Two business consultants with decades of experience with the Chinese market, give advice on how to make a go of e-business in the largest country in the world.
With China recently joining the World Trade Organisation (WTO), the time seems ripe to explore e-business strategies in this rapidly growing market. While it may be getting easier for multinationals to invest in the Chinese market, there remain barriers and pitfalls that Western technology and business leaders need to build into their business plans and practices. The exponential growth that has occurred in the number of Internet users in China makes it a prime target for foreign investment in e-commerce. In 1995, there were fewer than 50,000 Internet users in China. At the beginning of 1998, there were some 2.1 million users. By the end of 2003, the China Internet Information Centre projects there will be 20 million users. While the statistics may be exaggerated, the growth rates to date suggest that they may not be far from the mark. This growth is all the more extraordinary when one considers that only 14 per cent of the population have ever heard of the Internet. By the same token, that growth underlines the fact that the Chinese are quick to adopt technology as soon as it is available.
In addition, there are now 48,000 domain names in China, three-quarters of them commercial. According to the official Wenhui Daily, in 1999, e-commerce sales leapt 400 per cent from some $16 million to more than $80 million. And IDC expects sales of $7.5 billion by 2003.
The government is investing heavily in technology. It recognises the potential for e-business to transform China's distinct and complex markets into one e-marketplace. Teledensity is increasing rapidly. A fibre-optic grid is now in place, enabling the Ministry of Information Industry (MII) to install new lines at a stunning pace. While teledensity is still low with 11 lines for every 100 people, several more years of rapid growth will make China one of the most attractive telecom markets in the world.
But it must also be kept in mind that there is no national payment system for buying goods online. Reliable distribution channels are lacking as well. Even in the prosperous coastal provinces in the East, transportation can be very problematic. Buyers are not confident about security and those who have credit cards are reluctant to use them over the Web.
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