GXS Insights

Two Decades Later: The Emerging B2B Market in China

By Raymond Teh, Vice President, GXS Asia Pacific and Jane Cheng, Marketing Director, GXS Asia Pacific

Over the past two decades, the pace of both economic and technological evolution in China has been impressive, and this evolution continues to accelerate. According to the statistics provided by CCID, the ERP spending growth in China was at 64% in 2001 and 65% in 2002. In a recent report by Analysys International, the ERP market reached over 120 million USD in Q3 2006, a 17.91% increase compared to the same period in 2005. Once a significant investment has been made by companies to improve their operating efficiency by deploying ERP systems, CFOs and CIOs are challenged to optimize the existing ERP system. Currently they are looking at how they can extend their operating efficiency beyond the firewall by connecting trading partners throughout the supply chain.

In addition, economic reforms and the WTO accession have driven the country to become more open and connected to the world. Today, China is viewed as the world’s manufacturing hub. Global trade is inevitable due to the increasing role of global supply chains in all industries and the critical roles China plays as a supplier, manufacturer and consumer. In the most recent decade, the Chinese government has been promoting Globalization - a key initiative for the country. This is critical to China’s growth beyond local markets, and ensuring the country takes its place as a worldwide leader in global trade.

With this trend, a streamlined supply chain is mission critical in driving the efficiency between suppliers and manufacturers in China, and with consumers in all parts of the world. In addition with the growing reality of increasingly sophisticated supply chain requirements, the On-Demand Supply Chain is essential to unlock the potential of the extended enterprise within China’s companies as well as the multi-national companies (MNCs) with local operations.

The frequent trading activities between China and the rest of the world are resulting in the rapid growth of information exchanged via B2B e-commerce for  international hubs and local suppliers. However, driving B2B e-commerce in China is still challenging. The lack of B2B industry standards, concerns about data security, issues of data quality, and  low IT adoption in the non-core cities are the key barriers. ??Each of the markets, especially the emerging markets, has its own uniquity and China is no exception. China’s government policies, regulatory environment, cultural differences, and the language barrier complicate the adoption and usability of B2B e-commerce. If your business plan includes trading activities with China, you should establish good relationships with the government through strategic local partners to address these challenges. Also,  you will need a strong local presence. These are the keys to successful B2B e-commerce trading partnerships there.

In China, e-commerce development is evolving and i learning curve compared to mature markets. The Chinese government and local enterprises want to bring the successful e-commerce experience from overseas into China. After all, China will continue to play an important role in the world economy and doing business with or in China continues as a trend. Is your China strategy ready?