The irony of e-commerce

China is now the world’s largest e-commerce market, registering online sales of 1.85 trillion yuan ($300 billion) in 2013.

With China, the most populous country, set to replace the US as the largest global economy within one or two decades, it is no surprise that the People’s Republic outperforms other countries in e-shopping.

A large population and fast economic expansion, however, are not the only factors behind China’s e-commerce boom. Less regulation is actually a crucial anf often overlooked contributor to the explosive growth of Internet commerce.

As a transitional economy, China has had a hard-to-shake-off legacy of the planned economy — specifically, the state’s intervention into the market.

Although the recent global financial crisis, originating from the free markets of the West, has brought home the lesson that a less-regulated market may not be the best for an economy, China still needs to reduce its role in market activities.

The recent vow by the central government to reduce the number of administrative approval items in the hands of government agencies is evidence of such need.

China is still heavily regulating on many parts of the economy. You will, for example, have to go through a lot of approval procedures if you want to open a business.

Even so, the virtual shopping sector has so far had the privilege of not receiving much attention from regulators. After all, it was a new thing in China, as well as the rest of the world, after it started to take off 10 years ago.

For government regulators at the time, e-commerce had exciting potential and should be encouraged. Perhaps more important, they may not have known exactly how to regulate it.

Even industry experts and business leaders, including Alibaba’s Jack Ma, did not know the direction of the industry and it is understandable that regulators the world over were also at a loss.

The lack of regulation provided a vital “grey” area for e-commerce websites to evolve. Some of these pioneering sites, such as Alibaba, have had and are expected to have blockbuster IPOs on Wall Street.