China: Overcoming institutional barriers to e-Commerce

As a large developing country with an ambition to become one of the world’s economic superpowers, China sees its future closely tied to its information technology industry, as well as to the deployment and use of IT, the Internet, and e-commerce. However, currently there is a great disparity between this vision for “informatization” and the reality of e-commerce diffusion and use. That disparity is rooted in aspects of China’s environment and policy which shape the diffusion, use, and impacts of e-commerce. China’s economy has grown at an annual rate of more than 8% since 1995, but that growth has been accompanied by increasing inequality in income. There is also wide geographic inequality, with the eastern coastal regions around Beijing, Shanghai, and Guangdong having much higher incomes than the rest of the country. These regions, and especially their cities, have much better infrastructure and many more Internet users than the remote and economically poorer provinces elsewhere in the country. The larger enterprises, especially those located in these coastal regions, have larger IT budgets and better-trained staff than small and medium-sized enterprises, and are more capable of engaging in e-commerce, but tend to be conservative. The smaller, more entrepreneurial companies often lack the financial and human resources to engage in e-commerce.