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E-commerce Witnesses Recovery

Hong Qiliang, a student at Shanghai University, made a fortune in three months from e-business.

With a startup fund of 10,000 yuan (US$1,205), the young online shopkeeper amassed 82,000 yuan (US$9,880) in sales.

That is extraordinary for Chinese college students, who usually depend on money from their parents.

Hong was the top winner of the first National College Student E-business Competition which ended last month.

Behind Hong's miracle is the rapid growth of online business in China.

The top 10 winners in the competition sold items worth 320,000 yuan (US$38,554) in three months, said Shao Yibo, founder and chief executive officer of EachNet, China's largest online auction site.

That is amazing for Chinese college students who usually lack the entrepreneurial spirit displayed by their Western counterparts.

EachNet sponsored the competition and participants opened online shops on EachNet.

"We found the more than 40 per cent of online shops on our website have opened by college students," Shao said.

"And thousands of online shopkeepers are making a living solely from online sales."

The online retail sector was slow to develop in China.

And fledgling e-businesses were hit hard when the dotcom bubble burst.

But now demand for online sales in China has recovered.

"Small and medium-sized businesses and individuals are finding the web to be a good trading platform," Shao said.

That is especially true for the China's young generation who spend much more time surfing the web.

Statistics from the Ministry of Information Industry (MII) showed China had 87 million Internet users by July, mainly young people.

According to research house IDC, e-commerce spending in China reached US$4.8 billion last year and is projected to more than triple to US$14.6 billion by 2005.

There are currently around 4,000 websites in China dedicated to online sales.

Ji Jinkui, director-general of MII's Department of Informatization Promotion, said currently e-commerce is still in its infancy in China and faces many difficulties.

"The largest bottleneck is the skills shortage," Ji said.

And that is why the MII, and other key ministries like the National Development and Reform Commission, the Ministry of Commerce, and the Ministry of Education co-hosted the National College Student E-business Competition.

The Chinese Government is placing increasing attention on e-commerce, which it thinks will be a major engine of domestic economic growth in the years to come and a tool to transform traditional businesses.

The government has been promoting the use of debit card payments and improving delivery systems.

The country's top legislature late last month passed the Law on Electronic Signature, which is expected to give a big boost to electronic deals.

The law legalizes the increasing number of electronic deals for the first time.

According to the law, contracts signed via the Internet have the same legal status as paper ones. This is expected to clear some institutional barriers e-commerce currently faces.

But Ji acknowledged that China still lags far behind developed countries in providing a sound environment for electronic transactions in terms of laws, policies, investment and the market.

The awareness and application of electronic deals remains low in China, he noted.

Insecure payment mechanisms and delivery systems and a lack of trust is still thwarting the development of e-business in China, said Lu Chunwei, president of www.8848.com, a domestic e-commerce firm.

There is a heightened need for the country to establish a mechanism to rate the trustworthiness of e-commerce firms, Hong said.

"We need to punish those who are cheating in online transactions." he said.

Despite such obstacles, foreign e-commerce giants' enthusiasm for the fledgling Chinese e-commerce market has not diminished.

The world's biggest online auctioneer EBay took the early lead in China by acquiring EachNet last year with a total investment of US$180 million.

Early this year, Yahoo! Inc and Chinese Internet portal Sina Corp formed an online auction joint venture.

Amazon.com Inc, the world's No 2 e-commerce firm, last month announced plans to acquire Joyo.com Ltd, China's largest online retailer of books, music and videos, for US$75 million.

"A slew of foreign acquisitions of stake in China's e-commerce firms are a clear signal pointing to the rosy prospects for e-business in the country," Lu said.

(China Daily September 13, 2004)

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