Nontraditional ways of doing business gaining momentum

New forms of businesses and emerging industries have great potential and will soon be able to match the traditional economic engines in China, Premier Li Keqiang said in a message of encouragement after visiting two e-commerce plants in Henan province.

It is the second time in two weeks that the Premier has soothed concerns about the Chinese economy amid downward pressure. When meeting global corporate leaders earlier this month, he said there are ups and downs in the growth of the Chinese economy, but the momentum is still upbeat.

Li De, deputy manager of Jumei International Holding, a US-traded Chinese e-commerce company, said sales surged to 1.2 billion yuan ($188 million) in the first half of this year after the central government approved a bonded area in Zhengzhou, capital of Henan, to carry out cross-border e-commerce trade.

He said the company’s revenues would multiply their value many times over through knock-on effects in related industries such as logistics and packaging.

Jumei is one of the companies in the Henan Bonded Logistics Center, the first cross-border e-commerce pilot in Central China. The center set up an online-to-offline shopping center in 2012 to encourage the development of cross-border e-commerce. The O2O business model uses an online presence to attract customers into a physical store.

Xu Ping, general manager of the commodity center, said cooperation platforms with overseas governments have been set up to attract well-known overseas brands.

“In this way, we guarantee the genuineness and traceability of our products,” she said.

Xu said local governments have streamlined the customs and quarantine procedures to shorten the time from port to customer.

“Customs clearance procedures have been shortened from one or two days to 2 minutes.

“Our revenues in the first three months after opening have surged to more than 80 million yuan, more than the total revenues of the other five pilots in China,” she said.

“The three factors in the development of cross-border e-commerce are demand, logistics and labor cost, and it’s why the industry enjoys a stronger momentum in Central and Western China than the coastal area.

“We have a bigger market in central China since there are fewer franchises, and the cost for logistics and labor is relatively low,” she said.

During a visit to an incubator center for farmers in Xinzheng, Henan province, Li Keqiang inquired about the interest rates on loans at rural banks and if the new rates had been implemented.

“Please speak frankly,” the Premier told an employee of a rural bank.

The employee said the market-oriented interest rate reform will benefit banks in the long run, but the banks need time to adapt.

“The market-orientated reform is beneficial for interbank competition, which will then in turn lower the lending rate and better serve the real economy,” the Premier said.

The central bank cut the benchmark interest rate by 0.25 percentage points in late June and lowered the reserve requirement ratio for targeted banks.