Hu Kaihong (host):

Good morning, ladies and gentlemen. Welcome to today’s policy briefing. At the State Council executive meeting on Oct 14, plans and measures were discussed to upgrade the country’s Internet infrastructure and speed up the development of e-commerce and logistics industry in rural areas. This has attracted the media’s attention, and we can see there are a lot of reports on this issue recently.

Today, I’m honored to have Zhang Feng, chief engineer and spokesman of the Ministry of Industry and Information Technology; Wang Bingnan, assistant minister of Commerce; and Ma Junsheng, director of the State Post Bureau, to brief you on these issues and answer your questions. Mr Zhang, please.

Zhang Feng:

Good morning, ladies and gentlemen. I’m happy to be here today. I’ll give a brief introduction about the mechanism of compensation for local telecommunication services and take questions from you.

Zhang Feng:

The central government attaches great importance to the development of a broadband network. President Xi Jinping noted that we will develop the country with the help of the Internet and enable 1.3 billion Chinese people to enjoy the achievements of Internet development. Premier Li Keqiang noted that improvement in local telecommunication services is an important part of the development of broadband network and high-speed broadband networks must be constructed to narrow the urban-rural digital gap.

In May, the State Council issued a circular regarding the plan to speed up high-speed broadband network construction and reduce costs for broadband network services, which explicitly stressed efforts to promote local telecommunication services in villages and rural areas.

The Ministry of Industry and Information Technology and Ministry of Finance have released a working agenda on the implementation of local telecommunication services in accordance with the plans and decisions of the State Council.

On Oct 14, the 108th State Council Executive Meeting decided that supporting broadband construction in villages and rural areas through reform and innovation in compensation mechanism of local telecommunication services is a significant measure to reinforce public goods and services, drive effective investment, and promote a coordinated urban and rural development.

Zhang Feng:

Broadband has been developing very rapidly in recent years, but its development in rural and remote areas lags far behind. By the end of August 2015, about 366 million households had access to fiber-optic broadband Internet, an increase of 110 million new households this year, and 209 million households had access to fixed broadband, meaning 50 percent households had access to broadband. The speed of fixed broadband has increased 1.2 times from the end of 2104. But due to the poor economic conditions and complicated geographical conditions of the sparsely populated rural and remote areas, the construction and maintenance cost of broadband is very high, while the profit is quite low, thus widening the gap between rural and urban areas. The broadband coverage of households in rural areas is 40 percentage points lower than in urban areas. And currently, 50,000 villages still have no broadband access.

Zhang Feng:

The universal telecom service compensation mechanism is a long-term one aimed at supporting broadband development, especially broadband network construction, operation and maintenance, in rural and remote areas. By 2020, we will provide 50,000 villages that have no broadband access with access, and 150,000 villages with fiber-optic broadband access, and more than 30 million rural families will have their broadband upgraded.

Zhang Feng:

We need to encourage local governments and businesses to play an active role, thus forming joint efforts of the central and local governments and related enterprises in promoting the construction of broadband in rural areas.

Zhang Feng:

We will operate the compensation mechanism according to the rules of the market and increase the efficiency of the fiscal funds through a bidding process. We encourage telecom companies, broadcasters and private capital to participate in broadband construction, operation and maintenance in rural areas. And meanwhile, we will establish inspection and oversight mechanisms by both the central and local governments and promote the openness of information and strengthen social supervision to ensure that our objectives will all be met and enable rural and remote areas to share the benefits of development in information technology.

Hu Kaihong:

Thank you Mr Zhang. Mr Wang, please.

Wang Bingnan:

Good morning ladies and gentlemen. I am pleased to share with you some information on rural e-commerce.

Wang Bingnan:

The CPC Central Committee and the State Council place a high priority on rural e-commerce. On Oct 14, Premier Li Keqiang chaired the 108th executive meeting of the State Council concerning accelerated growth of rural e-commerce to benefit people’s livelihoods by boosting the new business type. The meeting unveiled six measures to push forward rural e-commerce.

Wang Bingnan:

First, require local governments to strengthen overall planning and guidance. Local governments should play a key role in the development of rural e-commerce and expand the application of e-commerce in rural areas.

Second, step up policy support. The Comprehensive Demonstration Program on “E-commerce into Rural Areas’’ will be advanced and priority will be given to the implementation in poor areas. New mechanisms on poverty reduction should be created to highlight the role of e-commerce and guidelines on using e-commerce as a tool to alleviate poverty should be formulated.

Third, support and encourage innovation. Local governments and businesses are encouraged to explore new models of e-commerce in rural areas in light of local conditions. E-commerce innovation and startup contests will be held in rural areas to attract farmers, rural youth, returned migrant workers and rural college students to participate. We will step up engagement with the media and strengthen supervision to create a favorable online shopping environment.

Fourth, quickly build the rural logistics network. We will promote sharing and integration of rural logistics service networks and facilities in the transport, commercial, logistics, rural supply and marketing sectors.

We will encourage multifunctional stations and all-in-one service networks, develop third-party and joint delivery services in order to increase efficiency. We will also establish a rural public warehousing and distribution system with priority given to least developed rural areas while promoting the building of rural area distribution and cold-chain facilities.

Fifth, strengthen rural infrastructure. We will improve the universal telecom service compensation mechanism, accelerate the construction of information infrastructure in rural areas and the speed of broadband Internet. We will continue to reduce charges of broadband, accelerate the building of roads in rural areas, and encourage capable regions to start bus services.

Sixth, increase financial support. We will coordinate all credit guarantee bodies to simplify the procedures to apply for small-amount short-tern loans and enhance loan support for farmers and rural youths who start e-commerce businesses.

Wang Bingnan:

The Ministry of Commerce will continue to specify and improve related measures according to the deployment and requirement of the State Council, and I am ready to take questions from the floor. Thank you.

Hu Kaihong:

Thank you Mr Wang. Mr Ma, please.

Ma Junsheng:

Ladies and gentleman, friends from the media, good morning everyone!

I’m very glad to be here for the policy briefing. Recently, the State Council has introduced the “Several Opinions on Promoting the Development of the Express Delivery Sector” (“the Opinions” for short hereafter). This is the first comprehensive programmatic document guiding the development of the express delivery sector promulgated by the State Council, which is an important milestone in the development history of China’s express delivery sector, and fully embodies the State Council’s great attention to the sector.

Ma Junsheng:

Now, I’ll brief you on the background and main contents of “the Opinions”.

In recent years, the express delivery sector in China has been developing rapidly, and has grown eightfold compared to the volume at the beginning of the 12th Five-Year Plan (2011-15). The business scale has been continuing to expand with increasingly improved service quality, and the express enterprises have grown substantially in number. The express delivery sector plays an active role in reducing the flow of transaction costs, supporting e-commerce development, serving the public’s daily life and production and expanding employment channels. The express delivery sector has become a “dark horse” driving China’s economic development. However, due to a rather late start and rapid development in the comparatively short period of time, China’s express enterprises encounter many prominent development problems, including, lagging infrastructure, imperfect policies and regulations and weak international competitiveness. Many security risks are constantly exposed in delivery channels. In short, there is still a large gap between the overall development level of the express delivery sector and China’s economic and social development.

Ma Junsheng:

In order to promote the sustained healthy development of the express delivery sector, serve mass entrepreneurship and innovation, and give better play to the roles of the express delivery sector in keeping steady growth, adjusting structure, promoting reform and improving people’s livelihood, the Ministry of Transport, the National Development and Reform Commission and the State Post Bureau, in conjunction with relevant departments, have drafted the “the Opinions” on the basis of in-depth investigation and research. They were reviewed and adopted at the 108th executive meeting of the State Council on Oct 14.

Ma Junsheng:

The Opinions mainly consist of four parts: general requirements, key tasks, policies and measures, organization and implementation.

In terms of general requirements, the Opinions put forward the basic principles of being market-oriented. These include security as a base and innovation as a driving force as well as coordinated development. They point out the “Internet Plus” as the direction for express development, so as to foster the growth of market players and extend the express service network to benefit more people. By 2020, the express service system characterized by general preference for urban and rural areas, advanced technology, quality service, safety and efficiency, green and energy-saving would be basically completed.

Ma Junsheng:

The Opinions define five key tasks. First, to foster the growth of express enterprises, support express enterprise mergers, reorganizations and public financing, encourage the enterprises to improve service quality and implement brand strategy, and to “go global” to compete in the international arena.

Second, to promote the “Internet Plus” mode of development, encourage the express enterprises to make the best of information technology, expand coordinated development of e-commerce, modern agriculture and advanced manufacturing. Third, to implement the project of the express service going “downward, westward and outward”, construct infrastructure for the express delivery sector, and build a sound service network.

Fourth, to implement the project of the express service for “the train, the ship and the air” in the transportation sector, which requires improvement of the express processing facilities and construction of “green passage”, and connect to the integrated transport system as well.

Fifth, to implement the project of “green shield” in safeguarding the security of delivery channels, so as to promote the standardization of enterprises’ safe production, strengthen the security responsibilities bound to the enterprises and individual senders, and enhance safety supervision of the delivery sector.

Ma Junsheng:

The Opinions put forward six policy measures to ensure the implementation of the tasks. First is to streamline government functions and delegate power. For example: to explore the new business administration mode for express enterprises as “multiple addresses under one single business license” within the same jurisdiction of industrial and commercial registration authority, to simplify business licensing procedures and filing procedures demanded for end outlets: to downsize affiliated branches, and to achieve efficient and convenient customs clearance for inward and outward express delivery.

Second is to optimize the development environment of the express market. That is to innovate regulation, establish and improve the user complaints and law enforcement joint mechanisms, and establish a “blacklist” of illegal and discreditable bodies.

Third is to improve the regulatory planning system. To accelerate the formulation of the express service regulations and related laws and regulations and incorporate the express delivery sector when making national economic and social development plans, and construct reasonable infrastructure related to the express delivery sector in urban and rural planning and land use planning as well.

Fourth is to enhance finance and taxation support. The central budget for investment will actively support express-related fundamental infrastructure construction in rural and western areas for purpose of serving public welfare. The express enterprises enjoy preferential tax policies. The government will coordinately arrange the particular land use of express enterprises in terms of construction of logistics parks, express mail distribution centers and other facilities, where the fees of electricity, gas and heat used by express enterprises will be charged no higher than the general industry.

Fifth is to improve the express delivery vehicle management. The government will formulate standards for special-purpose motor vehicles for express enterprises, facilitate express vehicles to pass through and temporally park in the city, research and introduce the national standards for special express electric tricycles. The local governments could introduce the particular administrative measures for express electronic tricycles with the purpose of express collection and delivery services in the city based on their own practical situation, so as to address the “last-mile” delivery challenge.

Sixth is to build professional teams. To explore the joint training model between schools, research institutions, associations and enterprises. To implement the quality promotion project for express delivery personnel, give support to express enterprises for their organizing the employees to participate in vocational training and vocational skill appraisals, and give subsidies to those involved enterprises in accordance with specified criteria.

Ma Junsheng:

In terms of organization and implementation, the Opinions require all localities and related departments to strengthen organizational leadership, improve the working mechanism, strengthen interaction and intensify support, and to adopt their targeted support measures to create a favorable environment for the development of the express delivery sector. Upon the official release of the Opinions, the Ministry of Transport, the National Development and Reform Commission and the State Post Bureau, in conjunction with relevant departments, will urge the local governments to earnestly implement it, and jointly promote the development of the express delivery sector.

Well, that’s all I need to introduce and thank you all for your attention on the express industry. Thanks.

Hu Kaihong:

Thank you, Mr Ma, any questions?

China National Radio:

My questions are about the compensation mechanism for local telecommunication services. Could you please give a detailed description about the compensation mechanism and specific measures? How would the Ministry of Industry and Information Technology cope with possible difficulties during the implementation?

Zhang Feng:

Thanks for your question. The compensation mechanism is set for the regions where broadband network services are costly and difficult to achieve through market mechanism. The government gives fiscal subsidies to these regions for local broadband network construction and operation, and encourages enterprises to offer broadband network services to local people. This is a long-term mechanism to tackle the lack of broadband network services in rural areas.

Over the last decade, the Ministry of Industry and Information Technology organized three telecommunication enterprises to implement projects in villages. So far, they have invested more than 90 billion yuan and offered telephone services in almost 210,000 villages and broadband network services in about 150,000 villages and towns.

At present, as I have said, more than 50,000 villages don’t have broadband network access, and 150,000 villages and towns that already have the access have an urgent need for upgrades.

Due to the poor economic conditions and complex geographical environment, and scattered population, the cost of broadband construction and operation is very high and the profit is very low. So enterprises are reluctant to upgrade their broadband network services in these regions. Thus, the focus of compensation mechanism is to solve the problems in broadband construction and upgrades in these areas.

Broadband network is the nationalstrategic public infrastructure, which was explicitly stressed in a plan issued years ago. It is also an important support plan to promote agricultural modernization and rural information consumption. Just as Mr. Wang has said, information networks are indispensable to the development of rural e-commerce. Broadband network is also a public service provided for farmers in the information era.

We used to say that roads must be built before villages are able to get rich. This is common sense. Now, in the information era, broadband network is an “information highway” that becomes a significant infrastructure for the development of villages and rural areas.

Recently, the Ministry of Industry and Information Technology undertook a thorough investigation on broadband network construction across the nation.

We found that 98 percent of 50,000 villages that don’t have broadband network access, and more than 80 percent of 150,000 villages that need upgrades are mainly in the central and western regions.

So, based on this finding, we will carry out regional subsidy measures that require voluntary applications from local governments. If the applications are approved, market mechanisms such as competitive bidding will be implemented to select enterprises to carry out broadband network construction, operation and maintenance.

As mentioned before, the compensation mechanism for local telecommunication services will invite competitive bidding. We welcome enterprises to bid for broadband network construction in the regions that are selected. Enterprises that need less national subsidies and can do a better job will win the bidding. The competitive bidding mechanism will make the information about costs transparent and improve policy efficiency.

In the meantime, the Ministry of Industry and Information Technology and Ministry of Finance will issue circulars and guidelines to officially initiate the efforts.

We will also improve broadband network coverage in village committees, elementary and secondary schools, hospitals and other public service institutions in the villages that will witness the implementation of local telecommunication services.

The final goal is to improve development of rural areas with the help of telecommunication services and enable rural people to enjoy the benefits of the development of information technology.

Thank you!

Reuters:

You mentioned that the government will expand the e-commerce, delivery services and universal telecommunication service, so I want to know, will these fields be open to foreign competitors? Will they get more opportunities through this policy?

Ma Junsheng:

Thank you for asking this question. Concerning the opening up of the delivery industry, the policies have been in place ever since China joined the World Trade Organization (WTO). Foreign companies have been playing an important part in the development of China’s delivery industry, such as UPS and FedEx from the United States, and DHL and TNT from Europe. An executive meeting of the State Council last year decided to open up the domestic delivery market, and we have issued five operation licenses to foreign companies covering 68 cities nationwide. Therefore, we welcome everyone to take part.

China Radio International:

As for the development of the express industry, the document said the key task is to advance “Internet Plus” express. What does that mean? What measures will the State Post Bureau adopt to promote this model?

Ma Junsheng:

You got the point. According to the State Council document, the future development of the express industry should push forward toward a clear direction, which is the “Internet Plus” express. As we all know, “Internet Plus”, a national strategy, also represents a trend of our times. Having emerged and prospered from the Internet, the express industry offers delivery services of goods in real time, which requires timely updates of information. Therefore, the express industry has been the first of all industries in China to embrace and connect with the Internet as its natural ally.

E-commerce has made impressively rapid progress in recent years, partly because of the vast demand from the population, but more important, because the express industry has connected the upstream industries of e-commerce with downstream. The development of e-commerce has been supported by the express industry, as 70 percent of China’s online purchases are delivered by express. Therefore, as mentioned in the document, the express industry serves as a major channel for the development of e-commerce.

Now that we are clear about our direction, the next step is how to carry it out. I am thinking of the following aspects:

(1) Make use of the Internet and big data technology to further optimize the network of our services and improve efficiency, transforming express enterprises into comprehensive operators of express and logistics.

(2) Further integrate the express industry with e-commerce, and continue to innovate new O2O models.

(3) As was called on by the central government, participate in the establishment of e-commerce platforms that serve agriculture, which will link the harvest with sales, and facilitate the flow of industrial products to rural areas and agricultural products to cities. This has bright prospects.

Let me cite an example. Of the various agricultural products in our country, I think e-commerce has performed the best in the selling of crabs. Every year, Yangcheng Lake in Jiangsu province produces 20,000 tons of crabs, half of which are purchased and delivered through express services. A few years ago, we had to go to restaurants to have those crabs, which might cost some 168 yuan each. However, nowadays, if we check online stores in e-commerce portals such as TMall and JD, the same type of crabs are sold for around 15 yuan. The crabs have gained access to almost every household. We have expanded the market this way. Crab sales in this channel account for almost 50 percent of the total volume, higher than any other product, especially in rural areas. Therefore, this business model can also be applied to fruits, fresh fish and meats, so that urban citizens can enjoy green and environmental products. We need to work a bit harder on that.

(4) Highlight the advantage of the supply chain. The government has also mapped out plans such as “Industry 2025” and 3D printing. We need to bring forward smart and personalized services to integrate the express sector in the process of industrialization. In mature foreign express markets, almost 40 percent of the delivered goods are industry-related, while in China, industry-related express has just started. Therefore, along with the implementation of “Industry 2025” and “Internet Plus”, all kinds of raw materials, components and parts can be delivered to any place using express services. This, if worked out well, will further contribute to the industrialization of our country.

(5) Improve information management and supervision. We have to not only develop the express sector rapidly but also assure citizens with safe and comfortable services. Thank you.

China Daily:

As we know, the Ministry of Commerce (MOC) has rolled out a number of policies to promote the development of e-commerce in rural areas. How about the implementation of these policies and what problems do you foresee?

Wang Bingnan:

Thanks for your question. MOC has implemented the “Internet Plus” action plan unveiled by the State Council. We have attached great importance to the development of e-commerce in building the market system in rural areas. E-commerce development is an important measure to expand consumption, improve farmers’ revenue and allow the rural economy to prosper. We made greater efforts to promote the development of e-commerce, especially this year.

Wang Bingnan:

MOC has strengthened the overall coordination. The ministry has released an opinion on speeding up the development of rural e-commerce jointly with 19 other ministries. The directive document is the first of its kind and gives suggestions for rural e-commerce development.

Wang Bingnan:

MOC has launched comprehensive demonstration projects for rural e-commerce development. Since 2014, 4.8 billion yuan financed by the central government has been allocated to support 256 demonstration counties to develop their e-commerce. We focused our support on areas in the central and western regions, especially 103 poverty-stricken counties.

Wang Bingnan:

Meanwhile, MOC has made efforts to create a development environment. We have carried out special programs for controlling infringing and counterfeit products in the Internet sector. We have issued a formulation procedure for third-party platform trading rules in online retail. Also, we have made efforts to promote the establishment of standards in the agricultural products chain.

Wang Bingnan:

MOC has also carried out personnel training to help more people acquire e-commerce knowledge. Local governments are asked to encourage more enterprises to provide e-commerce training to their staff. About 200,000 people have been trained by the country’s platform to cultivate e-commerce talents.

Wang Bingnan:

We have made preliminary progress in the development of e-commerce in rural areas. We expanded consumption in rural areas. Online shopping provides convenience for farmers, and local people showed their consumption potential. We also promoted the employment of farmers. For example, a total of 30,000 stores were opened online in the poverty-stricken areas of Gansu province, creating 100,000 new positions. Another example is that the number of rural promoters of JD.com, one of China’s biggest e-commerce retailers, alone has increased to 100,000 in 2015.

Wang Bingnan:

Here I would like to show you some statistics. By the end of June, a total of 81 e-commerce service centers and 70 distribution centers at the county level have been set up in 56 demonstration counties. The number of e-commerce service stations has reached 4,213 in villages, and the number of online shops reached 39,000. In terms of economic development, the sales amount of industrial products came to 58.9 billion yuan in rural areas. The sales amount of agricultural products sold in cities reached 19.3 billion yuan, and the number of tourist spending in rural areas 3.2 billion yuan.

Thank you!

China News Service:

The State Council said that 50,000 villages will get broadband access by 2020, is the investment mainly from central government funds, or also from local governments and social organizations? Another question: As you mentioned, the rate of return on investment in some remote areas is very low, so how will social investors be attracted?

Zhang Feng:

The investment funds are from a combination of central government, local government and enterprises. As for the compensation mechanism of the telecommunication service, I want to stress that its target is rural, and remote areas where the development of Internet infrastructure lags behind. Also, the central government funds work only as a guidance, and the main providers of the service will still be enterprises.

Xinhua News Agency:

Mr Wang, you just introduced the measures and policies to promote e-commerce in rural areas, could you brief us on the current situation of this sector? And we all know that promoting e-commerce in rural areas is an issue of collaboration in several aspects, including the construction of telecommunication and broadband infrastructure and express delivery sectors, so could you talk about this collaboration mechanism, and how the government will implement or make sure of the implementation of such a mechanism?

Wang Bingnan:

Thanks for the questions! I think the development characteristics of e-commerce development in China’s rural areas could be described in several words.

The first word is “fast”, as the speed of China’s e-commerce development in rural areas is very fast. In 2014, the population of netizens in China was 668 million, among which 178 million were net users in rural areas. Among the 178 million, people who have purchased things online was 77.14 million, a 40.6 percent year-on-year increase. The online shopping scale in rural areas was more than 180 billion yuan, a 60 percent year-on-year increase last year.

The second word is “widespread”, meaning that the coverage of online shopping in rural areas became wider in terms of users, covering regions and product varieties.

Forty percent of Internet users in rural areas have purchased online in 2014, and the number has big potential to grow.

The development of the online shopping sector is gradually moving from China’s eastern to middle and western areas. Seventy-five out of the top 100 counties that saw the biggest increases in mobile online shopping were in middle and western areas.

In the past, most of the online transactions have been industrial products. But now, the agricultural products are expanding into big cities thanks to e-commerce.

In Jan-Sept, online retail sales of agricultural products was 38 million yuan, 1.5 times the number last year.

The third word is “popular”. Almost all social circles attached great attention to e-commerce development in rural areas and were keen on the construction process. Not only have e-commerce giants such as Alibaba Group Holding Ltd, JD.com and Suning Appliance Co Ltd entered the rural market and built up the rural e-commerce operation net, but also, traditional enterprises such as China Post Group Corp and enterprises from a project aimed at promoting rural consumption were gradually moving from offline to online.

By August 2015, China Post’s 100,000 service stations nationwide were new stations for online shopping, providing online services for local residents. Local governments also are active in promoting e-commerce, and many places even regard e-commerce as the new shining points of local rural economic development and the new engines for the transformation and upgrading of the local economy.

The general situation of e-commerce development in rural areas is healthy, but problems also exist. That is to say, e-commerce development in China is still in the starting period, and there are existing problems such as the unsound development of market subjects, infrastructures lagging behind and lack of talents. So the State Council executive meeting on Oct 14 proposed measures, as I have mentioned, to help solve these problems.

Now that efforts from almost all sides have been made to develop this sector, how should we allocate the resources?

First of all, rural e-commerce is a systematic project that involves many institutions and departments. Led by the State Council, the Ministry of Commerce will coordinate efforts on this project, and the policies and measures released on this project.

Moreover, we should follow the development law of the market economy when promoting rural e-commerce, and allocate the resources from all aspects. We should also make full use of e-commerce giants and encourage them to cooperate with State-owned traditional enterprises. We should take advantage of e-commerce giants, better use the service stations and express delivery resources in rural areas, try to promote the implementation of combining multi-stations into one, one station for multiple uses, one shop for several functions and one net for multiple uses to avoid wasting resources.

Of course, I think the most important thing is to strictly follow the conference instructions from the State Council, and make efforts to promote e-commerce development in rural areas. Thank you!