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Investors Focus on E-commerce Sector

A new wave of investment in e-commerce is focusing investors on this still "miniscule" sector of China's economy.

Less than half of one percent of China's population is willing to buy products online, leaving the door open for enormous growth.

Chinese websites are becoming the most frequented on the Internet. Four of the top 10 sites listed in Alexa's top 500 list are from China. Yahoo!, Microsoft and Google take the first, second and third slot but Sina.com, comes in fourth place, Chinese-language search engine Baidu in sixth, Sohu.com ninth and 163.com 10th.

Taobao.com is number 27 on the list while Alibaba.com comes in at 36 place.

Alibaba.com links buyers around the world with Chinese manufacturers and suppliers. It allows access to everything from trousers to car parts. Alibaba also has a website that could challenge eBay in the consumer-to-consumer market, Taobao.

Despite the growing number of Internet users, the Internet market in China is still small as a percentage of its population. There are 103 million Internet users in the country, according to the China Internet Network Information Centre, up from 97 million in 2004 and second only to the United States.

But that's only 7.9 percent of China's population.

Japan's 78 million users, by comparison, represent 60 percent of its population. Japan is third in Internet use worldwide.

For e-commerce the China market is still woefully small, with only 0.4 percent of Internet use devoted to it.

"The e-commerce market in China is miniscule when compared with the United States," said Harry Tsao, co-founder of Smarter.com, a privately-owned company that operates a search website. It allows visitors to find products and buy them directly from suppliers.

It charges vendors based on the number of reliable leads the site generates.

Internet users in the United States spend some US$120 billion a year online, compared to US$1.1 billion in China, said Tsao.

Last week, Smarter.com announced plans to launch an e-shopping platform in China in the fourth quarter of this year.

The potential for growth is enormous as the number of people willing to purchase items online is growing faster than the number of Internet users. Last year, 14 million new people went online.

Tsao said his site has proved popular in the United States and now the plan is to launch it in China. The company has been operating in Shanghai for two years.

Smarter.com expects to get between 5 and 10 million users per month during its first year in China and plans are for it to grow alongside the e-commerce market.

"People will not advertise on the Internet if there is a very small market," he said. "When that market grows, the marketing dollars will be there."

Investors have been quick to heed the call of China's Internet boom.

On Friday, shares in Baidu.com almost quadrupled (jumping up 365 percent) in the first day of trading at NASDAQ.

(China Daily August 12, 2005)

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