E-commerce driving development in nation's rural areas

The Chinese government's investment in roads, water projects, logistics, and internet facilities in rural areas has enabled the rise of e-commerce entrepreneurs seizing new opportunities throughout the country. Many former migrants who once worked in factories or as deliverymen in cities in eastern China are now returning to their hometowns and establishing businesses.

The central government recently called for increased efforts promoting supply-side structural reform in the agricultural sector, to achieve food security while building a modern and efficient industry.

By the end of 2017 rural e-commerce had created more than 1.3 million new jobs, with total transactions for the year hitting 120 billion yuan ($17.88 billion), according to Alibaba.

"Many young people return from urban areas to open e-shops. They collect the products; they package them; they even create the brand name. E-commerce provides opportunities for these people to earn their income," said Li Xiaoyun, professor of development studies at China Agricultural University.

"There are lots of opportunities in non-agricultural activities, such as rural tourism or selling local products. For example, Yunnan farmers sell raw brown sugar from sugar cane and honey from bees raised on tea plantations," he said.

"E-commerce provides access so that both the consumer and the producer can meet in a timely way. This provides a very efficient way to link the producer and the consumer. Many of these small e-commerce companies and small traders use e-commerce to link the market and producers. That is something new and it has solved many problems," Li said.

Selling through large platforms such as Taobao, JD.com, or Pinduoduo allows rural people to connect with urban consumers, but government infrastructure and organizational support is needed to make the system work.

The government of Gansu province in northwestern China for example is working with the Asian Development Bank to encourage rural e-commerce opportunities throughout the province.

"The government realizes that in Gansu, which is less developed, you need a lot of services to organize the farmers, to standardize production, then to market that through e-commerce. Rural e-commerce is everywhere, but less so in the less-developed provinces. So you really need to catalyze it a little bit more," said Jan Hinrichs, a natural resources economist at the ADB, who works directly on the Gansu project.

He said that intermediary companies providing agricultural services are needed to make e-commerce work. "It's not just the individual farmer who puts a product on Taobao. That is a niche, but you can't do much with that. You need to have quality-assurance labels, sampling, packaging, marketing and sorting," he said.

He says the ADB is working with seven enterprises - some public, some private - to build a platform that connects with major e-commerce players like Alibaba and JD. "It is really a contract-farming relationship. The farmers have their own land, but access a stable market through these e-commerce platforms, which also provide logistics plus fertilizers and pesticides."

"People use this opportunity to build their own service shop. Some of these agro-enterprises are buying drones to provide a service, screening farms for where fertilizers or pesticides are to be applied. They can spray fertilizers and pesticides with these drones in a very targeted way.

"All of that will become available, so if you need to grow potatoes according to certain standards to make potato chips, you need to comply with standards. It makes the contract-farming relationship much easier by reducing transactions costs with the integrator and the individual farmer," Hinrichs said.

Hinrichs estimated that the project in Gansu is creating 1,700 full-time jobs. "If you give a market to farmers where they can sell their products, reliably they can increase their income."

Li had praise for the government, saying that its "investment in physical infrastructure in western China has made a big difference in living standards. Many remote and mountainous areas can produce a lot of local products, but transportation was a problem. You could not access these areas.

"There were no paved roads and transportation costs were very high. The logistics services companies were not able to really reach these people. During the last seven years, paved road access and Wi-Fi coverage has enormously improved."

Li has worked with Hebian, a village in Xishuangbanna, Yunnan province. "Traveling 10 kilometers on a local road took more than an hour. The costs for any trucks and transportation were very high. It was not only time consuming, but really ate up a lot of energy. There were no 4G or mobile connections. Now the whole village is covered by Wi-Fi."

"By 2020 in terms of income targets and related targets in education and health, according to the latest data, China will achieve its objectives by 2020. However rural poverty will not disappear. It will continue to exist in different terms.

"Therefore there must be a rural revitalization strategy that will continuously reduce poverty in the future," Li said.