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Cross-border e-commerce has established a free and open, universal and inclusive

global trade platform, on which millions upon millions consumers can buy worldwide

while small and medium-sized enterprises can sell worldwide, truly realizing global

connection and linkage. Through cross-border e-commerce big data from Alibaba’s

platforms, we see that new connections are being built between China and the world

via cross-border e-commerce.

•Rapid growth:It is expected that by 2020, China’s cross-border e-commerce

transaction size will reach 12 trillion Yuan, accounting for about 37.6% of its total

import and export, China’s cross-border e-commerce retail turnover will exceed 3.6

trillion Yuan, with an annual average increase of about 37%.

•Four major growth impetuses: technological progress,consumption upgrading,

industrial basis and credit guarantee.

•ECI index: According to Alibaba’s big data on cross-border e-commerce (concerning

B2B export, B2C export and B2C import), we have prepared the ECI index

(E-Commerce Connectivity Index between China and Major Economies), which aims

to reflect closeness of connection between China and other countries in cross-border

e-commerce. In 2015, the ECI between China and other G20 countries showed the

following ranking: the USA, Britain, Australia, France, Italy, Japan, Canada, Germany,

Korea, Russia, India, Turkey, Brazil, South Africa, Mexico, Indonesia, Argentina and

Saudi Arabia.

•eWTP: Entering 2016, Alibaba Group called on establishment of the Electronic World

Trade Platform (eWTP), so as to conform to the trend in our times, better help global

SMEs develop, promote growth of inclusive trade and data economy, and incubate

new rules for global trade in the times of Internet.

Abstract

Content

1.Overview of China’s Cross-border E-commerce Development

1.1 Concept of cross-border e-commerce

1.2 Development history of China’s cross-border e-commerce

2. China’s cross-border e-commerce market: size and growth

2.1 Growth of China’s cross-border e-commerce against trend

2.2 New growth of cross-border e-commerce retail

2.3 Four major growth impetuses: technological progress,consumption

upgrading, industrial basis and credit guarantee

3. New connections of China-global cross-border trade

3.1 Cross-border e-commerce: buying worldwide

3.2 Cross-border e-commerce: selling worldwide

4. ECI between China and countries among G20

4.1 ECI ranking

4.2 ECI grouping

5. The development of cross-border e-commerce retail policies in China

6. Outlook of the development of cross-border e-commerce in China

Appendix: Research Method

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1. Overview of China’s Cross-border E-commerce Development

1.1 Concept of cross-border e-commerce

The concept of cross-border e-commerce has both broad and narrow senses:

In a broad sense, cross-border e-commerce means cross-border import and export trade activities of transaction subjects from different customs territories by e-commerce means.

In a narrow sense, cross-border e-commerce refers in particular to cross-border e-retail, which means a new format of international trade where transaction subjects from different customs territories close deals by concluding transactions via the e-commerce platform, making cross-border payments and settlements, and delivering goods through cross-border logistics. Cross-border e-retail is a new trade pattern which comes into being when Internet develops into a certain stage.

The report contains a comprehensive analysis of China’s cross-border e-commerce development in the broad sense of cross-border e-commerce.

Fig.1 Definition of the Concept of Cross-border E-commerce

export import

C

B

cross-border e-commercein a narrow sense

cross-border e-commerceIn a broad sense

By interaction types, main modes of cross-border e-commerce can be divided into B2B, B2C, C2C and so forth, among which B2C and C2C are geared to ultimate consumers, so the two can be collectively called cross-border e-commerce retail; by operating entities, cross-border e-commerce can be divided into platform-based, self-run and combined (platform-based+ self-run) models.

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Fig.2 Classification of Main Business Models of Cross-border E-commerce in China

Business models Platform-based Self-runCross-border B2B (export) Alibaba.com, Made-in-China.com,

globalsources.com, dhgate.com

Cross-border B2B (import) 1688.com, seatent.com

Cross-border e-commerce retail

(export)

AliExpress, eBay, Amazon, Wish LightInTheBox, DX, Milanoo

Cross-border e-commerce retail

(import)

Tmall Global, global.taobao.com,

ymatou.com

kaola.com, JD Worldwide, jumei.com,

xiaohongshu.com

1.2 Development history of China’s cross-border e-commerce

China’s cross-border e-commerce development has undergone three stages:

Stage I (germination, 1997-2007): Cross-border e-commerce started in the late 20th century in China, with B2B platforms helping export of small and medium-sized enterprises being the earliest, represented by Alibaba.com, Made-in-China.com, etc. During 1997-1999, China’s foreign trade B2B e-commerce websites such as ChemNet.com.cn, Made-in-China.com and alibaba.com were established in succession, which provided small and medium-sized enterprises with commodity information presentation, transaction matchmaking and other basic services. Among these websites, Alibaba.com is the world’s largest cross-border B2B platform at present, and has gradually developed from an online B2B information service platform to a B2B cross-border online trading platform.

Stage II (development, 2008-2013): With an increase in global netizen penetration and in the level of services such as cross-border payment and logistics, around 2008, China’s cross-border e-commerce retail export (B2C/C2C) catering to overseas individual consumers began to flourish, with DX (2006), LightInTheBox (2007) and AliExpress (2009) being cross-border e-commerce B2C websites complying with the trend. The development of cross-border e-commerce retail resulted in great changes to international trade subjects, mode of trade and so on, and that a large number of small and medium-sized enterprises and network businessmen in China began to directly and deeply participate in international trade.

Stage III (outbreak, 2014 to now): in 2014, China carried out innovation in the

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Fig.3 China’s Cross-border E-commerce Development History

regulatory system for cross-border e-commerce retail import, facilitating rapid development of cross-border e-commerce retail import in China and giving birth to a multitude of cross-border e-commerce retail import platforms and enterprises, including Tmall Global, kaola.com, jumei.com, ymatou.com and xiaohongshu.com, and the whole industry ushered in explosive growth in 2015.

If cross-border e-commerce which started in the late 20th century changed only the marketing mode of the traditional international trade, then with rapid development and general installation of Internet infrastructures worldwide, the present cross-border has exerted revolutionary and substantive influence on operating mode of international trade and trade links. Small and medium-sized enterprises and individuals are deeply involved in different international trade links, and small and medium-sized enterprises directly interact and trade with global consumers, so that there are more people benefiting from globalization dividends and such benefits are more balanced and inclusive.

1999

Stage I

germination

2008 2014

Stage IIdevelopment

Stage IIIoutbreak

time

B2B platforms emerged

cross-border e-commerce retail export began to flourish

cross-border e-commerce retail import began to flourish

B2B platforms grew up B2B platforms upgraded

cross-border e-commerce retailexport grew up

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Fig.4 Exports of China to Main Economies in 2015

Source: General Administration of Customs

In 2015, though global trade showed down its growth and the growth of China’s cross-border e-commerce decreased, the growth of cross-border e-commerce was still much higher than that of import and export of trade in goods, and e-commerce penetration into China’s import and export trade continued to increase. In 2015, China’s cross-border e-commerce transaction size reached 4.8 trillion Yuan, representing a year-on-year increase of 28%. It is expected that by 2020, cross-border e-commerce market transaction size will reach 12 trillion Yuan and the compound average annual growth rate will be 20.1% from 2015 to 2020.

2. China’s cross-border e-commerce market: size and growth

In 2015, though global trade slowed down its growth, China’s cross-border e-commerce grew against trend and e-commerce penetration into import and export trade continued to increase. Cross-border e-commerce retail, as a new form of trade in the Internet era, is outshining, with its proportion in China’s cross-border e-commerce market being significantly increasing. Technological progress, industrial base, consumption upgrading and credit guarantee will be four impetuses for growth of China’s cross-border e-commerce.

2.1 Growth of China’s cross-border e-commerce against trend

In 2015, China’s total import and export of trade in goods was 24.59 trillion Yuan, indicating a 7% decrease over that in 2014. The export reached 14.14 trillion Yuan, decreasing by 1.8%; the import reached 10.45 trillion Yuan, decreasing by 13.2%. In view of the current situation, China’s foreign trade in 2016 is not optimistic and is still faced with large pressure.

Export value (billion US Dollars) Year-on-year growth rateThe USA 410.1 3.5%EU 356.4 -3.9%ASEAN 279.0 2.6%Japan 135.9 -9.2%India 58.3 7.4%Russia 34.8 -35.2%Brazil 27.4 -21.5%

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In 2015, cross-border e-commerce turnover accounted for 19.5% of China’s total import and export, and it is expected that by 2020, the proportion will reach 37.6%.

China’s cross-border e-commerce is export-oriented. In 2015, cross-border e-commerce export turnover accounted for 83.1% of total cross-border e-commerce turnover while the import turnover accounted for 16.9%. It is expected that by 2020, the proportion of cross-border e-commerce import turnover will rise to 25%.

Fig.6 Changes in the Proportion of China’s Cross-border E-commerce Turnover in Total Import and Export

19.5%37.6%

20152020

Source: Ministry of Commerce, General Administration of Customs, IResearch, Analysys, AliResearch; AliResearch analysis.

0.8 0.9 1.2 1.6 2.0 2.7

3.75 4.8

12

18.0

15.1

20.2

23.6 24.4

25.8 26.4

24.6

31.9

2008 2009 2010 2011 2012 2013 2014 2015 2020E

Turnover of Cross-border E-commerce(trillion Yuan) Total import and Export(trillion Yuan)

Fig.5 Changes in China’s Cross-border E-commerce Turnover and Total Import and Export

Source: Ministry of Commerce, General Administration of Customs, IResearch, Analysys, AliResearch; AliResearch analysis.

CAGR

+20.1%

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By business mode, China’s cross-border e-commerce is now B2B-based. In 2015, B2B accounted for 84.3% of total cross-border e-commerce while cross-border e-commerce retail accounted for only 15.7%, but the latter showed a strong growth. It is expected that by 2020, the proportion of cross-border e-commerce retail will exceed 30%.

90% 88.9% 88%83.1%

75%

10% 11.1% 12%16.9%

25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2020E

Import Export

Fig.7 Proportions of Export and Import in China’s Cross-border E-commerce Turnover

Source: Ministry of Commerce, General Administration of Customs, IResearch, Analysys, AliResearch; AliResearch analysis

95%89.4% 88.2% 84.3%

69.5%

5%10.6% 11.8% 15.7%

30.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2020E

Retail B2B

Fig.8 Proportions of Cross-border E-commerce B2B and Retail Turnovers

Source: Ministry of Commerce, General Administration of Customs, IResearch, Analysys, AliResearch; AliResearch analysis.

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2.2 New growth of cross-border e-commerce retail

In 2015, China’s cross-border e-commerce retail turnover reached 751.2 billion Yuan, representing a year-on-year increase of about 69%. Cross-border e-commerce retail export was 503.2 billion Yuan, representing a year-on-year increase of about 60%; cross-border e-commerce retail import was 248 billion Yuan, representing a year-on-year increase of about 92%. It is expected that by 2020, China’s cross-border e-commerce retail turnover will exceed 3.6 trillion Yuan, and the average annual increase will be 37% from 2015 to 2020. According to estimates, in 2020, cross-border e-commerce retail export will reach 2.16 trillion Yuan, indicating an average annual increase of about 34%; cross-border e-commerce retail import will reach 1.5 trillion Yuan, indicating an average annual increase of about 43%.

Along with sustained economic development and steady increase in resident income in China, China has ushered in a new round of consumption upgrading. In this course, domestic consumers have outstanding rigid demands for high-quality, long-tail and individual commodities overseas.

According to customs statistics, in 2014, China’s import of consumer goods reached 936.27 billion Yuan, increasing by 14.9%, apparently faster than overall growth of import in the corresponding period in China and accounting for 7.8% of total import then. During the first eleven months of 2015, China’s accumulative import of consumer goods reached 790.79 billion Yuan, indicating a year-on-year decrease of 7%, which was clearly lower than the decrease (-14.4%) of total import in the corresponding period.

Fig.9 China’s Cross-border E-commerce Retail Market Size and Average Annual Growth

884 1290 2480

15050

2013 2014 2015 2020E

China's Cross-border E-commerce Retail Import(billion Yuan)

1976 3145

5032

21600

2013 2014 2015 2020E

China's Cross-border E-commerce Retail Export(billion Yuan)

CAGR

+34%CAGR

+43%

Source: Ministry of Commerce, IResearch and AliResearch; AliResearch analysis.

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Fig.10 Import of Consumer Goods in China during 2014-2015

Year Import of consumer

goods(billion Yuan)

Year-on-year growth Overall growth

of import in the

corresponding period2014 936.27 14.9% -0.6%January to November,

2015

790.79 -7.0% -14.4%

It is expected that by 2020, China’s gross e-retail sales will exceed 10 trillion Yuan, accounting for 20.7% of total retail sales of consumer goods; then cross-border e-commerce retail import turnover (1.5 trillion Yuan) will amount to 15% of China’s gross e-retail sales (10 trillion Yuan).

0.5 0.8 1.3 1.9

2.9 3.9

4.9

6.2

7.5

8.9

10.4

3.2%4.5%

6.2%

7.6%

10.7%

12.9%

14.8%

16.8%18.5%

19.8%20.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

E-retail Turnover(trillion Yuan) E-retail's proportions of total retail sales of consumer goods

Fig.11 China’s E-retail Turnover, 2010-2020

Source: Ministry of Commerce, National Bureau of Statistics and AliResearch; Aliresearch analysis.

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2.3 Four major growth impetuses: technological progress, consumption upgrading, industrial basis and credit guarantee

In recent years, rapid development of cross-border e-commerce has accelerated the globalization of consumption, trade, service and small and medium-sized enterprises. China’s cross-border e-commerce development is particularly outstanding for the following four reasons:

1.Growth impetus I: technological progress

The popularization and development of Internet, cloud computing and intelligent terminal are basic conditions. In the traditional industrial age, multinational corporations dominated international trade, while consumers and small enterprises could hardly acquire adequate market information, neither did they have basic conditions to be engaged in cross-border e-commerce. Since this century, Internet technology and global e-commerce platforms have rapidly developed, so market participants can acquire rich and symmetrical information at nearly zero cost and that C2B/C2M consumer demands drive large-scale flexible production gradually comes true. The payment system has become increasingly perfect, logistics efficiency has increased at a lower cost, cloud computing and big data have been more and more popular, and professional services for cross-border trade have been developed rapidly. All these conditions lay a solid foundation for the rapid development of cross-border e-commerce.

2.Growth impetus II: consumption upgrading

The main impetus for China’s economic growth is consumption. The contribution of consumption to China’s national economic growth rose further to 66.4% in 2015 and will continue to rise in the future. Moreover, China is ushering in a new round of consumption upgrading, and it is expected that by 2020, the number of households in middle class and above in China will reach nearly 200 million1, while consumers will have increasingly strong demands for long-tail, high-quality, cheap and individual products overseas.

For the next five years, 42% of private consumption increment will be contributed by e-commerce2. Online shoppers in a huge scale are the basis of consumption newly created by e-commerce; as of the end of June 2016, the scale of online shoppers in China has reached 448 million and online shopping usage rate has reached 63%3.

1、BCG and AliResearch, China Consumption Trend Report, 2015.

2、BCG and AliResearch, China Consumption Trend Report, 2015.

3、CNNIC, The 38th Report of China Internet Development Statistics, 2016.

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Enclosure 1

In February 2015, alibaba.com officially announced to launch a Trade Assurance Program and establish a credit system like taobao.com for small and medium-sized enterprises in China. These enterprises can accumulate trade assurance amount: the larger export data is, the more amount of trade assurance alibaba.com will provide, the higher line of credit and higher credit level an enterprise will have. Big data behind the trade assurance system is real export data of different enterprises. The data is acquired from onetouch.alibaba.com, an integrated service platform for foreign trade.

This breaks the bottleneck that restrains the development of foreign trade e-commerce for years—the problem of credit. As of the end of January 2016, there are accumulatively more than 820,000 trade assurance guaranteed orders actively placed by buyers on alibaba.com. From the end of August 2015, trade assurance guaranteed orders have increased geometrically, 80% of which are actively placed by buyers. With the establishment of the entire buyer-seller credit system, cross-border e-commerce will usher in more development opportunities.

3.Growth impetus III: industrial basis

China accommodates about five million small and medium-sized enterprises engaged in foreign trade, which contribute about 60% of total foreign trade volume, and these enterprises constantly participate in cross-border e-commerce market as “sellers” in “selling worldwide”, rendering cross-border e-commerce export to maintain rapid development.

China boasts traditional manufacturing foundation and advantageous export products, with design, process and manufacturing level of consumer goods manufacturing being world-class, and is the world’s largest producer especially in terms of consumer goods such as clothes, shoes and hats, bags and suitcases, 3C digital products, household appliances, etc.

4.Growth impetus IV: credit guarantee

In view of the development history of cross-border e-commerce in China, credit system and secured transaction play a key role not only in the development of retail platforms like taobao.com, but also in cross-border e-commerce B2B development.

Though cross-border e-commerce B2B platforms have an early start in China, as there is no credit guarantee system, they develop slowly in general. Since 2015, China’s cross-border e-commerce B2B platforms represented by alibaba.com have gradually transformed from information service platforms to transaction platforms, which is supported by gradually accumulated enterprise transaction and credit data. Through services such as “customs, inspection and quarantine, taxation and foreign exchange” provided by integrated service platforms for foreign trade, cross-border e-commerce platforms can obtain real transaction data of enterprises and help enterprises establish a global network transaction credit system, so as to better get trust and orders from international buyers, transform credit to wealth and form a virtuous circle.

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3. New connections of China-global cross-border trade

Global traditional trade has apparently slowed down its growth, but cross-border e-commerce is growing strongly at a rate far higher than that of traditional foreign trade, which indicates the advent of a new round of globalization tide—the globalization in the data age. Cross-border e-commerce has established a free and open, universal and inclusive global trade platform, on which millions upon millions consumers can buy worldwide while small and medium-sized enterprises can sell worldwide, truly realizing global connection and linkage.

3.1 Cross-border e-commerce: buying worldwide

Through cross-border e-commerce big data from Alibaba’s platforms, we see that new connections are being built between China and the world via cross-border e-commerce.

In 2015, TOP 10 origins of commodities that were most purchased by Chinese consumers were the USA, Japan, Germany, Korea, Australia, Netherlands, France, UK, Italy and New Zealand, and commodities of these countries were in particular popular with Chinese consumers.

Fig.12 Top 10 Countries in Sales Amount on Tmall Global in 2015

Source: Tmall Global;Aliresearch analysis.

USA

Japan

Germany

Korea

Australia

Netherlands

France

UK

Italy

New Zealand

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From the perspective of imported categories, maternal supplies, personal care and cosmetics as well as nutrition and health care products are three major categories that drive China’s cross-border e-commerce retail import. Generally, as Chinese consumers have higher requirements for the quality of products involving health, safety and green, cross-border e-commerce retail import has become a new important channel for buying these products.

Through cross-border e-commerce retail import, each Chinese consumer averagely purchased commodities from two countries, while the most active Chinese consumers purchased commodities from 18 countries; cross-border e-commerce platforms help Chinese consumers connect directly with overseas merchants, thus realizing buying worldwide.

From the perspective of urban consumption power, consumers in first-tier cities in China have the highest per capita consumption and their per capita consumption grows the most rapidly, followed by those in second-tier cities. Among first-tier cities, Shanghai has the highest per capita consumption, indicating high maturity of consumption of cross-border e-commerce import products by high-tier cities. Compared with first- to third-tier cities, fourth- to sixth-tier cities witness faster increase in total consumption amount and number of buyers, indicating that consumers in low-tier cities have begun to try buying import goods via cross-border e-commerce and have huge development potential.

First-tier cities

Second-tier cities

Third-tier cities

Fourth-tier cities

Fifth-tier cities

Sixth-tier cities

2014 2015

Fig.13 The Comparison of Per Capita Consumption by First- to Sixth-tier Cities

Source: Tmall Global;Aliresearch analysis.

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Maternal&baby

Beauty&personal

care

Nutrition and health care

Apparel/footwear/bags

Packaged food&drink

Household products

Others

Fig.14 Distributions of categories on Tmall Global

Source: Tmall Global;Aliresearch analysis.

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In 2015, on the platform of alibaba.com, the Top 10 countries witnessing the most new buyers were Russia, USA, Brazil, Spain, France, Canada, Ukraine, India, UK and Italy.

3.2 Cross-border e-commerce: selling worldwide

In 2015, on the platform of alibaba.com, the Top 10 overseas markets that made the most inquiries to Chinese enterprises were the USA, UK, India, Canada, Russia, Australia, Germany, Austria, Malaysia and Brazil.

Fig.15 Top 10 Countries Making the Most Inquiries on Alibaba.com in 2015

Source: Alibaba.com;Aliresearch analysis.

USA UK India Canada Russia Australia Germany Austria Malaysia Brazil

Fig.16 Top 10 Countries Witnessing the Most New Buyers on Alibaba.com in 2015

Russia

USA

Brazil

Spain

France

Canada

Ukraine

India

UK

Italy

Source: Alibaba.com;Aliresearch analysis.

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Enclosure 2

Cross-border e-commerce helps small enterprise truly realize globalization—the globalization in

the data age.

On “November 11”, 2015, buyers from 214 countries and regions placed orders on AliExpress

and finally merchants on the platform of AliExpress sent 21.24 million packages all over the

world. Among these orders,

•155 ones were from Greenland, located in the northernmost part of the earth,

•415,479 ones were from Chile, located in the southernmost part of the earth

•608 ones were from Fiji, located in the easternmost and the westernmost part of the earth

•356 ones were from Seychelles, an island country in the Indian Ocean

•30 ones were from Lesotho, a country located in the south of Africa and with the world’s highest

average elevation

•15 ones were from Vatican, the world’s smallest country

•and 18 ones were from Syria in chaos

Enclosure 3

Internet shortens trade chains and facilitates C2B-type innovation

US consumers have great demands for wigs, so they become important goods on AliExpress. A

black girl from the USA purchased a wig on AliExpress and swam with it. Unexpectedly, glue on

the wig was not waterproof, so the wig fell off in the water. The girl left a message on AliExpress

to complain about the product. A week later, the Chinese manufacturer developed the first

waterproof wig in the world under the C2B mode and sold it to the USA. Now, 90% of wigs made

in China on AliExpress are sold to the USA.

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4. ECI between China and countries among G20

ECI (E-Commerce Connectivity Index between China and Major Economies) is prepared according to Alibaba's big data on cross-border e-commerce (B2B export, B2C export and B2C import) to reflect the connection between China and other countries in cross-border e-commerce trade.

With respect to the methodology, ECI combined index is comprised of ECI export index and ECI import index, each of which is used to measure the scale (absolute value) and the penetration rate (potential value) of cross-border e-commerce among China and that country in a comprehensive way.

This research involves G20, temporarily not including the EU. At present, the turnover of G20 accounts for 80% of the total global trade, and that between China and G20 occupies over 50% of China's total imports and exports.

4.1 ECI ranking

In 2015, the e-commerce connectivity index between China and related countries among G20 was ranked as follows: the United States, the United Kingdom, Australia, France, Italy, Japan, Canada, Germany, South Korea, Russia, India, Turkey, Brazil, South Africa, Mexico, Indonesia, Argentina and Saudi Arabia.

Enclosure 4

Big game of small enterprises: huddling to do business in the world

On June 2, 2016, Provence Flagship Store was officially opened on Tmall Global. It is the first

regional flagship store on the platform of Tmall Global

There are numerous small and medium-sized enterprises in France, but they can hardly open

up the Chinese market rapidly on their own. Marseilles Government led to attract investment

from small and medium-sized enterprises and brands in Provence in a concentrated manner,

so that they can sell through Provence Regional Flagship Store. When each brand develops to

a certain degree, these brands can opt to exit the regional flagship store and build independent

flagship stores on tmall.com by themselves. At present, Provence Regional Flagship Store has

signed contracts with eight brands, including La Corvette, Terre des Sens, Savon De Marseille,

L’eau de Cassis, Henry Blanc and other famous local brands in Provence.

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USA

UK

Australia

France

Italy

Japan

Canada

Germany

South Korea

Russia

India

Turkey

Brazil

South Africa

Mexico

Indonesia

Argentina

Saudi Arabia

import index export index

Fig. 17 E-Commerce Connectivity Index between China and Related Countries among G20

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4.2 ECI grouping

These countries can be divided into three groups by ECI, that is, strong connectivity, moderate connectivity and weak connectivity.

Countries of strong connectivity (with ECI scores above 40): These countries have frequent trade contacts with China through cross-border e-commerce, and are strongly connected with China both in export and import, with relatively balanced ECI import and export index. That includes the United States, the United Kingdom, Australia, France, Italy, Japan and Canada, among which, the United States has the highest scores on the whole, with ECI scores being 82, and is regarded as having super-strong connectivity.

Countries of moderate connectivity (with ECI scores between 21-40): These countries have many trade contacts with China through cross-border e-commence, and are moderately connected with China both in export and import, with relatively unbalanced ECI import and export index. That includes Germany, South Korea, Russia, India, Turkey, Brazil and South Africa.

Countries of weak connectivity (with ECI scores below 20): These countries have few trade contacts with China through cross-border e-commerce, with relatively low ECI import and export index, especially too low ECI import index. That includes Mexico, Indonesia, Argentina and Saudi Arabia.

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Fig. 18 Detail List of E-commerce Connectivity Index between China and related countries among G20

G20 ECI import index ECI export index E-Commerce

Connectivity Index The United States 45 37 82The United Kingdom 35 30 65Australia 30 25 55France 32 22 54Italy 27 18 45Japan 39 5 44Canada 7 35 42Germany 23 16 39South Korea 25 7 32Russia 1 31 32India 1 30 31Turkey 1 28 29Brazil 1 22 23South Africa 1 22 23Mexico 0 13 13Indonesia 1 12 13Argentina 0 11 11Saudi Arabia 0 3 3

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5. The development of cross-border e-commerce retail policies in China

With the rapid development of the Internet technology and global e-commerce platform, and a new round of globalization of cross-border trade, consumption, service and SMEs, cross-border e-commerce retail is becoming a new format and an important part of international trade. However, trade rules and regulation pattern will exert great influence to the development of cross-border e-commerce retail.

The existing main and common difficulty for governments around the world to regulate cross-border e-commerce retail lies in the lack of high-efficient and low-cost management ways. In fact, the international community holds two viewpoints and policy orientations towards cross-border e-commerce retail, which in a certain sense reflects related countries' policy orientations towards trade protection or trade liberalization.

The first viewpoint takes cross-border e-commerce retail as one of major development trends of international trade in future. It thinks that such a trend conforms to the development trend of the Internet economy, and should be given positive support and policy innovation. The main policy thinking is to take it as low-value goods management, to simplify customs, inspection and taxation procedures, and to increase customs import duty exemption thresholds.

The second viewpoint takes cross-border e-commerce retail as a new kind of "gray" or "unfair" trade. It looks at and amplifies problems in the proceed of development through "colored spectacles", strictly criticizes its impact on general trade and exaggerates the problems such as tax evasion and product quality, and is proposed to be restricted.

In recent years, Chinese government and industries have attached great importance to the development of cross-border e-commerce, and regarded it as the new engine of China's economic development in the new period, the new format of industrial transformation, and the new window of the opening up. After several years of development, China has preliminarily established a "systematic and comprehensive" model to regulate cross-border e-commerce retail imports through continuous perfection of policies and systems and new business models, laying a good foundation for promoting the development of cross-border e-commerce in China. Cross-border e-commerce, however, as a new format, requires the Chinese government and the industrial circle to continuously improve policy design for its sound development.

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Fig. 19 China's Policies on Cross-border E-commerce (2012 till now)

Time Prepared by Policy Significance

December 2012 NDRC and General

Administration of Customs

of the P.R.C.

Deployment Meeting on

Cross-border E-commerce

Pilot

Cross-border e-commerce pilot work is

launched preliminarily in Zhengzhou,

Shanghai, Chongqing, Hangzhou and

Ningbo.。

February 2013 State Administration of

Foreign Exchange

Guidance on the Pilot

Program of Foreign Exchange

Payments for Cross-border

E-commerce of Third-party

Payment Institutions

It determines to establish pilot

programs of foreign exchange payments

for cross-border e-commerce of third-

party payment institutions in Shanghai,

Beijing, Chongqing, Zhejiang and

Shenzhen.

August 2013 Ministry of Commerce of

the P.R.C. and other 8

departments

Opinion on Implementing

Policies that Give Support

to Cross-border E-commerce

Retail Exports

It incorporates cross-border e-commerce

retail exports into export trade

statistics, introduces supportive

policies on cross-border e-commerce

retail exports, and puts forward six

concrete measures such as export

inspection and exchange collection and

settlement.

December 2013 Ministry of Commerce of the

P.R.C.

Notice on Taxation Policies

of Cross-border E-commerce

Retail Imports

Cross-border e-commerce retail exports

can enjoy tax refund and exemption

January 2014 General Administration of

Customs of the P.R.C.

Notice [2014]No. 12

issued by the General

Administration of Customs of

the P.R.C., i.e. Notice on

Setting Customs' Regulation

Code

General Administration of Customs of the

P.R.C. especially sets "9610" as the

regulation pattern code for cross-border

e-commerce.

April 2014 State Administration of

Taxation

Announcement on Issues

about Tax Refund (and

Exemption) for Export Goods

of Integrated Trading

Service Enterprise

It specifies conditions where integrated

foreign trade service enterprises

can enjoy tax refund and detailed

requirements in that respect.

April 2014 General Administration of

Customs of the P.R.C.

Notice on Issues about

Online Shopping Bonded

Import Model Used in Cross-

border E-commerce Pilots

It specifies bonded imports and amounts

as well as bonded import operation mode.

July 2014 General Administration of

Customs of the P.R.C.

Notice [2014]No. 56

issued by the General

Administration of Customs

of the P.R.C. i.e. Notice

on Issues about Regulating

Imports and Exports Traded

by Cross-border E-commerce

It further clarifies regulations on

cross-border e-commerce and distinguishes

the concepts of commodities and goods,

to which different regulation proposals

will be taken.

22

Time Prepared by Policy Significance

July 2014 General Administration of

Customs of the P.R.C.

Notice [2014]No. 57

issued by the General

Administration of Customs

of the P.R.C. in 2014, i.e.

Notice on Setting Customs'

Regulation Code

It specifies to add "1210" as customs

regulation pattern code, with the full

name of "Bonded Cross-border E-commerce

Trade", enabling cross-border e-commerce

bonded imports to be legal.

March 2015 The State Council Reply of the Approval of

Establishing Cross-border

E-commerce Comprehensive

Pilots in China (Hangzhou)

It clarifies to make breakthroughs and

give priority to the pilot programs in

each link of cross-border e-commerce,

so as to create a complete industrial

chain and an ecological chain for the

development of cross-border e-commerce

May 2015 General Administration

of Quality Supervision,

Inspection and Quarantine

of the P.R.C.

Opinion on Playing the

Role of Inspection and

Quarantine to Promote the

Development of Cross-border

E-commerce

It provides targeted arrangements and

measures for cross-border e-commerce

inspection and quarantine.

May 2015 General Administration of

Customs of the P.R.C.

Notice on Adjusting Customs

Work Time and Customs

Clearance Time Limit for

Cross-border E-commerce

Regulation

It specifies that working hours and

time limit for customs clearance for

cross-border e-commerce goods. To be

specific, "the Customs should work

throughout the year (365 days) without

holiday and goods should go through

customs clearance procedures within 24

hours upon arrival at customs regulation

place".

January 2016 The State Council Reply of the Approval of

Establishing Cross-border

E-commerce Comprehensive

Pilots in Tianjin and Other

11 cities

It approves to establish cross-border

e-commerce comprehensive pilots in

Tianjin, Shanghai, Chongqing, Hefei,

Zhengzhou, Guangzhou, Chengdu, Dalian,

Ningbo, Qingdao, Shenzhen and Suzhou.

April 2016 Ministry of Finance of

the P.R.C. and other 10

departments

Notice on Taxation Policies

of Cross-border E-commerce

Retail Imports

The tariff is temporarily set as 0%;

VAT and consumption tax are no longer

exempted and will be temporarily levied

by 70% for imports; individual's single

transaction amount is limited to 2000

Yuan and annual transaction amount is

limited to 20,000 Yuan.

May 2016 General Administration of

Customs of the P.R.C.

Notice on Implementing New

Regulation Requirements of

Cross-border E-commerce

Retail Imports

It specifies new requirements to

regulate cross-border e-commerce retail

imports in transition period. The

transition period is one year and will

be ended on May 11, 2017 (including the

11th day)

23

Enclosure 5

Bonded mode for cross-border e-commerce import retail: in July 2014, Bulletin [2014] No.57 by the General Administration of Customs added the customs regulation pattern code “1210”, with the full name of “bonded cross-border e-commerce trade”, or abbreviation of “bonded e-commerce”. The policy, driving birth of bonded mode for import based on cross-border retail, is an important innovation in the model of China’s supervision of cross-border e-commerce.

Flow of bonded mode for import based on cross-border e-commerce retail: overseas merchants on cross-border e-commercial platform transport relevant commodities into the Chinese bonded area in advance via international logistics, provide corresponding information for filing with Chinese customs and national inspection authority, and store the commodities in the bonded warehouses. After Chinese consumers place orders, cross-border e-commerce platform will help submit information on order, shipping documents and payment to customs, gain release from customs after inspection, then transport the commodities ordered to Chinese consumers through domestic express service.

Advantages of bonded mode for cross-border e-commerce import retail

-Advantage in efficiency: reducing intermediate links and cutting down purchase cost and international logistics cost

-Advantage in regulation: changing massive personal purchase and transportation behaviors into centralized purchase and transportation, making them enter national supervision areas, and executing the “three bills in one” system to master relevant information and data, perfect trade statistics, safeguard homeland security and quarantine safety and carry out supervision efficiently.

-Advantage in consumption experience: shortening delivery time and lifting customer’s experience.

6. Outlook of the development of cross-border e-commerce in China

From the practice of the development of cross-border e-commerce in China, we have the following inspiration and outlook:

B2B platform of cross-border e-commerce will be upgraded from an information platform to a trading platform. The provision of integrated foreign trade services will contribute to the accumulation of real trading data, and will help foreign trade enterprises to establish a global network trading credit system and minimize international trade risks. Meanwhile, cross-border e-commerce platform can make effective trade matching based on big data, innovate credit guarantee services, and provide financial and logistic services and other supporting services, which is very imaginative and has a lot of room to grow.

Cross-border e-commerce retail will help global consumers and enterprises freer and more convenient in “buy from and sell to the world”. Traditional trade (M2B2…B2C) will constantly shift to C2B or C2M, and the previous intermediate links relying on information asymmetry will be eliminated gradually. With such a system, producers will be able to connect end consumers directly, carry out customized, driven flexible production according to real-time demands of consumers and markets, and rely on global e-commerce platform, together with professional

24

4、Accenture and Ali Research, Prospects for Global Cross-border B2C E-commerce Market, 2015

trade service providers, to form a netty production and service concerted ecology. Cross-border e-retail is based on Internet and big data, and will gradually develop into a main global trade way with the same weight as B2B. On the one hand, it will surely replace partial traditional B2B trade; on the other hand, it will generate a large number of new trades, which is the general trend of business development brought by technological revolution and will be irreversible.

Cross-border e-commerce service ecology will be more prosperous and healthier in development. Cross-border financial service, cross-border logistics service, comprehensive foreign trade service and derivative cross-border e-commerce service (agency operation, search for key words and optimization, and personnel training and consulting, etc.), big data and cloud computing, etc. will witness rapid centering on cross-border e-commerce platforms.

Cross-border e-commerce will promote formation of new rules and new order of international trade in the times of Internet. By 2020, total consumers with cross-border e-commerce in the world will exceed 900 million4,and global cross-border e-commerce retail will become an important part of international trade, which represents a great change of global trade subjects and trade mode in the times of Internet. Therefore, the international community needs to constantly innovate in trade systems, rules and standards, so as to adapt to the trend of the times featuring leap-forward development of Internet economy and cross-border e-commerce.

Entering 2016, Alibaba Group called on establishment of the Electronic World Trade Platform (eWTP), so as to conform to the trend in our times, better help global SMEs develop, promote growth of inclusive trade and data economy, and incubate new rules for global trade in the times of Internet. The eWTP initiative has won active response and high identification from the international community, many international organizations including UN bodies, government authorities, industrial and commercial circles, think-tank scholars and consumer groups, and gained support and recognition by G20 trade ministers in July 2016.

25

Appendix: Research Method

ECI Index = ECI Import Index + ECI Export Index

ECI Import Index = Import scale score * weight + import penetration rate score * weight

ECI Export Index = Export scale score * weight + export penetration rate score * weight

A country’s import/export scale and penetration rate scores are calculated according to Alibaba’s big data on cross-border e-commerce (2015 full-year inquiries and turnover) and imports/exports between the country and China, with scale score range of 0-50 and penetration rate score range of 0-50.

ECI Import Index

ECI Export Index ECI Index

Import scale

score

Scale score

Penetration

rate

Export scale

score

Importpenetration

rate

Exportpenetration

rate

26

About Mentors and Authors of the Report

Mentors:

Hongbing Gao -Vice President of Alibaba Group, Director of AliResearch

Jian Yang - Deputy Director of AliResearch

Authors:

Yan Xue - Senior Analyst of AliResearch, Deputy Director of Ali Cross-border E-commerce Research Center

Cheng Ouyang - Executive Expert of AliResearch, Director of Ali Cross-border E-commerce Research Center

Hongjie Wan - Data Mining Engineer of AliResearch

Zhengwei Jiang - Data Mining Expert of AliResearch

Acknowledgments

This report would not have been possible without the efforts of our AliResearch colleagues Liang Chen, Zhoupei Xie, Yonghua Pan, Xin Cheng, and Lingxiao Zhang, as well as our Alibaba Group colleagues Peng Liu, Nan Zhou, Wei Liu and Wei Dou.