China’s e-commerce boom drives country’s growth

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Arguable the epicentre of one of the first waves of globalisation, linking markets from East to West, Central Asia has a long and storied history of trade. In China, this dates back to, at least, the country’s Han Dynasty in 206 BCE, with the country’s original Silk Road forging trade networks across Central Asian nations and beyond, with some routes covering thousands of miles into Europe.

This early trade route sparked a boom in wealth, as goods and culture were moved between nations. China would send silk, spices and minerals to the West, receiving glass, precious metals and other items in return. In modern times, airfreight has sped up the movement of goods and cemented China’s role in international trade. That was evident during the pandemic, when the country played a critical role in supplying PPE around the globe, as well as how it has long served as a key manufacturing hub for companies around the globe.

While there has been fluctuations in trade volumes over time, with numerous challenges and hurdles impacting routes, trends show that China is playing an increasingly important role in international trade due to the rapid expansion of the e-commerce market.

Tough times

As the first country to impose lockdown restrictions following the outbreak of the Covid pandemic, with some of those measures only recently being lifted, China has been particularly impacted by the virus over the past few years. Businesses have been forced to cut back their activities, people have been unable to work as they used to and companies around the globe have had to reconsider how they operate around the tricky environment in China and surrounding countries that adopted tough restrictions.

Earlier in 2022, China recorded its weakest

level of export growth since June 2020, as lingering Covid rules continued to take their toll on the country’s trade. Prolonged lockdowns have prevented the country’s major economic hubs from reaching the momentum that they are truly capable of, as the virus remains a problem for the country, while other nations return to normality.

Major trade hub, Shanghai, for example, battled one of the country’s worst outbreaks of Covid at the start of the year since the pandemic began. This resulted in substantial disruption and delays, hitting transport and logistics networks, sending waves that rippled throughout the global supply chain.

Export growth has been a significant driver of the Chinese economy but continued pressure from Covid risks that. Not only does China have to contend with other Asian nations having removed restrictions taking trade away from Beijing, there has been a weakening in global demand from the West, as soaring inflation and a cost-of- living crisis hits purchasing power.

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e-commerce comes to the rescue

There’s hope on the horizon though, particularly as the Christmas period approaches, with the rapid expansion of the e-commerce industry forming a central part of China’s growing economy. China currently ranks at number one worldwide for retail e-commerce sales. In 2021, despite the pandemic, retail e-commerce sales in China totalled over $2.7 trillion, with that number expected to grow to over $3.5 trillion by 2024, according to analysts’ predictions.

Nowadays, China holds 40% of the global market share of the e-commerce industry. This is a strong performance for a country which accounted for less than 1% of the e-commerce market before 2008. Alone, China handles more e-commerce transactions than France, German, Japan, the UK and US combined.

China’s strong grip on the e-commerce sector has been powered by both domestic and international trade. In 2021, China accounted for more than one-fifth of all internet users worldwide. Out of that number, as of December 2021, over 81% of internet users in China had shopped online. On Singles Day 2021, China’s biggest shopping festival, Alibaba and JD.com recorded $139 billion worth of sales alone across their platforms. 2022 is set to be a strong year too, with pre-sales looking healthy according to China’s leading e-commerce platforms despite a slowdown in consumer spending.

New cargo airline

The potential opportunities presented by the expanding e-commerce market is reflected in how Zongteng Group, a Chinese logistics service provider, recently announced the acquisition of a freighter to launch a cargo airline that will help sales platforms reach global markets faster.

The second-hand Boeing 777 freighter will increase warehouse fulfilment capabilities, flying three to four times per week from Shenzhen to the Middle East and Europe for the company’s subsidiary YunExpress. The first route was launched from Shenzhen to Riyadh, Saudi Arabia in September, with the European leg to Paris’ Charles de Gaulle Airport to start in December. There is even suggestion the logistics company could extend its services to North America. The move is an example of the strong confidence in the further growth of the e-commerce market within China and the potential it presents to airlines, cargo handlers, logistics service providers and more across the industry.

Zongteng Group is the latest company to take this approach with Amazon and JD.com having taken similar steps, setting up private cargo carriers to ensure they have greater control over the movement of goods, rather than having to rely on other airlines to meet the needs of clients and customers.

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China’s long-term vision

The Covid pandemic has moved shoppers from traditional brick and mortar stores to online orders that need to be moved by cargo carriers. The emergence of new platforms, increased confidence in online shopping and the expansion of technology has seen rapid growth in the e-commerce sector over the last five years.

China isn’t just happy to profit from the rise in e-commerce though, it wants to be instrumental in its growth. Beijing has its eyes set on establishing its own rival to global logistics giants like FedEx and UPS.

Alibaba’s Cainiao recently offered a new road delivery route from Asia to Liege in Belgium, adding an alternative option, alongside airfreight and ocean routes. JD.com’s delivery company JD Logistics is stepping up its activities. SF Express is looking to expand its market share. As well as those three established companies, China launched a state-owned logistics giant last year with the expressed aim to become a “global supply chain organiser.” The China Logistics Group, combining the assets of four companies, has hubs in 30 domestic provinces and five continents, as well as three million vehicles at its disposal.

Only time will tell whether China can achieve its goal but what is clear is that Beijing is determined to further solidify its position in the international supply chain.