Editor's note: E-commerce gained growth momentum among Chinese companies a decade ago. The Ministry of Commerce recently issued a report reviewing the application of e-commerce in local business. The following excerpts talk about the use of e-commerce in enterprises involved import-export business.

After sampling 481 companies conducting import-export business, the report said 67 percent of the respondents believe it is necessary to begin e-commerce. And only 3 percent said it is unnecessary. The remaining 30 percent are uncertain.

And 67 percent of the responding companies said there is still a large gap between the reality and the desired use of e-commerce.

The report says it is believed the figure indicated these companies have a strong willingness to improve the use of e-commerce, which implies a bright future for e-commerce in foreign trading business.

Benefits of e-commerce

The majority of the foreign trading companies said e-commerce brings them more business opportunities.

Nearly 60 percent of these companies said e-commerce helps them increase their suppliers and 70 percent said the number of their clients rose after they used e-commerce.

Some 52 percent of the respondents said they believed the biggest change brought by e-commerce is quick access to information. Some 43 percent and 30 percent chose improved efficiencies and lower costs respectively. Another 27 percent mentioned the possibility of better management.

The report said the economic benefit of e-commerce is still small though many companies have been achieving benefits.

Some 80 percent of the responding foreign trading companies said they had sales through e-commerce.

Some 5 percent of these companies said e-commerce sales accounted for more than 35 percent of their total sales. As much as 80 percent said the percentage was under 15 percent.

As far as marketing is concerned, 28 percent of the businesses said they never advertised online.

Investment in enterprise informatization

The report said investments by the foreign trading companies in informatization are still small compared to their capability.

The investments of responding companies mostly range from 100,000 to 500,000 yuan (US$12,082-US$60,408), compared to their capital size of from 10 million to 50 million (US$1.2-6 million).

Import-export companies in the pharmaceutical area top the investment list with an average amount of nearly 1 million yuan (US$120,000). Textiles, electronics and construction materials industries rank second to fourth.

The State-owned companies invest mostly in informatization by amount, which was almost double that of foreign-funded companies and private companies.

In terms of the informatization investments' share in the companies' total capital, wholly foreign-funded companies top the list, followed by foreign joint ventures and private companies.

Motivation behind e-business

The motivation for e-commerce mostly comes from enterprises, the report said.

About a quarter of the companies said they chose e-commerce because of the strategic planning of senior executives. Some 20 percent of the companies said main business units were major drivers behind the start-up of e-commerce. And 15 percent of these traders said they had just followed their competitors' suit. Some 10 percent said governments push them to use e-commerce.

In motivation outside the companies, governments play a bigger role in pushing State-owned companies to begin e-commerce. For foreign-funded companies, pressure from competitors is the major reason.

On expectations at beginning e-commerce, 67 percent of the companies aimed to improve business efficiency by the new business means. Some 56 percent hoped it would help cut operation costs and 42 percent expected e-commerce to be a way to improve public image.

Third-party e-commerce platform

About 40 percent of the foreign trading companies do e-business through a third-party e-commerce website, besides building websites themselves.

About 32 percent have deals with two third-party e-commerce websites and 14 percent do business with three or four websites.

Among these companies doing e-business with third-party platforms, 40 percent have changed cooperative third-party websites.

Some 53 percent of the companies chose e-commerce websites for the amount of information they provided. The reason for the other 46 percent was the credit of the websites. Only 1 percent said the price of the website was most important.

Problems blocking e-commerce

The report said China's e-commerce development is hindered by many problems, including online payment, existing taxation, delivery service and lack of professional staff.

The report said weak logistics systems in China were a major problem preventing companies from using e-commerce. The need to provide a speedy transaction and delivery regardless of space and distance can hardly be fulfilled.

Safety authentication, one of the main components of online payments systems, also needs improvement.

Many banks have already set up their own financial authentication centers, but the absence of a unified and authoritative nationwide authentication center leads to many problems, such as cross authentication, repeated authentication and a waste of resources.

The efficiency of online payments in China is still low: Payment validation from the bank takes about 10 days, the charge is as high as 5 percent service fee of credit cards transaction.

Meanwhile China has no tax rules regarding e-commerce trade.

And companies also said they have not enough staff who are both knowledgable about their industries and e-business.

(China Daily December 24, 2004)