Hu Kaihong:
Good morning and welcome to the policy briefing in 2016. The State Council discussed work to set up more cross-border e-commerce comprehensive pilot areas at an executive meeting on Jan 6. We are glad to have Mr Zhang Ji, assistant minister of the Ministry of Commerce, to brief us relevant policies and answer your questions.
Please, Mr Zhang.
Zhang Ji:
Thank you.
Good morning. As you know, Premier Li Keqiang presided over the State Council executive meeting on Jan 6, where he was informed of the Ministry of Commerce’s work to set up more such pilot areas for international e-commerce.
Such work is important for streamlining administrative approval procedures and improving the government’s service. It can attract large, medium-sized and small enterprises, encourage mass entrepreneurship and innovation, create more jobs and nurture exports.
It was decided at the executive meeting that the government will draw on experience gained from the cross-border e-commerce comprehensive pilot area in Hangzhou, Zhejiang province and promote it to other parts of the country.
Now I would like to introduce to you the pilot area in Hangzhou.
Zhang Ji:
The pilot area was approved on March 7, 2015 in order to gain experience in developing e-commerce.
The Ministry of Commerce worked with other departments to come up with a work plan for the pilot area. It stays in touch with 13 departments and set up a weekly report system with the Zhejiang and Hangzhou authorities to ensure the work on the pilot area is fully communicated.
The Zhejiang and Hangzhou authorities set up a specialist team to carry out the work.
The Ministry of Commerce and relevant departments sent inspection teams to Hangzhou five times, held eight special meetings and made six reports to the State Council on the progress of the construction of the pilot area. The efforts helped address challenges during the process.
Relevant departments such as the authorities for quality inspection, the National Reform and Development Commission, the Ministry of Industry and Information Technology, the Ministry of Transport and the People’s Bank of China offered their support.
After more than six months of operation, the accomplishments of the pilot area are as follows.
First, the volume of international e-commerce transaction in Hangzhou has grown rapidly from less than $20 million in 2014 to $3.04 billion.
Second, the number of foreign trade companies registered in the pilot area’s online platform has increased to more than 4,000.
Third, 12 international e-commerce parks were set up in the area and attracted 330 companies.
Fourth, the area helped exports and the economy to grow. Hangzhou’s exports from January to November in 2015 hit $39.9 billion, 3.8 percent more than the same period for the year before. The growth was markedly faster than the average growth of export for Zhejiang province and the country.
Fifth, the area serves as an important channel for mass entrepreneurship and innovation. It also spurred the development of various sectors, including logistics, finance and custom clearances. It offered strong support for startup and small enterprises.
The area setup six systems and two platforms, and the experience of this approach will be beneficial.
The six systems are: information sharing, financial services, smart logistics, e-commerce company credit information, risk management, and statistics and monitoring.
The two platforms set up were online and offline.
These accomplishments were gained through hard work. Various departments collaborated closely. The CPC Central Committee and the State Council attach great important to the development of the area. The Zhejiang and Hangzhou authorities have been pushing the work effectively. The work teams and participating companies showed their courage and innovation.
Of course it will take some time for the policies introduced into the pilot area to show their effect. As a result, it’s necessary to set up more pilot areas to gain more experience for e-commerce development.
Zhang Ji:
The State Council will disclose the new e-commerce pilot areas after it approves of them.
The principles of choosing from various cities for the new pilot areas are as follows.
First, they should have economic conditions to copy and promote the experience gained in Hangzhou.
Second, they should rank in the top 10 in import and export volume in the country. We also took into consideration the need for development in central and western areas.
Third, they should have a relatively large scale of international and domestic e-commerce industry.
Fourth, the authorities of the cities that apply for a pilot area should attach great importance to exports. Their application should show creativity and innovation.
Fifth, they should submit formal applications to the State Council.
It’s vital for pilot areas to free their minds and be brave enough to try new things. Also, the pilot areas should develop in comprehensive ways and work for a new system for the country.
We should deal well with the relationships including those between the government and the market, between development and regulation, between the present and long term, and between supervision and facilitation.
Zhang Ji:
After the State Council approves of the cities, the Ministry of Commerce will work with the cities to:
First, set up liaison mechanisms; second, develop plans that are in line with the cities’ situation and report the issues they would like the central government to help address; third, submit the plans to the local authorities for approval.
The plans are developed not by the State Council, but by local authorities and companies together. They will communicate with the central government if they run into problems.
All in all, brave exploration in the pilot areas will help develop the country’s e-commerce industry, the upgrading of its economy and foreign trade.
This completes my introduction. Now I would like to take your questions.
People’s Daily:
What is the context for setting up a new series of cross-border e-commerce experimental districts? What is the final goal that we want to achieve?
Zhang Ji: Thank you for the questions. Setting up the cross-border e-commerce experimental districts is an important policy carried out by the State Council. The goal is to solve some deeply rooted and institutional problems that hinder cross-border e-commerce development through innovation in systems, management and services as well as coordinated development. These components complete a chain and will gradually help form a series of managing regulations that will benefit cross-border e-commerce and provide knowledge and experience that will support the future development of the industry.
We will guarantee the disciplined development of the districts, and expand them in steady steps. This will help us explore the mechanism and managing mode for cross border e-commerce and provide new momentum for growth. This will also help to better attract medium and small-size enterprises to gather, release market vitality and promote the development of new industries. And it will also help further boost mass innovation and entrepreneurship, increase the competitiveness of our industries, stabilize trade growth and nurture new competitive advantages for foreign trade.
Relative government departments need to transform their traditional ways and ideas of working, and provide comprehensive support for the pilot areas. We also need to have full control of any potential risks within the pilot areas and make sure that development is based on the fact that national and cyber security, trade safety, and the quality of exported and imported goods is fully guaranteed, and create a healthy development environment for a market under fair competition.
China Daily:
Hello, Mr Zhang. Some agencies say that China’s cross-border e-commerce transactions will reach 6.5 trillion yuan in 2016, accounting for 20 percent of our total foreign trade, and the growth rate of cross-border e-commerce will exceed 30 percent, far higher than traditional trade. What’s your opinion on that? You just mentioned that the comprehensive pilot area in Hangzhou, Zhejiang province can be duplicated and repeated, particularly the policy and management system featuring “six major systems and two platforms”, which is suitable for cross-border e-commerce development. Could you talk more about that? Thanks.
Zhang Ji:
Thanks for your questions. I’ll answer your second question first. Although it has been only six months since the comprehensive pilot area in Hangzhou was established, valuable discoveries have been made by local governments and the efficient work team of the pilot area. We should say the experience is valuable, because local governments and the work team were not asking for preferential policies from authorities, but are really making top-level designs. They have explored institutional innovation, and achieved positive results. What I want to specify is, the “six major systems and two platforms” they have explored are very good, but some of them need to be put into further tests, because some were implemented earlier, and some have just been implemented.
We should say, the policy and management system of Hangzhou featuring “six major systems and two platforms” has already exhibited advantages. Specifically, the “six major systems” refer to information sharing, financial services, intelligent logistics, e-commerce credit, supervision and risk prevention. First, the information sharing system. It will establish information connectivity among enterprises, financial institutions and supervision authorities, which will be great progress. Under the system, authorities and enterprises can both share information. Second, the financial services system. Third-party payment agencies of financial institutions, third-party e-commerce platforms and foreign trade service enterprises will be encouraged to cooperate, to provide cross-border e-commerce transactions with one-stop financial services, such as online payment and settlement, financing and insurance. It will ease the financing problems of medium, small and micro businesses.
Third, smart logistics system. Logistics information system, storage network system, and operation service system will be built through the technologies of cloud computing, Internet of Things, and big data as well as public logistics information platforms, bringing the whole process of logistics supply chain under supervision and solving the high cost and low efficiency problems of cross-border e-commerce.
Fourth, e-commerce business credit system. A credit database of cross-border e-commerce and credit rating, credit regulation, and credit negative list system will be built to record and accumulate basic data of cross-border e-commerce enterprises, logistics enterprises, and comprehensive service enterprises, to help supervise e-commerce credit and cracking down on dishonest activities and counterfeits in e-commerce.
Fifth, statistics monitoring system. A big data center of cross-border e-commerce and statistics monitoring system of cross-border e-commerce will be built, and a statistical approach to cross-border e-commerce will be improved to provide decision-making consulting services for government and enterprises and establish reliable statistics of cross-border e-commerce.
Sixth, risk control system. Mechanisms of risk information collection, risk analysis and review, and warning will be established to control technological risks, including money laundering, data storage, payment transactions, Internet security, product security, and credit trade.
Zhang Ji:
The “two platforms” include the online and offline platforms. For the online platform, it will exchange data with government departments in charge of Customs, inspection and quarantine, tax, foreign exchange, business affairs, industry and commerce, and postal service, which will allow information exchanges among government departments and provide logistics and financial services to cross-border e-commerce. For the offline platform, an integrated industrial chain with optimized support services will be built. The most applicable experience is the system featuring “six systems and two platforms”. The government takes steps to offer favorable tax policies for cross-border e-commerce enterprises. On the other hand, governments of Customs, inspection and quarantine, tax and foreign exchange provide convenient services for cross-border e-commerce. In addition, related government departments put forward 55 innovative policies. You can do an in-depth research on them if you are interested.
The first question I mentioned just now was about the scale of cross-border e-commerce, as we also noticed that there were so many reports or definitions about the scale issue. They are from professional agencies, experts or enterprises, but no one was from the government, as cross-border e-commerce is something new, and we need time to explore its definition, tendency, standards and the calculation method of its scale. What should be particularly mentioned here is that cross-border e-commerce cannot change the properties of the goods, trade and related finance, it is just a technical approach. That is to say, we cannot change the quality of goods through cross-border e-commerce, and the online trade platform cannot change the quality of goods and services. Cross-border e-commerce should be combined with industries to increase the competitiveness of the industries. Related government departments indeed did a lot of work on the calculation.
A reporter just now said the scale of cross-border e-commerce has reached trillions of yuan, and accounted for 20 percent of China’s foreign trade. That was exaggerated and not accurate. Cross-border e-commerce increased rapidly, but it still has a limited scale and takes up a small share in foreign trade. However, it has the potential to grow, and it is also a strong growth driver, and we want to make it grow bigger and dig out its potential through the pilot zones.
So what on earth is the number? I want to answer this question here. As we know, Shenzhen in South China’s Guangdong province has the highest market share of cross-border e-commerce in China. Sales in 2015 were twice the number in 2014, and during the Jan-Nov period of 2015, sales volume for cross-border e-commerce reached $28.8 billion. Another city in the province, Dongguan, is also an active region for cross-border e-commerce, and many enterprises for foreign trade services and platform enterprises are situated there. Dongguan’s sales volume in cross-border e-commerce in 2015 was $420 million.
Customs data showed that during the Jan-Nov period of 2015, China’s export and import volume of cross-border e-commerce under the B2C (business to customer) model was 7.9 billion yuan and 14.5 billion yuan, respectively. I must say that the government really helped a lot in promoting cross-border e-commerce.
The 7.9 billion yuan in B2C exports, or $1.2 billion, was calculated on the basis of the 148 million Customs clearance records in 23 major cities. The import scale was equal to $2.23 billion, and that was based on the nearly 96 million Customs clearance records from the seven pilot cities approved for cross-border retail sales business.
China’s exports volume totaled $2.3 trillion last year, and this year’s number is expected to be similar. Cross-border e-commerce’s share in foreign trade was limited, but the growth potential is huge. We want to make cross-border e-commerce’s contributions to foreign trade grow bit by bit, dig out its growth potential to help economic growth and the upgrade of foreign trade through the pilot zones. Thank you!
Economic Daily:
Mr. Zhang, you just said that the cross-border e-commerce comprehensive pilot zone is a kind of experimental area trying new systems. What is the principle during the process of the test?
Zhang Ji:
Thanks. Actually, China has become the biggest trading country in the world. When we are developing into a powerful country, we should focus more on quality improvement and national benefit rather than simply the numbers. So we need the structural transformation - this is to create an environment and innovate the system.
Cross-border e-commerce is a newly emerged thing, with no matching management and policy systems. There are two pathways: cross-border e-commerce adapts to the current; or systems adapt to cross-border e-commerce. According to the State Council, government at all levels should support the development of new things. Regarding cross-border e-commerce, we have seen its vitality, and it can be used for our economy, foreign trade and employment. Now we are using a kind of new conception and system to develop the industry. This is not a beneficial policy at the initial stage but a systematic arrangement.
Zhang Ji:
As for pilot projects in the next phase, our major task is to explore a new management system that adapts to cross-border e-commerce, with an emphasis on efficiency and equity. The second principle we should abide by is development, which is also our main purpose. We should provide enough opportunities for an enterprise to grow before setting all kinds of rules. As an innovative business model, cross-border e-commerce might not match some of the existing policies, so we should be tolerant, allow it to make mistakes and help it get it right. However, as for unlawful acts such as selling fake commodities or infringement on intellectual properties, we should take strict precautionary measures from the very beginning. Also, we should stick to pilot programs before making final institutional adjustments, especially on technical standards, operation process, supervision model and information construction of transaction, payment, logistics, clearance, tax refund and exchange settlement during the whole process of cross-border e-commerce. Meanwhile, assessment of the results of these pilot programs should be practical, so that the building of pilot programs could be promoted in an orderly way.
Zhang Ji:
Fourth, stick to integrated reform and coordinated development. Inter-department cooperation and connection of related policies should be strengthened. The government will pursue the integration of supervision and services, online and offline, as well as of the government and market.
Comprehensive reform should cover the entire industrial chain of cross-border e-commerce, including customs, inspection, tax, logistics and finance, in order to form supervisory and service models for cross-border e-commerce.
Based on our pilot zone in Hangzhou, we now have a clearer direction and focus for future reform. The new pilot cities can avoid some mistakes and proceed at a relatively high level.
Development of cross-border e-commerce is not merely about delivering a small parcel; instead, it should drive the development of industries and help them improve their global competitiveness. Data in fragments cannot help China evolve into a strong global trader. We hope to carve out the new edges of outbound trade in global competition. We should make efforts to improve the technology and services to create our brands, which should be sold at a higher price, instead of going lower because of homogenization.
Development of cross-border e-commerce relies on the B2B model, with a complementary B2C model. The B2C model cannot go far, whereas the B2B model will grow stronger. The focus on B2B can help China stabilize trade growth and restructure its economy. It also helps cut the cost of supervision and improve efficiency for customs clearance.
We should also cultivate the service chain for trade in emerging industries to build an integrated “ecologic circle” covering industry, trade and services.
In addition, rules and regulations should be improved and optimized from a new starting point. Thank you.
Hu Kaihong:
Here we conclude today’s policy briefing. Thank you, everyone.
Zhang Ji:
Thank you for your long-term interest in our ministry, especially in cross-border e-commerce.
