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New law no great help to e-commerce

By You Nuo (China Daily)
Updated: 2008-08-04 17:11

There have been enough examples of government agencies spoiling a flourishing market by trying to make it develop "in a healthier way". One common sign of such a folly is that no public hearings are held, especially serious ones, before the new regulations are enacted.

As a result, as often is the case, the implementation of those regulations tends to be awkward, sometimes giving rise to more problems than public benefits.

Right now, judging from some of the opinions from the hundreds and thousands of individuals running their online retail business, the newly introduced "regulations toward promotion of informationization" by the municipal authorities of Beijing may be such a nuisance.

According to the regulations, as of August 1, all who are engaged in electronic commerce may not continue their business unless they register with the city government and have a business license, while previously, they never needed that.

But the authorities which introduced the new regulations have not made it clear whether they are aimed at taxing the small e-commerce merchants or at rendering a better protection for the customers. For the moment, nothing is mentioned. People can only guess.

For Wang Juntao, a figure well-known in China's e-commerce circle as one of the first individuals to start the business, the unprecedented requirement of government license is without question to pave way for future taxation. Otherwise, what is the point, he told reporters.

While for some officials of China E-Commerce Association, who spoke more diplomatically, the step "to rationally follow" in having all merchants register for government licenses is to collect a tax from them.

There are people who argue that it would not matter to just have a test of the new regulations. The Beijing municipal regulations would not do a major harm, they say, because they affect only small merchants, of the so-called C2C type. In total, they do not make a significant business volume.

A small volume it may be, keeping a cluster, and indeed one of the nation's largest clusters of online merchants in Beijing is more important than what can be measured in money terms.

With the largest cluster of universities and university students in China, Beijing used to be an ideal place for the Internet startups. But since the mid-1990s, the city has failed to dominate the national market because many companies have relocated themselves to the south, most noticeably to Shanghai and Hangzhou.

Local governments may not be the only reason for their relocations. But at least, no one, as far as I can remember, described the government service as extraordinary.

Internet is a fluid marketplace after all. As a result of the municipal license requirement, I am afraid, more Internet companies would withdraw their physical presence from Beijing - especially some small and colorful ones - along with the diverse job opportunities they provide.

Not long ago, CNNIC (China Internet Network Information Center) just reported in its survey that of the Chinese Internet population, the proportion of those who have ever bought things online is much lower than South Korea and the United States. A rapid development of e-commerce would need more merchants rather than fewer.

If the true purpose of new regulations, as some municipal officials said, is to protect customers, then there can be many ways to do so, and to do it more effectively, such as to let the small merchants form their associations and communities, to regulate the few platform (or portal) providers rather than the much larger number of retailers and barter traders, to set up complaint hotlines, and to allow netizens to view the credit standing of the most frequent traders.

The biggest loophole in the Beijing regulations is that it only affects the online retailers based within the Chinese capital city. If its purpose is really to protect customers, it does not hold any effect on business operators from elsewhere. Nor can the regulations prevent the spontaneous transactions among netizens who meet new people and discover new resources in the virtual space on a daily basis.

E-mail: younuo@chinadaily.com.cn