A report by the International Data Corp (IDC) has found that the
Chinese online community is heading for profitability despite security
concerns, government restrictions and an underdeveloped
infrastructure.
The report said that although red is a colour signifying good luck and
is the national colour of the country, it is also the colour used to
record negative revenues, which have dogged China's pioneering internet
companies.
But it shouldn't be long however, before the Chinese online community
begins to bring in profits.
In 2000, China's ecommerce revenue hovered at USdollars 2.1 billion. IDC
expects a takeoff to USdollars 26 billion by 2004, propelling China to
the number three ecommerce market in Asia, after Australia and
Korea.
The IDC also noted in its report that Chinese consumer spending on the
internet showed signs of maturing.
In a survey of respondents to banner ads during the summer of last year,
more than one-third of the 10,000 Chinese respondents reported making
one or more web purchases during the past 12 months. A total of 71.7 per
cent said they were either "somewhat likely" or "very likely" to do so
in the coming 12 months.
Chinese internet users who still shop online primarily for computer
hardware and software, now focus more on media purchases such as books,
magazines, CDs, toys and games, said IDC.
Despite the relatively small number of people who have credit cards in
China, the IDC survey found credit cards the most common form of payment
for business to consumer (B2C) transactions. Those without credit cards
paid cash on delivery.
Revenue collected over the web is expected to grow more than 11 per cent
this year reaching to at least 30 per cent in 2004.
The IDC noted security and privacy concerns were key limiting factors to
revenue growth, with four out of five respondents indicating they were
"very concerned" about credit card information being intercepted and
misused on the web. These fears, the IDC said, may not be unreasonable,
given a general lack of experience with both credit cards and online
shopping.
But the bad news for China is that despite the evident enthusiasm from
its internet providers and users, the mainland's regulatory environment
remains difficult to navigate for both local start-ups and Western
investors.
"Censorship is still alive and well. The State Bureau of Security
prohibits release and discussion of government information on the
internet, and places the burden of enforcing these rules on ISPs, which
can be shut down if posting of state data are found on their
facilities," the report said. However, it added that regulations against
foreign investment in ISPs would be eased following negotiations over
China's entry into the World Trade Organisation.
