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E-commerce boosts China-Russia ties, dampening impact of trade war
Last Updated: 2019-06-13 00:03 | Global Times
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Booming cross-border e-commerce trade between China and Russia could provide a sneak peek into how the two countries, which are commemorating the 70th anniversary of the establishment of diplomatic relations, have been drawing closer in recent years.

One of the latest indications was the establishment of a new joint venture called AliExpress Russia, formed by Chinese e-commerce giant Alibaba Group, Russian internet giant Mail.ru and Russian mobile phone operator Megafon, over the last week.

"It shows that e-commerce cooperation between the two has come to a new level, from doing each other's own business to working together and building a leading e-commerce giant in Russian-speaking markets," Lu Zhenhong, a Beijing-based independent e-commerce analyst, told the Global Times on Tuesday.

"Chinese e-commerce giants could provide local operators with know-how in product updates, cost control and promotions in the sector, and boost the development of the digital economy of Russia, and it's also in line with these Chinese companies' global ambitions - win-win cooperation everyone loves to see," Lu said.

The new operation, which will include business assets from all three, is expected to become a leading e-commerce project in Russia and neighboring countries, according to media reports.

Alibaba and Russia's RDIF sovereign wealth fund will each invest $100 million into the joint venture.

The big investment also shows Alibaba's confidence in the market, and the confidence does not come from nowhere.

Last year, during the "Double 11 (November 11)" online shopping festival, the number of orders on AliExpress surged by more than 76 percent year-on-year, covering more than 386 categories of goods, 1.2 times more than the number in 2017, according to figures provided by the company.

Double 11 is an annual online shopping bonanza in China, which was initiated by Alibaba in 2009 and has been observed on November 11 every year since.

E-commerce is gaining momentum in Russia, as are Chinese goods. From January to September last year, the cross-border e-commerce trade between the two countries reached $3.7 billion, jumping by 23 percent year-on-year, according to the latest figures released by China's Commerce Ministry.

Andrey Denisov, Russian ambassador to China, forecast that the number would surpass $4 billion at the end of 2018, according to Sputnik News.

Bilateral trade volume, which jumped by 24.5 percent in 2018 year-on-year, also hit a record high of $108 billion. Amid the global uncertainties, trade between the two also recorded a growth rate of 5.8 percent in the first four months of 2019.

Furthermore, solid bilateral relations between Beijing and Moscow that could be described as the best in their history create a favorable situation to ensure cooperation in cross-border e-commerce goes further, Lu said.

On June 5, leaders of the two agreed to upgrade their relationship to a comprehensive strategic partnership of coordination for a new era.

'Best days'

Chinese traders - not only e-commerce platforms, but also those working with Russian businesses, including logistics firms - welcomed the good news from the top and said they believe they are entering a golden era.

"A friendly China-Russia relationship has largely helped promote our cross-border e-commerce businesses," Guo Xinxin, general manager of Sailing, a company based in Yiwu, East China's Zhejiang Province, told the Global Times on Tuesday.

"We sold goods worth more than $100 million in 2018, a surge of 80 percent year-on-year," Guo said, adding that in the first half of 2019, exports to Russia further rose by 30 percent compared with that in 2018.

Guo's company entered the Russian market in 2014, selling mainly China-made clothes, household supplies and cosmetics on e-commerce platforms including AliExpress and Russian platforms such as Joom.

Hu Yong, also based in Yiwu, who works in logistics for Chinese products to Russia, also echoed Hu's experience. He told the Global Times on Monday that the number of Chinese packages sent to Russia has been continuously rising in past years.

Hu's company delivers millions of packages from China to Russia every year and saw its business increase by "at least 30 percent" last year, according to Hu.

"Russian people relied on imports in clothes and daily necessities," Guo said. "Young people in Russia are all potential internet users. With the maturation of payment tools and logistics, e-commerce is the future."

According to Yandex, Russia's largest payment system, orders from Russian customers on Chinese e-commerce platforms increased by 105 percent from December 1 to 27 last year.

Logistics times have been reduced greatly thanks to frequent bilateral trade connections. If transported by air, Russian customers just need to wait three to five days after ordering online, while road transport requires around 15 days, according to Hu.

Five years ago, it took more than 60 days for delivery.

Hu noted that the China-EU railway also played a significant role in delivering large products, such as furniture, adding that logistics fees are also relatively low.

Payment methods have also advanced greatly. For example, Alibaba has partnered with Yandex to allow users to pay through Yandex.Money online.

E-commerce could be a new backbone to support trade between China and Russia, and there's huge potential as e-commerce still accounts for just a small percentage of the total volume of bilateral trade, Hu said.

Morgan Stanley predicts that the e-commerce market in Russia will be worth $50 billion in 2020.

During President Xi Jinping's visit to Russia last week, a series of deals covering areas including e-commerce worth a total of $200 billion were signed.

Last year, the two countries also signed a memorandum of understanding (MOU) on e-commerce cooperation to establish a bilateral e-commerce cooperation mechanism.

Mapping the future

Betting on the future of the Russia market, Chinese industry players have closely paid attention to Russian customers' behavior to localize their services and better serve local customers.

Hu noticed that Russian customers' demand for Chinese goods is "upgrading." "Apart from traditional popular small commodities from Yiwu, demand for high value-added products including outdoor equipment, electronics products and furniture from South China's Guangdong Province are also growing faster," Hu said.

Guo has also observed the trend, saying his company is actively expanding exports of higher value products priced in the range of $30 to $150.

Guo said his company is also strengthening localization work, such as using Russian on product packaging and product description pages, as well as adopting European sizes for clothes.

"We are also exploring the Russian market with hopes of taking some high-quality Russian products back to China as well," Hu said. These include healthcare products, cosmetics, ice cream, chocolates and sweets.

"With the relationship between the two countries becoming closer, I hope the customs clearing part could be further accelerated so our products could be delivered in a more efficient manner," Hu said.

According to a report from the Xinhua News Agency, Russian customs is promoting electronic clearance to better serve Chinese export enterprises. Electronic clearance is expected to account for at least 95 percent of the total in 2020, citing the Russian Embassy in China.

Experts noted that the robust trade relationship between China and Russia will also help counter the unstable external environment amid the escalating China-US trade war.

"Despite declining exports to the US, markets such as Russia, France, Italy and Japan have all increased markedly," according to Guo.

Cross-border e-commerce can also bring China's trade online with other countries and regions along the China-proposed Belt and Road Initiative (BRI), experts said. "E-commerce can further enable the BRI market to work together, and shake off slowing economic growth amid rising uncertainties and protectionism in the global context," Lu said.

 

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E-commerce boosts China-Russia ties, dampening impact of trade war
Source:Global Times | 2019-06-13 00:03
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