Broadband connections to boost rural online commerce

Rural areas will be the next battlefield for e-commerce giants as the State Council, China's Cabinet, looks to promote online shopping by providing faster internet connections to remote locations.

The government will invest more money in establishing rural broadband networks, which in turn will facilitate the exchange of industrial products and agricultural goods between urban and rural areas, according to a statement issued by the State Council's executive meeting chaired by Premier Li Keqiang last Wednesday.

It is part of a program that aims to integrate the internet with the logistics sector, thereby reducing costs, increasing profits, stimulating consumption and boosting employment, the statement said.

E-commerce giants such as the Alibaba Group Holding, JD Inc and Suning Electronic Materials Company are expanding into rural areas as the market in first- and second-tier cities becomes saturated.

The exchange of goods and services between cities and villages in China is traditionally quite expensive, compared to developed economies, due to the vast differences in rural and urban development.

Urban residents, worried about food safety, thirst for uncontaminated food from the countryside, while farmers go to great pains to sell their fruits, vegetables and meat in the harvest season.

The situation has gradually improved since domestic reform and opening-up policies began in the early 1980s, liberalizing the market and giving rise to more players that can participate in rural businesses. But more progress is needed.

In the internet era, online shopping can be a good means to bridge the rural-urban gap and make it easier for the exchange of products and services between these areas, especially with the rise of mobile internet in recent years.

The expansion of internet usage in rural areas will facilitate the sales of agricultural goods and increase the incomes of farmers. Looking at the bigger picture, it will also enrich cities' supply lines and stabilize market prices.

However, China only ranks 91st among more than 200 countries around the world in terms of broadband speed, and internet access in the country's rural areas is more sluggish than the cities. Thus comes this new policy to provide more funds for rural Internet infrastructure and broadband connections.

According to the latest report by the China Internet Network Information Center, in 2015, 195 million of China's Internet users lived in rural areas, accounting for 28.4 percent of the country's total. The number of rural netizens saw a year-on-year increase of 9.5 percent last year, almost double the increase in urban internet users.

As of last year, more than 600 million people lived in China's rural areas and at least 405 million of those are potential internet users and online shoppers. This is 50 percent more than the population of the United States.

China Post used to dominate mail delivery in rural areas as the company benefited from its nationwide network that reaches even the most far-flung places. This monopoly has been broken as express delivery companies eye the potential that rural areas present.

The 11 key measures publicized by the central government last year were regarded as a boost for rural online shopping and express delivery companies are setting up branches in rural areas where the transport network is less efficient.

In East China's Anhui province, for example, express delivery companies have set up branches in all of Yuexi county's townships and goods from Beijing can now be delivered in two days, a 1,200-km journey that used to take two weeks.

According to the CINIC report, online shopping shows great potential in rural markets as 22.4 percent of online shoppers live in townships and villages. This number is growing fast and rural residents may outnumber urban buyers within 10 years, necessitating the buildup of broadband infrastructure.