Obstacles to the Growth of E-Commerce

Gao Kun

During its initial development of E-business, gaps appeared between developing and developed nations: first, differences in technological levels; second, differences in application and management levels; and third, differences in concepts and legal consciousness.

At present, the greatest obstacle to the development of E-business in China is not technology, but problems in promotion and application, such as social understanding, concepts, planning, organization, legal standards, utilization scale and personnel training.

Deng Shoupeng, research fellow with the State Council's Development Research Center, has identified seven key obstacles.

Outmoded shopping concepts and methods. Chinese customers habitually shop by looking at, touching, listening to and tasting the products. In general, they feel it is indirect shopping on-line is unsafe. In the latest sample survey, 86 percent of respondents rejected outright any form of on-line business transactions, while 88 percent expressed no interest in on-line shopping.

Deficiencies in the general business environment. China's business activities are basically conducted on a person-to-person basis. Although the transactional frequency between individuals and businesses is quite high, the volume of each transaction is fairly small. With such a shopping pattern, on-line transaction seems to be unnecessary.

Incomplete network infrastructure facilities. E-business is based on electronic commercial and financial systems. At present, the national financial network has not been fully completed, and the financial sector has not yet fully achieved its switch to electronic methods. The commercial sector lags even further behind. All these aspects restrict the survival and development space for E-business.

Unsatisfactory network quality. The main technological obstacles to the promotion of E-business lie in the transmission speed and reliability of the network. The current transmission speed of Chinanet is fairly slow, frequently causing delays. Simultaneously, there exist many unreliable factors, such as those involved in software, telecommunications lines and systems.

Incomplete on-line security and confidentiality. On-line prices, deals and final contracts involve many trade secrets and matters of personal privacy. Cases have been reported where it proved easy to use ordinary technical means to obtain credit card numbers and codes from business websites.

Incompatible management and operational systems. The existing management system of China's information industry still bears strong signs of the old planned economy, and high-level centralization and monopoly have restricted market competition, delaying the promotion and application of E-business throughout society.

Lack of related knowledge and skills. China is a developing country, and the public's general educational level remains low. Most people cannot catch up with the ever-developing modern communications and network technologies. To overcome all these obstacles, insiders believe the government should improve the market environment as well as build up the operating mechanism.

In the area of the market environment, there are several musts. For one thing, the security of online transactions must be guaranteed and the mode of payment improved. Public Internet access also needs to be made easier.

To build up the operating mechanism, the government should enhance its role in macroscopic planning and guidance, establish and perfect the related legal system and actively participate in international cooperation.

(CIIC 09/28/2000)

In This Series

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