China E-Commerce to Pass U.S in 2015 - HW#6

I read the Businessweek article titled China E-Commerce May Pass U.S. in 2015, Boston Consulting Says written by Bloomberg News on November 22, 2011. This article was an incredibly interesting read. Although I’m sure everyone is aware of China’s growing economic power, many Chinese citizens face problems with poverty. However, as the Chinese economy continues to grow, more and more e-commerce transactions are occurring through China. The current value of e-commerce transactions in China is at $314 billion.

The article states that since 2008, E-commerce in China has essentially quadrupled. Chinese citizens are using beginning to use the internet more and are buying and selling products online. Chinese harsh geography makes typical “brick and mortar” retail stores difficult. Many of the more rural citizens have a difficult time travelling for their goods. This means that e-commerce is even more of a convenience in China than in some other parts of the world.

China has the largest population of people in the world and some of the lowest costs of manufacturing currently available. The shipping rates in China are also extraordinarily cheap – six times cheaper than shipping costs in the United States. All of these facts added into the already growing Chinese economy (and richer per-capita incomes) allow for e-commerce to take hold very quickly and strongly in China. Internet malls are also beginning to form and may very soon make up a very large part of the Chinese economy.

The conclusion was that China will be able to surpass the United States in e-commerce sales by 2015. This is very important because China’s economy has already been noted to be growing at a ridiculous pace and surpassing the United States in e-commerce sales will be a huge step in overtaking the United States economy.

But I do not believe that China’s e-commerce growth is all bad. Many of this growth is in purchases rather than sales. This means that while China’s economy grows the United States economy will also reap the benefits of a huge market. The challenge will be in making products in the United States (or at the very least controlled in the United States and outsourced to China) that will be cheap enough to be sold and shipped to China (rather than the Chinese buying from their own sellers).