China reforms create bigger stage for online business performance

Reuters

* China aiming for $2.95 trillion in online transactions by2015

* Incentives given for bricks-and-morter retailers to goonline

* China's online retail market to overtake US this year-Bain

SHANGHAI, Nov 21 (Reuters) - China has released new rules toboost spending in its fast-growing e-commerce sector as it looksto encourage greater levels of domestic demand after thecountry's leaders announced its most ambitious reforms indecades earlier this month.

China will target total e-commerce transactions of 18trillion yuan ($2.95 trillion) by 2015, according to guidelinesreleased by China's Ministry of Commerce (MOFCOM) on Thursday.Total e-commerce spend last year was 8.1 trillion yuan.

With the rise of smartphones and broadband connections,China's online retail segment is set to overtake the UnitedStates as the world's biggest this year and reach 3.3 trillionyuan by 2015, according to Bain & Co. Total spending by Chineseconsumers on online shopping reached $212.4 billion in 2012,compared to $228.7 billion in the United States.

China policymakers are keen to boost consumption andservices, which they see as the future of the economy afteryears of investment and export-led growth.

According to the new directives, China is targetinge-commerce to make up more than 10 percent the country's importsand exports. It wants the same proportion of the consumer retailmarket to be purchased online.

"E-commerce can reach the majority of consumers much fasterthan offline retail. It's also a capital efficient way ofgrowing consumption, and fast. With those two things together Ican understand why it's a priority," said Jeff Walters,China-based partner at Boston Consulting Group.

The new directives will support firms such as market leaderAlibaba , which is preparing for an initial publicoffering that could value the firm at more than $100 billion.Alibaba's Tmall platform holds more than half of the onlinebusiness-to-consumer retail market. It's eBay-like sister site,Taobao, also dominates China's consumer-to-consumer sales.

Officials from Alibaba were not immediately available tocomment on the new rules.

The guidelines are also another incentive for the country'sbricks-and-mortar retailers to move online. China's largestelectronics seller, Suning Commerce Group Co Ltd, issetting up an online-to-offline model to keep pace.

China will help online and offline retailers organisepromotions and events to encourage consumers to shop online aswell as helping traditional offline retails establish a digitalpresence, according to the directive.

The country's e-commerce firms will also be encouraged toestablish operations overseas to boost cross-border onlinetrade, while authorities will look to improve cross-borderlogistics, payment and regulatory systems.

The new directive will also support e-commerce for small andmedium-sized firms, improve key logistics systems intough-to-reach regions, set up local funds to support onlinebusiness and help cultivate talented personnel in onlinebusiness.

"There's a lot of headroom for e-commerce to be growing,with an enormous population that hasn't even turned to onlineshopping yet. There's a lot of upside," said Walters.

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