Have plane, will travel
China’s regulatory environment may be sluggish, but nothing yet has been able to tame the insatiable demand for e-commerce across the nation – and there’s no end yet in sight. The latest figures from the China E-commerce Research Center showed that Chinese e-commerce grew by 31.4 percent in 2014, while the online retail market rose by about 50 percent, with about US$2.1 trillion changing hands through B2B trading last year.
In response, the Civil Aviation Administration of China (CAAC) recently approved the launch of two new cargo airlines – YTO Cargo and Ningxia Cargo airlines.
YTO Express, which is 20 percent owned by Alibaba, received the operating license to launch Hangzhou-based YTO Cargo. YTO also will work with Alibaba’s courier company, Cainiao, and CJ Korea Express, a leading Korean delivery company, making YTO the first privately owned cargo airline in China to operate international flights. Meanwhile, Ningxia Cargo Airlines, with three newly acquired 737-300Fs, is based in the north-central agricultural region of Ningxia and is licensed for domestic operations, including services to Taiwan, Macau and Hong Kong.
Many brands are experimenting with e-commerce, but China is still trying to find the right balance between the online and bricks-and-mortar environments. “The model two or three years ago was to open up retail stores, but now the trend is to open a flagship store in Hong Kong, Singapore or Shanghai, for example, and set up an e-commerce platform to supply the rest of Asia, with a hub for distribution close to the largest percentage of suppliers,” Rowlands said.
Getting better all the time
Rather than being the hindrance that it was infamous for, the Mainland China government is keen to improve the overall quality of warehousing and transportation services, Millar said. In 2014, the Ministry of Commerce announced new policies to develop China’s logistics industry – including both the B2C e-commerce and cold chain sectors – by providing tax incentives to attract more logistics firms.
Poulsen said that, over the years, it has become easier to break into the Chinese market, but only to a certain extent. While some of the original entry barriers have been removed or relaxed, the country still has a confusing licensing system and has failed to reconcile inconsistent regulatory policies that often exist between different provinces and cities. “Local relationships are as important as ever,” he added.
China certainly has more experience now with international trade, said CEVA’s Bicil, but there is still room for improvement regarding the rising expectations of Chinese customers. “They’re becoming more exacting, and demand better resources and more convincing credentials,” he said. “Finding and retaining talented people all take time and meticulous preparation.”
CEVA’s own expectations for the Chinese market remain strong. “The country, its economy, its industry and its society are still growing and maturing,” Bicil added. “We’ve all heard recently about slowing output, but economic growth is predicted to stay above 6 percent – and that’s a slowdown most other economies would be very happy to experience.”
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