Three obstacles hinder e-commerce in China
(chinadaily.com.cn)
Updated: 2004-08-05 11:39

China's e-commerce development is hindered by three problems -- online payment, existing taxation and logistics service, a report by the Ministry of Commerce says.

The report says the development of e-commerce also greatly relies on information technology and network establishment, relevant laws, and social credibility situation.

The report made an analysis of the three obstacles. Online payment plays a key role in e-commerce, and a safe, convenient, and efficient online payment system is essential. However, safety authentication, one of the main component of online payment system, is inadequate in China.

Although many banks have already set up their own financial authentication centres, there lacks a unitive and authoritative nationwide authentication centre, leading to many cases of cross authentication, repeated authentication and a waste of resources.

Besides, due to the lack of legal protection in this field, arbitration and liability cognizance are difficult when disputes arise. In addition, the efficiency of online payment in China is still low: payment validation from the bank takes a long time (about 10 days), the charge is too high (5 per cent service fee of credit cards transaction), and there are too many restrictions. All these hinder the development of e-commerce in China.

Second is the problem in the exisitng taxation. While e-commerce is a brand new type of business mode differing from the traditional one, China has no tax rule targeting e-commerce trade. The report urged the government to draft relevant laws so as to ensure the healthy development of e-commerce in the future.

In fact, countries with different economic levels should have different taxation towards e-commerce. For example, e-commerce businesses, digital products and internet access are tax-free in the United States, while the European Union practices a "clear and neutral" taxation system by collecting value added tax only from e-commerce businesses.

Third is the limitation in the logistics system. Among the corporations providing logistic services for e-commerce business in China, some 1,000 are traditional ones and their service quality is not good enough; therefore, the need to provide a speedy transaction and delivery regardless of space and distance can hardly be fulfilled.

The report suggested that the government should take an active role in encouraging and supporting the e-commerce of tradtional corporations. Besides, it also emphasized the business nature of e-commerce, and warned that e-commerce business activities cannot be done by simply building networks.

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