China - Country Commercial Guide

Describes what a company needs to know to take advantage of e-commerce in the local market and covers prominent B2B websites.

Last published date: 2021-02-03

China is the world’s largest eCommerce market with over 50% of global eCommerce transactions coming from China. Moving into 2021, China’s eCommerce market is predicted to be larger than those of the U.S., UK, Japan, Germany, and France combined, according to a report by Dezan Shira & Associates.

Home to more than 710 million digital buyers, China’s online retail transactions reached $1.93 trillion in 2019 and are forecasted to reach $4.09 trillion by 2023. 

Retail eCommerce Sales in China; 2018-2023
    Retail eCommerce Sales in China; 2018-2023

Source: eMarketer

Domestic E-Commerce (B2C), Cross-Border E-Commerce, and B2B E-Commerce
Alibaba’s Taobao and Tmall (55.9% of market share) and (16.7%) are the domestic platforms that dominate China’s e-commerce market, according to a report from eMarketer. Meanwhile, Pinduoduo (7.3%) has recently overtaken dozens of competitors to become the third largest platform, using a new group purchasing model. Other platforms, including Suning, Gome, Vipshop, Yihaodian, Dangdang, and JuMei, comprise the remaining market share. A Statista study shows that cross-border e-commerce transactions reached $144 billion this year and could surpass $199 billion by 2022.

U.S. firms can choose to establish a presence in China or use cross-border e-commerce to sell products from abroad. U.S. firms can benefit from streamlined Chinese customs procedures through the over 100 cross-border e-commerce-integrated pilot zones in China. A guide from Walk the Chat reports that those zones limit Chinese consumers to purchasing up to $714 per transaction and no more than $3,714 per year. U.S. firms must work with authorized partners to record Chinese customs transactions.

While the overall growth of the transaction value of cross-border e-commerce (CBEC) is estimated to have slowed between 2014-21, the predicted growth in that same period increased dramatically from 14.7 billion RMB to 355.6 billion RMB.

Transaction Value of Cross-border E-Commerce Retail Market: 2014-2021
   Transaction Value of Cross-border E-Commerce Retail Market: 2014-2021

Source: Fung Business Intelligence

Significant Shopping Holidays

“Singles Day” in China, November 11th, or 11/11, is the busiest online shopping day of the year. Brands offer huge discounts and can generate up to 80% of their annual revenue. In 2019, Alibaba recorded a gross merchandise value, or GMV of $38 billion on Singles Day, including over $12 billion in the first hour, according to a CNBC report.

While the largest of the major shopping holidays in China, Singles Day is not the only one. Other holidays such as Valentine’s Day, 6.18 Mid-Year Shopping Festival, and the Chinese New Year are also popular online shopping dates.

Intellectual Property Rights

In part to address rampant online infringement of intellectual property (IP) rights, China issued the E-Commerce Law in 2018, which included requirements related to “notice-and-takedown” mechanisms for China’s e-commerce platforms. Notice-and-takedown mechanisms allow individuals to request that platforms delist or “takedown” links offering products that infringe on established IP rights. Similar to enforcement offline, companies must register their patent and trademark rights in China to be accepted by e-commerce platforms.

As different platforms have different procedures for accepting takedown notices, companies must familiarize themselves with takedown procedures for various e-commerce platforms in China. Monitoring e-commerce platforms for infringing goods can be time-consuming, so firms often rely on local agents to monitor China’s large platforms in a regular and cost-effective manner. Nevertheless, because robust business-to-business and business-to-consumer sales occur on China’s e-commerce platforms, an effective IP enforcement strategy should have an online component.

Marketing and Advertising

China is the world’s second-largest advertising market, projected to surpass $113 billion in 2020, according to a report by eMarketer. Internet ad spending is reported to be nearly five times the value of TV ad spending, comprising 75% of total media ad spending in 2020. China’s advertising industry is growing faster than the economy as a whole.

Advertising in China is heavily regulated, with national and provincial governments exercising control over content. The Advertising Law of the People’s Republic of China (Advertising Law) was revised in 2015, with updates to online ads, health claims, celebrity endorsers, and false advertising. Major changes include:

  • Expanding the law’s purview to include online advertising
  • Obliging telecommunications firms, internet service providers, and websites to remove illegal/misleading advertisements
  • Disallowing dietary supplements companies to imply that they are “necessary” for good health
  • Prohibiting the use of spokespeople in many types of health-related advertising
  • Broadening definitions of “advertising” and “false advertising”
  • Restricting children’s advertising
  • Restricting tobacco advertising

Following the COVID-19 pandemic, China will further crack-down on false advertising, specifically relating to health and property safety or on mobile apps and social media. Foreign firms must work with a licensed partner to advertise in China. Many firms establish a representative office in China and team up with Chinese partners through joint ventures and other types of partnerships. Companies new to the market may gain valuable insight from prestigious advertising firms on crafting an effective advertising strategy responsive to Chinese consumer preferences.