Cross-Border E-Commerce in China: An Institutional Explanation

Recent years have witnessed robust growth of cross-border e-commerce in China. According to the China E-Commerce Report published by the Ministry of Commerce, the cross-border e-commerce growth rate has accelerated since Alibaba’s initial public offering in the United States of America at the end of 2014, to an annual growth rate of 30%.

In 2015, the State Council and relevant ministries and commissions launched various policies encouraging cross-border e-commerce, reforming and innovating means of foreign trade supervision, approving cross-border e-commerce pilot-test cities, introducing a new customs supervision code and giving green light to Hangzhou as the Comprehensive Pilot-Test City for cross-border e-commerce. By innovating government supervision and business models, and by making corporate transformations, a new framework for China’s foreign trade is evolving.

As cross-border e-commerce appears to have different meanings to private consumers, businesses and the academic community, the concept shall be clarified first: “Cross-Border E-Commerce” represents the intention to introduce innovative developments of e-commerce to the arena of foreign trade. Nevertheless, the concept is often used in a narrower sense, as cross-border online sales mostly target individual consumers purchasing and paying online. Because such transactions take place online, they do not belong to international trade in a traditional sense. Broadly speaking, cross-border e-commerce represents the application of the internet and information technologies to foreign trade at various levels as well as consequential market changes. This includes changes regarding main market players and innovations of means, ways of business operation, business models, and even global business rules and legal environment.

The internet has spread globally for nearly two decades, leading to a far-reaching transformation of the world market. The way people do business and interact with their environment has changed profoundly. Analogous to the evolution of species, business models become extinct if they fail to adapt to new market environments. Simultaneously, changing market environments spark the rise of new business models. To provide theoretical explanations of such developments, researchers must analyse and identify patterns of change.

Government supervision over trade has always been an important aspect in international trade. For enterprises, compliance is often a necessary consideration. However, most of the foreign-trade supervision regulations were made more than one decade ago. Hence, given the rapid expansion of the internet and global cross-border e-commerce, many of these regulations require review and revision. Moreover, the definition of the legal status or establishment of a supervision system for several of the new business models, such as enterprises providing so called Comprehensive Foreign Trade Services, has not yet succeeded. For China, the change of market environments involves opening and reform; improper handling would lead to chains of problems. For instance, the April 8 New Supervision Policies released in 2016 immediately aroused considerable instability in the cross-border e-commerce industry.

 
This reader attempts to provide an overview on the legal environment, statutory supervision and relevant policies regarding cross-border e-commerce in China from an institutional perspective. In addition, it examines relevant operating models, supervision means and policy developments by analysing business models and procedure innovations. Further this reader points out opportunities and challenges,
and helps to understand trends in global cross-border e-commerce from the Chinese perspective. In particular, it predicts future regulatory trends for cross-border e-commerce.

For the first time, the statutory environment and service model of cross-border e-commerce in China are discussed from an institutional perspective for international experts and the interested public. We would highly appreciate if you would inform us of any mistake or improper analysis.

Prof. Jian Wang