ernest et al pp. 5 2000). Effendi et al agree with this assertion and blame it for what they call a “lack of transactional trust”(Effendi et al pp. 296 2004).
Action has been taken on this with the publishing of a regulation on management of Internet information service by the Chinese Government. Furthermore, a group of twelve banks including the People’s Bank of China have also established a financial authentication system to counter concerns over the security of payments(Heft 2001). However, Effendi et al’s recent research suggest though that the predominantly cash based society still exists as their survey found that credit cards were only third in volume of payment types use don the Internet (Effendi et al 2004).
Ernest et al identify another factor to be that there is a trend within new e-commerce ventures in China to be simply a case of existing retailers offering their complete catalogue on-line. They recommend a“more focused product line and target market” through development of a“sales strategies that give them a competitive advantage over conventional shopping” as a way of increasing business (Ernest et al2000 pp. 3).
A formal definition of a market in economic terms gives two conditions which must exist “firstly, that the potential sellers of a good come into contact with a potential buyer, and second, that a medium of exchange is available” (Schneider et al pp. 21 2001). Both these factors are lacking in the Chinese e-business forum.
Whilst American companies such as Microsoft, Intel and Compaq have all started offices in China, Hunter et al feel that there are many barriers to these companies becoming successful in the Chinese market due to what they describe as “especially significant cultural differences between the two countries” (Hunter et al 2004). Ernest et al identify three reasons for the slow growth of e-commerce in China .Firstly, they highlight the nature of the “founders and investors” in the industry and question the impact of “factors in their profile” and the effect these have on profitability and business plans (Ernest et al2000 pp. 2).
Secondly, they question the historic development of organisational culture and behaviour within China and how the resulting nature of business in the country contributes to the slow growth of thee-commerce industry. Lastly, they recognise a number of bottlenecks that exist and adversely affect the ease with which companies and consumers can do business (Ernest et al 2000). The Chinese economy has not had the advantages of the way of operating in the international arena that has helped other countries to make the necessary adjustments to their way of doing business that are required when entering thee-commerce market. Ernest et al identify that countries such as the United States have a deeper understanding of “global industry trend sand competitive dynamics” which has attracted foreign and domestic venture capitalists, which leads to the development of pragmatic and highly visible business plans (Ernest et al pp.3 2000).
The Chinese knowledge base is primarily domestic as are the sources of finance and based much more on “blind enthusiasm” than technical know how (Ernest metal pp. 3 2000). Hub et al agree with this comment and feel that the lack of knowledge covers every area – “ the technology involved,infrastructure or network readiness, operating and implementing cost,and real economic benefits to users” (Hub et al date unknown). This ha snot been due to a lack of international trade, as China has been operating in the international markets for more than twenty years, but the nature of the relationships the country has with it’s trading partners.
The state-controlled nature of China’s economy has “led to a system of hierarchical firm organisations and centralised management structures that are incompatible with the requirements of web design and management” (Ernest et al pp. 4 2000). To overcome this problem,there needs to develop a system of “informal social networks” where face-to-face contact can solve issues (Ernest et al pp. 4 2000)Effendi et al agree with this and term this style of personal relationships as “guan xi” (Effendi et al pp. 295 2004) and highlight the importance with which it is viewed by the Chinese in their day today business transactions.
China’s historic and economic development has resulted in distribution infrastructure that does not facilitate the e-commerce industry. Whilst national courier services do exist, they are not widely used and Ernest et al give us two examples of how e-businesses currently distribute to their customers. 8518.com is a Shanghai based company mainly dealing in selling computers and software as its Internet business. Its distribution system consists of “100 delivery stations, equipped with 200 minivans, 1,000 three-wheeled bikes andover 1,000 employees” (Ernest et al pp. 4 2000).
Eguo.com offers a one-hour delivery service throughout Beijing and achieves this by employing bicyclists to make the deliveries (Ernest metal pp. 4 2000). Not only will these systems be inadequate to cope withal rapid expansion in e-commerce, more advanced logistics systems tend to be reliant on Internet systems themselves (Ernest et al 2000). The present situation will also limit e-commerce to dealing within the major towns and cities, as the costs would be to high to deliver to the rural areas. Hunter et al point out that whilst companies such as DH Land EMS are beginning to operate in China, their business is mainly with office complexes as their costs are too expensive for the private consumer (Hunter et al 2004).
Effendi et al support the idea of there being specific bottleneck sand define five of them which they see as the main barriers toe-commerce in China. These are: access to the Internet (including computers, connection to the Internet and Internet service Providers),systems of payment, distribution of products to the consumer,“transaction trust” (which they define as “representations of the goods are accurate and true, purchased goods will be delivered and payment will be made” (Effendi et al pp. 295 2004) and the unnaturalness of debt within Chinese society (Effendi et al 2004).
Despite these issues, the future of e-commerce in China is seen as promising. Meg Whitman, embay's CEO is quoted as saying "China is becoming a leading player in global e-commerce, and Chinese consumers are quickly learning how to make online trading work for them," during presentation at Beijing University to publicise the partnership between eMbay's and Each Net (News Release 2004). The two e-commerce companies went into partnership in 2002 with the aim of mixing eMbay's’worldwide experience with Each net’s local knowledge to improve the online trading opportunities for Chinese consumers (News Release 2004).The partnership seems to be a success as at the beginning of 2004, 4.3million registered users on Each net in China had traded items to the value of US$124 million in 2003 (News Release 2004).
Effendi et al’s research showed that, overall, their sample population experienced no significant problems in accessing the Internet in terms of hardware, connections, or service providers,although they did identify that their sample population was made up of what they determined to be “early adopters”, that is, those who we reconsidered to be the most likely users of the Internet (Effendi metal 2004). They comment in their findings that the level of e-commerce activity was “surprising” for them as more than 50% of their sample had purchased from the Internet more than six times in the previous year(Effendi et al 2004). They go on to report that this figure is higher than that given for the United States.
Stygian et al conclude by saying that “China could potentially emerge as the largest Internet…market in the world if certain economic,environmental, and organisational barriers are effectively addressed”(Syrians et al pp. 302 2004).
Design and Methodology
The object of the research was to determine the opinions of a group of Chinese nationals on the subject of e-commerce, specifically shopping on the Internet and then compare their views to the published analysis .A group of forty six Chinese students at a university in England was chosen as the sample group. These people ranged in age from 18 to 25and were studying a variety of subjects to first degree level. They were asked to complete a questionnaire during a face-to-face interview.The interview method was used as the sample group was relatively small and it was deemed that using electronic or traditional mail might have had a poor response rate which would have given insufficient data to make valuable conclusions.
Several limitations to the research methodology have been noted .Firstly, by the nature of the fact that the sample group were studying at an English university, it is likely that they originated from more affluent backgrounds in China and therefore, would have more access to the Internet and more disposable income than the general Chinese population. Their e-commerce habits prior to moving to England may therefore not be totally representative of the Chinese population as aw hole. Secondly, they have had access to the Internet in England and associate with fellow students who are probably more use to shopping over the Internet that their peers in China. This could have affected the answers they gave as they may have been referring to experiences since coming to England.
It was identified that the fact that the sample population would be answering questions in a language that wa snot their mother tongue may produce issues with erroneous interpretations. This concern was deemed to be insignificant as to be studying in England, all the sample population must have sufficient command of the English language. It is accepted that by using university students for the research, this could not be deemed as representative of the Chinese population as a whole and this has been referred to in the analysis of the results.
The questionnaire was divided into four sections. The first section was to determine quantitative information on how long the students had been in England, as this would affect the opportunities that had been available for them to become familiar with the English culture of Internet shopping, and to determine that they were able to access the internet currently and that they had been able to access it whilst they had been living in China. Should any of the respondents been unable to access the Internet either now or whilst living in China, they would have been excluded from the research. The second section collected qualitative and quantitative information regarding their use of internet shopping whilst they had been living in China.
The third section asked the same questions in respect of their Internet shopping habits since they had moved to England. This information was collected to be able to make a direct comparison of their Internet shopping activities in China and England so that the current status of e-business in China could be accessed using the English information asa measure. Section four examined the sample population’s view of the future of e-business in China by questioning them about their opinion sand facts about their own personal actions, the skills and knowledge of their peers and the action or lack of it from the Chinese Government.
In section two, only twenty two of the respondents had ever bought anything from the Internet, so only this group was asked the remainder of the questions in that section to ensure that real experiences only were collected rather than hearsay and conjecture. In section three,only thirty seven of the respondents had bought from the Internet and again, only this group was asked the remaining questions in the section. The whole sample group of forty six were asked the question sin section four as it collected opinions and information that were relevant whether or not the respondent engaged in e-business.
The results were obtained by questioning each respondent once and the whole survey was conducted over a period of two weeks. The majority of the questions were asked in open-ended format to be able to gain full range of replies. The remainder were where quantitative information was required such as whether or not the respondent had Internet access.
Analysis of Results
The results of the questionnaire were analysed to determine how the sample population’s use of e-business had changed since they had moved to England. When asked whether they tended to visit English or Chinese language sites on the Internet, since moving to England, English language sites attracted 96% of respondents compared to only 65% whilst they had been in China. This could reflect the value of peer pressure on the individuals as their colleagues in England would be more likely to discuss or mention English sites to them. It could also reflect the amount of advertising of web sites in the media, which also would have given prominence to the English language sites.
It is not thought that they found more opportunities to buy products on the English language sites although, on reflection, this would have been a further question that could have been asked to give more understanding as to the relevance of this fact. The number of respondents who used e-business nearly doubled (48% to 80%) since they had moved to England with Allaire proportion (76%) having made between one and three purchases in the last six months and 65% having made between one and six purchase sin the last twelve months.
This shows that since moving to England the sample group had used the Internet for shopping much more than they had whilst living in China. This result was expected as the review of previous research highlights the lack of saturation in the market in China.
Other aspects of their actual buying habits, though, had generally stayed the same. All the respondents used to and continued to mainly buy single items rather than multiple items and since moving to England, books continued to be the most common product bought. Compact discs, televisions, audio equipment and cameras and sports equipment or clothes also remained equally popular purchases. The sample group increased their purchases or DVD's, downloads and clothing or accessories whilst they bought less travel related items, leisure products and toys.
It is interesting to note that the travel ticket sand leisure products tend to be those items that are more likely to be paid for on consumption i.e. an individual may book an hotel room on the Internet, but only pay for it on checkout. This is interesting as it supports the previous research which suggests that these are more popular Internet purchases in China because of the lack of trust in data security and the culture of paying with cash. When the sample population were in a culture where paying on-line was predominant it is more likely that their purchases of pay prior to consumption increased rather than a decrease in their pay on consumption purchases.
This would suggest that if credit cards were more widely available and popular in China, other sectors would increase to overtake the leisure type market rather than a decrease in that particular sector, leading to an overall rise in the value of e-business trade. Three items had been bought since the respondents moved to England that they had never bought whilst living in China. These were: beauty products, groceries and flowers. This could indicate the lack of availability of some of these products in China as two of them, groceries and flowers, are perishable and, as the research indicates that the distribution system in
China is not advanced, these types of products are potentially more difficult to deliver to the customer in a saleable state, due to the nature of the delivery method, a high proportion of non-temperature controlled vehicles such as bicycles. However, it is also worth noting that the appearance of these three items in the results at this stage indicate the different cultures in the two countries and it can be suggested that the process of buying these particular products,especially groceries, is a situation where face-to-face contact is preferred by the Chinese. Again, on reflection, further investigation of this question would have allowed a more in depth analysis.
Prior to and since moving to England, the respondents were equally(82% compared to 86%) likely to know what they wanted before searching the Internet. They were, however, more likely to search several sites to compare prices after moving to England (86% compared to 55%) and more likely to conduct research on the product on the Internet before buying (76% compared to 68%). These two patterns are likely to be due to the high cost of Internet time in China which would dissuade people from spending more time than needed on the Internet.
This could potentially limit the opportunities for businesses to capture impulse sales as the consumers would not spend time browsing through different sites, but would go directly to the supplier of the particular product they wanted. Having a shop’s catalogue with you whilst visiting the shop’s web site remained unpopular (9% and 14%) regardless of where the respondent was. Whilst living in China, none of the respondents bought particular product only from the Internet, whilst since moving to england, 11% said they did. These products were found to be specialist Chinese herbs which they had not been able to find in shops.
The majority of the respondents had paid for Internet bought purchases with cash on delivery when they lived in China (64%). 18% paid by cheque either on delivery or through the post and 9% by bank transferor credit card. This altered significantly when they answered for their current payment methods. 89% now use credit cards and pay on line. Further question could have been asked to determine how many of the sample population now had credit cards compared to how many had them whilst living in China. The two people who said they paid by bank transfer commented that this was specifically through the Pay Pal system which some regard as a form of credit.
The respondents found the benefits of Internet shopping from England to be the speed (76%), convenience (68%) and price (59%) whereas when they had been in China, the benefits of price (55%) and speed (41%) were rated to a much lower degree. The biggest benefit whilst living in china. was seen to be the fact that it could be conducted from home(73%). This was an unexpected result as the literature research suggested that Chinese people value highly the face-to-face contact that comes with buying from shops and markets. It is also interesting to note that the ability to be able to tell other people that you had bought something from the Internet was more highly regarded when they were living in China (23% versus 5%). This could reflect the lower penetration rate of e-business in China which may serve to make it more of a conversation point than in England.
The sample population had little criticism of Internet shopping in England. 22% of respondents said they would use Internet shopping mo rein England if the cost of access was bought down, whereas the 82%stated that this would have encouraged them whilst they were living in china. They also cited payment methods (77%) and speeding up the process (55%) as being significant incentives.
When asked to compare their e-business experiences in China and England, the majority thought that it was easier (76%), cheaper (78%)and quicker (57%) in England than in China. A slight minority (46%)thought that the process was more secure in England meaning that 54%did not see a difference in this factor between the two countries. It is noted that due to the international nature of e-business, a Chinese site could be illegally accessed by someone anywhere in the world as easily as a site in England and therefore, it is the perception or the risk rather than the risk itself which is significant.
91% of respondents were confident that they had the skills and knowledge needed to be able to conduct e-business and 83% felt that their peers in China were also competent. This is in contrast to earlier research which suggested that the education of the population of China in using e-business was a vital step to encourage its usage.
96% saw increase e-commerce as a way of increasing the value of the economy and 41% saw it as a way of increasing the rate of rise in the economy Again, earlier research suggested that the benefits of e-business should be made more widely understood to encourage Chinese uptake. The respondent’s replies indicate that this level of knowledge is already there although it is accepted that the sample population used were of an intelligence and economic level as to be atypical of the Chinese population as a whole.
Access to the Internet was more varied for the respondents since moving to England. They were more likely to access it both at home and at university whereas in China the vast majority (89%) accessed it at home only. It should be noted, however, that the fact that sample population were generally not at university at home would make this insignificant data.
96% of respondents said that when they returned to China, they were intending to keep the Internet shopping habits they had developed whilst living in England.
The main barriers to the growth of e-business in China were seen as being the cost of accessing the Internet (70%), the payment methods(61%) and not being able to see the item before buying it (35%). The inclusion of the third factor could prove to be a major problem in growing e-business in China as it is a cultural factor that would ha veto be overcome by changing people’s mind sets rather than removing the obstacle itself. When asked which was the singular most significant factor, the third factor became less significant with costs of Internet access (59%) and payment methods (35%) being dominant.
The sample population seemed generally unaware of the actions being taken by their government to increase the amount of e-business,although 87% believed it was not enough. They felt that the government should increase the security of transactions (85%), encourage the use of credit cards (83%) and reduce the costs of access (59%). They saw the government’s lack of understanding on how to actually make these things happen as the main reason why they were’t being done rather than a lack of will to do them.
Despite this, the sample population generally believed tate-business would increase dramatically in China and that this would bema positive thing (85%).
The final questions asked specifically why the respondents thought their Internet shopping usage had changed since they had been living in england. This was considered to be a key question as it would give ac lear picture of the barriers to e-commerce growth in China as the sample population would indicate the factors that affected them rather than an inference having to be made. Roughly equal proportions stated that it was the influence of their friends that encouraged there-commerce use (33%), that is was generally a much easier process in england. than in China (39%) and that they used the Internet because they did not like going to shops in England (33%).
The significance of the last factor should not be underestimated and may be indicate limitation to the research methodology in that using a sample of non-English students living in England may have been affected by the fact that they were finding the English way of life a culture shock and were therefore, forced into finding alternate methods of purchasing goods. This would give the research an unintentional bias and a major influence on their behaviour may be unrelated to the subject of the research.
The writer could not identify a suitable way of overcoming this. The importance of peer pressure is also significant and suggests that the growth of e-commerce within any culture is subject to what is referred to as the “domino effect”. Once it becomes popular within section of the population, word of mouth becomes an important driver in encouraging others to try it. The proportion of the respondents who included the general ease of Internet shopping in England as a main factor in their change of habits, supports the previous research which highlighted the existence of various bottlenecks hampering the uptake of e-commerce in China.
The majority (61%) stated that they had much more confidence in the products they purchased being received when they purchased from the Internet in England than they did when singe-commerce in China. This would be due to several of the factors mentioned by previous researchers. These include the lack of faith in the security of transactions and the lack of an advanced distribution system. It indicates that for e-commerce to experience the rapid grow thin China that is seen as so desirable, the Chinese Government needs to give the population confidence in the whole practice of buying from the internet
Summary and Conclusion
This paper set out to examine the views of Chinese nationals, now living in England, as to what particular issues they had experienced with e-business in their own country now that they had partaken of it in a foreign country and could compare the processes. This was expected to indicate why the growth of e-commerce in China is taking longer than many economists hoped for. Previous research had indicated that there were a series of barriers in place that were slowing the growth and that they were a combination of cultural and infrastructure issues. Generally, the results of this piece of work supported the previous research.
The costs of Internet access and the Chinese culture of paying for goods by cash made the experience in China unattractive to many. However, once these were overcome in practice and nature, the Chinese sample population began to show e-business usage similar to those in England. Purchasing from the Internet became more attractive to them and whilst they still had concerns regarding the security of on-line transactions, they were more likely to pay on-line using credit cards. The range of products they were buying increased and changed slightly in nature. The respondents identified the role of the Chinese Government in overcoming the barriers and felt that the government should be taking more action.
They felt that, contrary to earlier research, it was not a lack of education and knowledge amongst the chinese population that was holding back e-commerce, but a lack of confidence in the whole process from accessing the Internet, through paying for items to receiving what they expected. This indicates that it would take only a few, relatively simple steps to promote the growth of e-commerce in China. The message for the Chinese Government would seem to be one of both national action in doing more to make credit cards. available, improve security of trading on line, update the distribution infrastructure and encourage companies to trade through this resource as well as providing the resources necessary to ensure the average Chinese person feels more comfortable with the technology.
Several writers, Ernest et al, Effendi et al, Heft and Stygian metal amongst them, have examined the risks to the rise in e-business in china. Generally they tend to agree that whilst China’s Internet availability and e-business opportunities are showing an ever increasing rise, there remains a series of barriers that are likely to prevent it from becoming a major contributor to the Gross Domestic Product unless they are removed. These barriers range in nature from the mind set and parochial views of the business leaders in China to the more practical problems with Internet access costs and a poor distribution infrastructure. This piece of work, whilst generally agreeing with these views, suggests that the more practical problems are the most significant and the easiest to resolve.
Ernest et al feel that “China has the resources, the means, and the motivation to be a central player in the global e-commerce industry but is lagging far behind other countries in terms of market size and scope” (Ernest et al 2000). It is generally accepted that the most growth in e-business is through non-western countries, particularly China and Hunter et al explain this by saying that whilst today, 80% of internet users are from the United States, this will drop to 30% in the near future because Internet access has reached saturation point in the United States (Hunter et al 2004).
Ernest et al go on to suggest that whilst “the Web economy will be then engine of economic growth in the twenty-first century and is now regarded as the key to future productivity improvements and competitiveness”, China will need to be able to cope with the“significant social and economic disruptions” that the “rapid transformations of production and information systems” will bring about(Ernest et al pp. 5 2000).
Ernest et al call for the establishment of a “central government organisation responsible for the overall e-commerce development” (Ernest al pp. 6 2000).
Ernest et al also highlight the need for the education and training of both government officials and company executives in e-business as a key requirement for China’s development and comment on the need to “develop broad base of Chinese knowledge, skills and capabilities through aggressive human resource development policies” as being a key (Ernest al pp. 7 2000).
Effendi et al conclude their report by saying that “as China opens up to the outside world and becomes a more integral part of the world community…changes will take place, starting with the banking reforms, which in return will promote fundamental cultural changes in Chinese society” (Effendi et al pp. 302 2004).
Whether the Chinese government can succeed in doing this remains to beseem although they have recognised the need with ex-President Jangle being quoted as saying “We should recognize the tremendous power of information technology and vigorously promote it’s development”(Zionism pp. 12 2004).
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