Potentials and Perils of E-Business in China

Abstract

The E-business market in China is growing at an exponential rate. In 2013, the business volume is expected to reach $285 billion which surpasses the level in the U.S. As a result, there is a gold rush to China to participate in the market. This article discusses the potential but also points out the perils. This paper also focuses on the competition in the Chinese E-business market, and reveals that the Chinese online business is almost completely monopolized by only one seller, Taobao, which accounts for 81.2% of the whole E-business market. This article further considers the tax burden of the Internet commerce transaction which found that the Chinese government imposes a value-added tax at a rate of 17%. This rate is much higher than the sales tax rate at 7% in the U.S. Additionally, this article investigates the problem of counterfeited products and infringement of intellectual property rights. It discovered that this problem is rampant in China. The losses in international trade amount to $360 billion a year. Eighty percent of the counterfeited products were originated in China. The problem is extremely serious. Moreover, this article offers many planning strategies for operating an E-business in China. Despite the perils, this article concludes that the benefits of running an E-business in China outweigh the risks.