Amazon is a "chokehold" on China's cross-border e-commerce: People's Daily overseas edition

Op-Ed calls for Chinese exporters to cut reliance on Amazon

A buzzword in China-U.S. ties in recent years is “chokehold” - in Chinese, 卡脖子 qiǎ bó zi - used in both U.S. and China to describe certain perceived excessive reliance on something from the other side.

For example, in the early days of the COVID-19 pandemic, The New York Times reported Coronavirus Spurs U.S. Efforts to End China’s Chokehold on Drugs. More recently, two U.S. Senators have proposed a law aiming to end China's alleged “chokehold” on rare-earth metal supplies, according to an AFP report.

The numerous sanctions that the U.S. slapped on Chinese entities have spurred perhaps a much more urgent sense of the need for self-reliance. There are so many examples already, and a recent Op-Ed on Page 06 of the 人民日报海外版 overseas edition of the People’s Daily specifically named Amazon as one of the “chokeholds” in Chinese exporters’ drive to sell overseas.

Today’s newsletter is a translation of that Op-Ed 《化解跨境电商渠道的“卡脖子”风险》Defusing the Risk of “Chokehold” in China's Cross-border E-commerce Channels, published on March 22, 2022

It is written by 洪勇 Hong Yong, 商务部国际贸易经济合作研究院电子商务研究所副研究员 an Associate Research Fellow at the Institute of E-commerce, Chinese Academy of International Trade and Economic Cooperation (CAITEC), Ministry of Commerce.

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《化解跨境电商渠道的“卡脖子”风险》

Defusing the Risk of “Chokehold” in China's Cross-border E-commerce Channels

洪勇

By Hong Yong

《人民日报海外版》（2022年03月22日第06版）

People's Daily Overseas Edition (Page 06, March 22, 2022)

Independent e-commerce websites are the independent websites established by (Chinese) foreign trade enterprises to carry out sales, payment, after-sales, and other e-commerce businesses. In July 2021, the 国务院办公厅 General Office of the State Council released 《关于加快发展外贸新业态新模式的意见》[CHN] Guidelines on Accelerating the Development of New Forms and Models of Foreign Trade [ENG by PKULaw], encouraging foreign trade enterprises to build their own independent e-commerce websites and support professional website building, platform-optimizing, and service capacity improving.

In recent years, China has seen a rapidly growing number of independent e-commerce websites, totaling about 200,000. They have become an important channel for cross-border e-commerce. Building them can reduce the reliance on third-party platforms and the risk of “chokeholds”.

For a long time, Chinese foreign trade enterprises have developed a relatively high dependence on Amazon. As one of the most popular third-party platforms for cross-border e-commerce internationally, Amazon has become the main channel of selling products overseas for Chinese foreign trade enterprises.

In recent years, Chinese cross-border e-commerce enterprises are in the trend of “去亚马逊” “de-Amazonize” for the following three reasons.

First of all, the fees on Amazon remain high. Chinese foreign trade companies on Amazon are facing relatively high operating costs. As dividends from Internet traffic on Amazon have peaked, the price for traffic inside Amazon keeps rising. It costs Chinese foreign trade companies less to gain Internet traffic on social media platforms such as Facebook, YouTube, and TikTok.

Secondly, Amazon has shut down [SCMP] a large number of foreign trade enterprise accounts. The closure of their stores on Amazon leads to their inability to withdraw funds, dealing a serious blow to small- and medium-sized enterprises.

Thirdly, Amazon no longer provides core consumer data. Since April 2021, Amazon no longer provides FBA (Fulfillment By Amazon) sellers with buyer names, addresses, and other details, making it very difficult for companies to analyze consumer preferences and to carry out product design or precision marketing, which requires consumer information.

Independent e-commerce websites, by contrast, enjoy a high degree of autonomy in building independent brands while selling overseas and realizing the leapfrog from “Made in China” to “Chinese brands”.

In the future, Chinese foreign trade enterprises should avoid reliance on Amazon by actively expanding their business channels. Building independent websites will be an important pathway for them to develop multiple channels and approach multiple markets.

Also, Chinese foreign trade enterprises are facing the risk of a “chokehold” when it comes to tools for building independent e-commerce websites. SaaS (Software as a Service) platforms provide Chinese foreign trade enterprises with solutions to go overseas and assist in product promotion. At present, the market of SaaS website builders has seen the pattern of “one superpower with multiple great powers”.

[Comment: The name of the “one superpower” isn’t named, but your Pekingnology thinks that refers to Canada-based NYSE-listed Shopify.]

Chinese foreign trade companies have gradually recognized a number of domestic SaaS website building companies, such as 店匠科技 Shoplazza, given their performances in terms of cost, function, and ecosystem building, but when it comes to equipment compatibility, product marketing, and safety and reliability, there is still much room for improvement.

In order to defuse the risk of the “chokehold” in China's cross-border e-commerce channels and move cross-border e-commerce to a high-quality development stage, China should encourage foreign trade enterprises to build their own independent websites, and support professional builders of these websites to enhance their service capabilities. Specifically, the cultivation of a number of internationally competitive cross-border e-commerce independent websites should start from three aspects:

Optimize policies in support of independent e-commerce websites. We should continuously improve the business environment for independent website enterprises, strengthen supportive policies for cross-border e-commerce, help traditional foreign trade enterprises speed up their digital transformation, and carry out in-depth activities that promote the building of good examples in independent e-commerce websites by foreign trade enterprises.

We should enable China's specialized funds for foreign trade to produce its effects, and to support the building and promotion of independent e-commerce websites, among other activities.

Strengthen oversight over independent e-commerce websites [on their compliance with rules and service records]. We should promote information exchange between home and abroad in cross-border e-commerce, and crack down on fraudulent acts such as fake statements and exaggerated traffic in the cross-border e-commerce field. We should establish and perfect an evaluation system over the cross-border e-commerce enterprises’ records of their transactions and of their business integrity/ethics with customers.

Build a talent pool for the building of independent e-commerce websites. We should establish, in the field of cross-border e-commerce, long-term mechanisms such as school-enterprise cooperation in the school curriculum, specialized training, study tours, and internship bases. By providing cross-border e-commerce practical training such as SaaS, live broadcast, and short video, a systematic, unique, and practical cross-border e-commerce talent training system can be formed.

(The author is an Associate Research Fellow, at the Institute of Electronic Business, Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce)

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ICYMI: Last Pekingnology newsletter is a short Op-Ed by Dr. 管涛 Guan Tao on the People’s Daily overseas edition. The former Director-General in China’s foreign exchange regulator writes Increasing Outstanding External Debt Denominated in RMB Complementary with RMB Internationalization and calls for enhancing the flexibility of the RMB exchange rate and prudently promoting institutional financial opening, including China’s bond market.