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What is driving China’s e-commerce growth? — Hsiao Chink Tang and Yuying Tang

Summary:
Perhaps the biggest reason is that China is leapfrogging retail storefronts and going directly to ecommerce. But there are other factors to consider as well. For example, China is highly digitized in many respects that affect retail. The result is that the Chinese are turning from savers into consumers, which is an essential in the transformation from an investment-export led economy into a consumer-dominant economy, that is, producing chiefly for the domestic population rather than chiefly for foreigners.This is what would be expected as an economy develops. The Chinese government has encouraged this transformation using economic and financial policy.However, the post doesn't consider the downside of growing a consumption economy, namely, the rise of "consumerism" and all that goes with

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Perhaps the biggest reason is that China is leapfrogging retail storefronts and going directly to ecommerce. But there are other factors to consider as well. For example, China is highly digitized in many respects that affect retail. 

The result is that the Chinese are turning from savers into consumers, which is an essential in the transformation from an investment-export led economy into a consumer-dominant economy, that is, producing chiefly for the domestic population rather than chiefly for foreigners.

This is what would be expected as an economy develops. The Chinese government has encouraged this transformation using economic and financial policy.

However, the post doesn't consider the downside of growing a consumption economy, namely, the rise of "consumerism" and all that goes with it socially and culturally. 

The Chinese government has decided that it is now necessary to address the negative aspects of neoliberalism while retaining a market-based system of entrepreneurship and market pricing but reducing rent extraction. 

The goal is to direct markets to be socially productive as well as economically productive instead of economically productive but social unproductive and even socially detrimental. This would be expected of a primarily traditional society. The government has been behind the curve on this so far and is now playing catch-up as a matter of perceived necessity, both to preserve the culture and retain power.

The method seems to be to balance traditionalism and liberalism in an integrative way that promotes social harmony and protects against excessive individualism that threatens the social fabric, as it assesses is happening elsewhere, primarily in the US.

It's a delicate balance being aimed at and not simple to achieve for a country with a population of over a billion people whose appetite for consumption has been whetted and the structure is in place to satisfy it.

And then there is the challenge of climate change involving the carbon footprint. This dictates that needs have to prioritized over wants in order to limit energy use before non-carbon sources become dominant.

East Asia Forum
What is driving China’s e-commerce growth? 
Hsiao Chink Tang, ANU, and Yuying Tang, NetEase Games



Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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