– China’s cross-border e-commerce market size is expected to grow by 2023 trillion yuan in 13
– China’s digital trade that started with Alibaba, gradually matured with the introduction of a large number of trade-related software and solutions
– Korean companies that do business with Chinese companies and hope to enter the Chinese market Korean companies must actively embrace the trend of digital trade
Digital trade refers to trade based on the digital economy represented by e-commerce platforms, big data, block chain, smart logistics, and fintech. This can also be seen as a set of trading methods used. When it comes to digital trade, the concept that comes to mind most easily is trading through e-commerce platforms such as Alibaba and Amazon. Currently, China's digital trade is also growing rapidly thanks to the development of related technologies and the active policy of the government.
China digital trade scale
According to iResearch, China's digital trade (international trade) scale as of 2020 is 6 trillion yuan (about 1,118 trillion won). It is expected to reach 2023 trillion yuan by 28.1, growing at an average annual rate of 13%. Digital trade has become an important growth engine for China's overall trade. B2B transactions account for 72.7% of total cross-border e-commerce transactions, accounting for more than 2/3 of the total.
<2016-2023 China Cross-Border E-Commerce Market Size and B2B Ratio>
(Unit: trillion yuan, %)
Comparison of traditional trade and digital trade
With the advent of cross-border digital trade, companies can reduce the cost and time required for trade. In the last 10 years, almost all processes of trade can be conducted online with technologies such as e-commerce platforms, smart logistics, simple payment, and electronic documents.
<Comparison of traditional trade and digital trade>
China's Digital Trade Development Factors
1) Growth of the digital economy
According to the 'White Paper on Global Digital Trade' recently published by iResearch, there are four major factors contributing to the rapid growth of digital trade in China. First of all, according to the data released by the China Correspondents (中国通信院) regarding the digital economy, which is the high level concept and foundation of digital trade, the size of China's digital economy in 2020 is 39 trillion yuan (about 2000 trillion won), 7,292 trillion won compared to the same period in the same period. % and accounted for 2.4% of the total GDP. In addition, during the same period, the penetration rates of the digital economy in China's agriculture, industry and service industries reached 38.6%, 8.9%, and 21%, respectively.
Note: Market penetration is the rate at which a product (service) reaches a customer at least once during a specified period.
<China's digital economy and GDP share in 2014-2020>
(Unit: trillion yuan, %)
<Digital Economy Penetration Rate by Industry 2019-2020>
2) Policy factors
The Chinese government is proposing support policies and guidance opinions that enable the digital economy to converge with each sector of its economy. The Chinese government is constantly announcing policies necessary for the overall digital trade, from the digitalization, IT and smartization of the manufacturing industry, which is the pre-trade stage, to the emergence of e-commerce platforms in the trade transaction stage, and the generalization of overseas direct purchase.
<Recent policies related to the digital economy>
3) technical factor
The emergence and development of new technologies such as big data, block chain, Internet of Things, and artificial intelligence laid the foundation for digital trade. Digital trading platforms such as Amazon and Jingdong provide high-efficiency logistics systems through smart inventory management and delivery using IoT technology. In addition, although currently limited, blockchain is used in fields such as trade settlement and trade document management, and digital technology is being used in all areas of trade transactions from product inventory management to transportation and settlement. For example, if company A in the US orders products from company B in China, company B uses a smart inventory management system to track inventory and transport the products. Due to the transportation system applied with RFID technology, Company A can know where the goods are located in real time. When company A pays through an online payment system such as Tenpay or PayPal, company B issues a bill of lading (BL) applied with block chain to company A. Company A searches for products after customs clearance based on the bill of lading.
4) Capital Factor
In addition, a lot of capital has been invested in digital trade over the past five years. Capital, which was previously invested mainly in B5C, has recently been invested more in B2B e-commerce. This phenomenon is due to the overheated competition in the B2C market compared to the B2B market and the conversion of many companies' work methods to digital.
<Proportion of Loans by E-commerce Type in China in 2016 and 2021>
China's major digital trade platform (enterprise)
Various platforms and companies in China are currently providing services, from customer discovery to consulting, contracting, transportation, payment, and customs clearance. In addition to Alibaba and Amazon, which are familiar to the general public, there are also B360B e-commerce platforms such as Zall (卓尔智联), HC2 (慧聪网), and Guo Liangufen (国联股份) listed on the Hong Kong Stock Exchange. In addition to the e-commerce comprehensive platform, there are transportation, data storage, payment, trade finance, etc. as services using digital technology at each stage of trade. The main platforms that provide these services are as follows.
<China's major digital trade companies (platforms)>
implication
In the late 1990s, thanks to the spread of the Internet in China, Alibaba was established, and China also entered the era of digital trade. Since then, China has become the most active country in digital trade in the world as local IT companies advance, spread smart phones, and develop software and solutions related to international trade. The size of China's cross-border e-commerce market, which was 2020 trillion yuan in 6, is expected to more than double to 2023 trillion yuan by 13.
In the future, if the technologies representing the 4th revolution such as big data, Internet of Things, AI, and block chain are applied more to the trade field, the first stage of trade, factory inventory management, to the last stage, customs clearance and inland transportation It is predicted that digital technology will be applied in a more comprehensive field. For example, in the case of Alibaba, China's representative electronic platform for digital trade, in the initial model where only products were displayed and consultations were possible, now data processing such as estimated delivery time, buyer reply speed, transaction volume, major trading countries, etc., buyer credit guarantee, logistics It provides comprehensive services related to trade, such as services, simple payment, live commerce, and online exhibitions.
As such, the transition to digital trade in China is an irresistible development trend, and Korean companies that do business with Chinese companies will have to step up to this trend more actively.
Source: Comprehensive data from iResearch, National Bureau of Statistics of China, China Correspondent, State Council of China, Alibaba website and KOTRA Dalian Trade Center