ChinaWith over 1.3 billion inhabitants, China is the world’s most populous country. One of the oldest continuous civilizations — China sent ambassadors to the Roman emperor Augustus — the country is home to at least 55 ethnic groups, though over 90% of the population are Han Chinese. Officially a people’s republic, the country has been ruled since 1947 by the Chinese Communist Party. Since 1978 the government has pursued an ambitious and wide-ranging programme of economic reform which boosted the rate annual of economic growth to an average rate of nearly 10% between 1979 and 20161.

Today, China is on its way to becoming a superpower and is already the workshop of the world. Growth may have slowed since the financial crisis in 2007, from 14.2% to 6.7%, but that still makes it one of the world’s fastest-growing economies2. In December 2017, the Chinese government released figures showing that export volumes for the previous month were up 12.3% year-on-year3. The average growth in export volumes between 2009 and 2017 was 6.6%4. The top export destination for Chinese goods is the USA, which takes 18% of the country’s exports5. Just over 16% of China’s exports go to the EU5.

Population 1,371,220,000 4,486,151,520 7,515,284,153

Population (15+) 1,134,936,848 3,409,475,155.20 5,561,310,273

GDP ($USD millions)

$11,064,664.79 $22,551,209.12 $74,292,303.73

GDP per capita ($USD)

$8,069.21 $5,664.48 $10,112.33

Online population 689,723,660 2,075,157,798 3,464,545,995

B2C E-commerce ($USD Billion)

$865.00 $1,082.17 $2,495.70

Average online spend ($USD)

$1,800.00 $908.00 $1,042.00

China Asia World

the payment professionals

PPROPayments & E-commerce Report

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Top e-commerce segments

CLOTHING 6 FOOTWEAR

13.2%

AIRLINES & HOTELS

12.3%

FOOD & DRINK

12.1%

B2C e-commercegrowth

China

26.7%

World Asia

14.0% 27.9%

E-commerce completed on a mobile device

China

20.0%

World Asia

28.7% 29.1%

E-commerce % of total retail

China

18.4%

World Asia

6.9% 9.1%

Chinese garden gazebo

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As China’s prosperity has increased, so its wage costs have risen. According to the Financial Times, average hourly wages in China’s manufacturing sector have trebled since 20056. In the long term, this may create difficulties for China, as it finds itself undercut by low-cost labour destinations in South East Asia. Right now, however, it’s great news for retailers thinking about entering the Chinese market.

By November 2017, the value of Chinese retail sales had grown by 10.2% year-on-year7. This is faster than the growth rate for 2016, which was 9.6%8. In the third quarter of 2017, China’s consumer confidence reached a record high of 114 points9.

The Chinese e-commerce market

The Chinese e-commerce market is worth $865 billion and is growing at a rate of 26.8% a year10. The average Chinese e-commerce shopper spends $1,800 a year with online merchants10. E-commerce accounts for 18.4% of all retail sales10. The most popular purchase categories are clothing (13.2%), travel (12.3%) and food (12.1%)10. Although not yet able to rival America’s leadership in technology, China is the home to e-commerce giants, including the now globe-spanning JD.com, Tencent and Alibaba. All three companies are booming. In February 2018, Alibaba announced Q3 earnings that were 66% higher year-on-year than 2017’s11. Meanwhile, Tencent grew by 61% in the third quarter of 201712 and JD.com b7 39.2%13.

In 2017 report, PwC estimated that e-commerce would account for 25% of all Chinese retail sales by 202014. The study found that 52% of consumers shop online using their mobile devices at least once a week, 12% more than shop online with a PC at least once a week14. Price is the most important factor in prompting Chinese online shoppers to make a purchase (56% said it would motivate them to buy) with trust a close second (40%)14.

The local payment culture

E-wallets are the most popular type of online payment method in China, with 49% of market share for e-commerce transactions10. Credit and debit cards come second, with a 25% market share, followed by cash (9%), various other minor payment methods (9%), and online bank transfers (8%)10. Major international credit card providers have almost no purchase on the Chinese market. 96% of credit cards are issued by local schemes. Visa has a 2% market share, Mastercard just 1%10.

The Chinese payment split

Banked population (15+)

China

61.0%

World Asia

Credit card (15+)

China

17.6%

World Asia

Internet penetration (%)

China

46.1%

World Asia

Smartphone penetration

China

47.9%

World Asia

Waterfall, Detian, Guangxi Province, China

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79.0%

65.0%

15.8%

12.8%

50.3%

46.3%

51.7%

29.1%

49 % E-WALLET

8 % BANK TRANSFER

9 % CASH

9 % OTHER

25 % CARD

Conclusion

Despite slow-downs in the wake of the global recession and concerns about the trade and economic implications of foreign relations, China is the workshop of the world. Its economy is booming and along with it the prosperity enjoyed by Chinese workers, who in some places now earn as much as Southern Europeans. If you can negotiate the complexity of doing business in China, the potential rewards for e-commerce merchants are huge.

Enabling and limiting factors

Since the election of President Trump, there have been ongoing concerns about the potential for a trade conflict between China and the United States. At the Davos World Economic Forum, Chinese President Xi Jinping reaffirmed his country’s commitment to free trade. But if it does come to an escalation, anyone operating in China is likely to feel a negative impact.

China also has strict rules that foreign companies setting up a business in the country must follow. In practice most

companies wishing to do business on the mainland will need to set up a joint venture with a Chinese partner.

79% of Chinese adults have a bank account and 15.8% have a credit card10. As noted above, however, almost all payment cards are issued by local schemes. Western companies should not assume that they can use in China a payment infrastructure that relies on well-known global credit card brands.

Just over half of Chinese consumers have an Internet connection and an Internet-enabled smartphone [10]. That puts the Chinese online population at over twice the total US population. This average, however, conceals some stark regional differences. For instance, in the southern province of Guangdong, which contains the manufacturing hub of Shenzhen, over 80% of residents have Internet access15. In the north-eastern province of Tianjin, just 10% have Internet access15.

1. China’s Economic Rise: History, Trends, Challenges, and Implications for the United States, 15 September 2017, Wayne M. Morrison (Specialist in Asian Trade and Finance), US Congressional Research Service

2. GDP growth (annual %), World Bank. 3. China exports growth hits eight-month high, imports defy pollution curbs, 8 December 2017, Reuters. 4. China Total Exports Growth, CEIC.com.5. World Integrated Trade Solution, World Bank. 6. Chinese wages now higher than in Brazil, Argentina and Mexico, Steve Johnson, 27 February 2017, FT Chinese, 7. China Retail Sales Rise 10.2% In November, 13 December 2017, Markets Insider. 8. China Consumption Growth Down -- And Heading Lower Fast, 22 January 2017, Gordon G. Chang, Forbes.

9. China Consumer Confidence Index Reaches Record High in Q3 of 2017, 23 November 2017, Nielsen. 10. Original PPRO research. 11. Alibaba Group Just Won’t Stop Growing, 2 February 2018, Anders Bylund, Motely Fool. 12. Tencent Rises to Record After Best Revenue Growth in 7 Years, 16 November 2017, Lulu Yilun Chen,

Bloomberg 13. JD.com Announces Third Quarter 2017 Results, 13 November 2017, CNBC14. eCommerce in China – the future is already here, April 2017, PwC15. China Internet Statistics 2017, China Internet Watch

Terracotta Soldiers in Trenches, Mausoleum of Emperor Qin Shi Huang, Xi´an

General Source:Edgar, Dunn & Company: Commissioned workPublicly available online information

This report is provided for your information and publication, and is based on data and information collected from publicly available sources commissioned from Edgar, Dunn & Company by PPRO. The e-commerce market and payment methods develop at a fast pace, so all content, data, statements and other information contained within this report is subject to change. PPRO is not responsible or liable for the quality or accuracy of the information in this report nor how this report is subsequently used or published.

© 2017 PPRO Financial Ltd

Important local payment methods

BAIDU WALLETUNIONPAY

WECHATPAY