SEOUL: China’s foreign trade volume declined 7 percent but its online trade jumped 28 percent last year. On the other hand, Korea _ China’s third-largest trading partner in 2015 _ fell to ninth place in online trade. The contrasting figures point to the need for Korea to revitalize online trade with the world’s second-largest economy to make up for the fall in offline trade, industry sources said Sunday.
Ali Research, the think tank of Alibaba, China’s largest e-commerce company, recently released an E-Commerce Connectivity Index (ECI), which measured the level of online trade between China and its 20 major trading partners. Last year it ranked Korea ninth _ the same as Russia _ with an ECI of 32. The ECI included B2C (business-to-consumer) transactions as well as B2B (business-to-business) trades, meaning that direct overseas purchases and reverse purchases can affect it.
Considering Korea was China’s third-largest trading partner following the U.S. and Japan last year, the nation’s online trade ranking falls far short of its overall status as China’s counterpart, the sources said.
Korea’s ECI in China’s online imports stood at 25, rising two notches to seventh place but remaining lower than Mexico and Indonesia. China imported from Korea more than any other countries, but Korea failed to be one of the top-five online exporters to China.
Likewise, Korea was the third-largest buyer of the Chinese products last year but fell to 12th place among online importers from China. Ali Research estimated China’s cross-border e-commerce volume would grow from 4.8 trillion yuan last year to 12 trillion yuan in 2020 with its share in total trade expanding from 19.5 percent to 37.6 percent.
China’s online trade is focusing on exports with imports remaining at 16.9 percent of the total. However, imports are expected to rise to 25 percent in 2020, meaning China’s trading partners will need to carve a larger share of the increasing pie in China’s online import market, the experts said. Also growing rapidly is the share of trade in consumer goods. Wholesale trade of capital goods accounts for 84.3 percent of China’s online trade, but retail e-commerce trade increased 69 percent to 751.2 billion yuan last year, growing more than twice as fast as the 28-percent growth rate of China’s overall online trade. In particular, the increase rate of online retail imports amounted to 92 percent with its portion in China’s consumption market rapidly rising from 0.5 percent in 2010 to 3.9 percent last year and an estimated 10.4 percent in 2020.
China’s online retail imports are expected to grow at an annual average of 43 percent over the next five years to reach 1.5 trillion yuan in 2020. Online retail exports are also estimated to grow 37 percent a year on average to 2.16 trillion yuan in 2020. The retail sector’s share in online trade is projected to jump from 15.7 percent in 2015 to 30 percent in 2020.
Moreover, China is taking the initiative in establishing an “Internet silk road.” Ma Win, Alibaba’s founder, called for the creation of an “electronic World Trade Platform (eWTP),” at a Boao Forum for Asia early this year. Later, at the B20 Summit (a meeting of business leaders of the 20 major economies), he also proposed that the G20 establish an eWTP.
Ma explained that the eWTP is a new global trade regime that allows up to 3 billion young entrepreneurs and small businesses to sell and buy goods freely on the Internet. He said it would supplement the World Trade Organization system, hoping it would help to turn around the slowdown in global trade. All this explains why Korea’s trading system needs to change quickly to meet the new trend in the world’s largest trading country, which is rapidly shifting to e-commerce, the industry experts said.
