Despite various economic challenges facing China, the country’s cross-border e-commerce stands out to show rapid growth.  The seeds of this growth were, however, not planted erratically as a response to economic woes associated with the COVID-19 pandemic.  Understanding how this type of commerce has gained governmental support and what latest measures have been taken to resolve related disputes helps businesses seeking to sell globally seize potentially lucrative opportunities.

The Growing Trend of China’s Cross-Border E-Commerce

According to China’s official reports, imports and exports of the country’s cross-border e-commerce reached RMB 1.92 trillion (about USD 284 billion) in 2021, representing an increase of nearly 19 per cent year-on-year.  As noted by Vice-Minister of Commerce SHENG Qiuping, changes in consumer behavior during the COVID-19 pandemic led to growing demands for online shopping.

Yet, what happened during the pandemic cannot account for the growing trend that began much earlier: imports and exports of China’s cross-border e-commerce have grown nearly ten times in the past five years!

The Main Driving Force

The tenfold jump over the past five years is closely related to China’s approval for the establishment of “cross-border e-commerce comprehensive pilot zones”.  In March 2015, China’s State Council approved the establishment of the first zone of this type in Hangzhou, Zhejiang Province, which is the hometown of e-commerce giant Alibaba.  In January 2016, 12 more such zones were approved to be established in Tianjin and other cities.

The success of these 13 zones led to the issuance of a formal letter in October 2017 by the Ministry of Commerce, National Development and Reform Commission, General Administration of Customs, and 11 other departments under the State Council, stating that these zones “have strongly supported the transformation, upgrading, and innovative development of foreign trade” and “have promoted mass entrepreneurship and innovation”.  The letter continued to urge that “mature experiences and practices”, such as “information sharing, financial services, intelligent logistics, and risk prevention and control” of these zones, be “replicated and promoted across the country”.

Following the direction stated in this letter, 119 cross-border e-commerce comprehensive pilot zones were established from 2018 to 2022, bringing the total number of these zones to 132 (see Chart).  These zones cover almost all provincial-level regions in China.

In these zones, e-commerce businesses can enjoy preferential treatments related to tax, customs clearances, exchange settlement, and logistics.  For example, e-commerce businesses in China are allowed to import foreign goods in advance and store them in warehouses.  Once an order is placed by a consumer in China, the goods can be delivered to the consumer in just a few days.

The Prospects & Online Dispute Resolution

With 132 cross-border e-commerce comprehensive pilot zones, China will likely continue to do well in cross-border e-commerce.  In addition, the entry into force earlier this year of the Regional Comprehensive Economic Partnership (RCEP) Agreement, a free trade agreement currently binding upon Australia, Brunei, Cambodia, China, Japan, Laos, Malaysia, New Zealand, Singapore, South Korea, Thailand, and Vietnam, will help drive the growth of cross-border e-commerce between China and these countries.

The proliferation of China’s cross-border e-commerce comprehensive pilot zones has also captured the attention of the International Trade Administration, U.S. Department of Commerce.  The agency shares the following “market intelligence”:

The growth of e-commerce channels in China […] present[s] new opportunities for U.S. exporters to reach Chinese consumers.  Cross-border e-commerce channels now provide unprecedented access to markets across China.  This is due to improvements in delivery methods, policies that allow direct-to-consumer cross-border transactions and exemptions of certain goods from registration, Chinese labeling, and testing requirements.

[…] Over 68 percent of Chinese consumers report considering foreign goods as better quality, particularly in the fashion and beauty industries, which make up the largest segment of e-commerce imports.

(emphasis added)

While U.S. exporters are expected to seize these e-commerce opportunities, Chinese exporters may also do the same to reach U.S. consumers.  At the Sixth Global Cross-Border E-Commerce Summit held in Hangzhou in late July, NIE Linhai, Chairman of the China Electronic Commerce Association Alliance and Former Counselor of the Department of Electronic Commerce and Informatization of China’s Ministry of Commerce, pointed out that despite the rise of other e-commerce markets in the world, the North America market would still be a focus of China’s cross-border e-commerce in the near future because “consumers there [are] more mature and [have] higher requirements for e-commerce brands, quality, and services”.

The prospects for China’s cross-border e-commerce are promising.  However, these prospects will be weakened if disputes arising from this type of commerce cannot be handled properly and efficiently.  Online dispute resolution of these disputes has been explored.  To support this type of resolution, China’s Standardization Administration, an authority that is in charge of setting national standards in China, released in December 2021 a set of standards titled “Cross-border E-commerce—Specification for Online Dispute Resolution Documents” (GB/T 41127-2021).  The standards, which became effective on July 1, 2022, specify, among other details, the types of documents to be used in “online negotiation”, “online mediation”, or “online arbitration” conducted to resolve cross-border e-commerce disputes as well as requirements for these documents so as to ensure information security.

These standards represent a small but significant step taken by China to establish an effective online dispute resolution mechanism for supporting cross-border e-commerce.  If China is able to develop a strong mechanism, its experiences will serve as useful reference for other countries aspiring to develop cross-border e-commerce.  This contribution may appear to be small but will help bring China and the rest of the world closer together.

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^† The citation of this article is: Dr. Mei Gechlik, China’s Booming Cross-Border E-Commerce & Online Dispute Resolution, SINOTALKS.COM, In Brief No. 19, Aug. 17, 2022, https://sinotalks.com/inbrief/2022w33-english.

The original, English version of this article was edited by Nathan Harpainter.  The information and views set out in this article are the responsibility of the author and do not necessarily reflect the work or views of SINOTALKS.COM.