Rural e-commerce development unlocks a rural consumer market worth hundreds of billions

On October 14, Premier Li Keqiang of the State Council presided over an executive meeting of the State Council, deciding to improve the compensation mechanism for universal broadband and telecommunications services in rural and remote areas to narrow the urban-rural digital divide; deploying accelerated development of rural e-commerce, and promoting consumption and benefiting people's livelihoods by strengthening new business forms; and determining measures to promote the development of the express delivery industry and cultivate new growth points for the modern service industry. 

The three items proposed at the State Council executive meeting, including achieving 98% broadband coverage in administrative villages, are important measures to promote the deep integration of agricultural modernization and informatization. Increasing broadband coverage in remote rural areas means advancing the informatization of rural areas, agriculture and farmers; developing rural e-commerce means giving the informatization of agriculture, rural areas and farmers a concrete economic development format. It is an important vehicle for the informatization of the rural economy, and the development of rural e-commerce must rely on informatization. Promoting the development of the express delivery industry plays a supporting role in the development of rural e-commerce, because the development of rural e-commerce requires a developed and secure logistics system.

At a time when downward pressure on the economy is obvious and economic growth needs new momentum, the State Council executive meeting focuses on the rural consumer market and promotes rural development and farmer consumption, which is of great significance to China's economic transformation.

First, rural areas are a huge market. China has more than 800 million farmers, but the consumption capacity of these more than 800 million farmers is not strong, and their willingness to consume has not been stimulated, resulting in insufficient consumption in the rural market. If the consumption of more than 800 million farmers is mobilized, it will have a huge pulling effect on economic growth. Moreover, when rural areas become prosperous and farmers have money to spend, it will also help narrow the urban-rural gap, and it is an important manifestation of development benefiting the people.

Second, in recent years e-commerce has developed rapidly, and its scope of operation has already reached agriculture, rural areas and agricultural products, which has also laid the foundation for further development. In terms of agricultural product trading, in 2014 there were 17 varieties of agricultural product online futures, with a trading volume of 2.186 billion lots and a transaction value of 32.29 trillion yuan; there were 300 bulk agricultural product commodity trading markets, with a transaction value of 15 trillion yuan, an increase of 50%; the Ministry of Commerce's government online agricultural product trade fair had a transaction value of 11.03 billion yuan; and online retail sales of agricultural products were about 100 billion yuan, an increase of nearly 50%. In the next five years, China's agricultural product e-commerce transaction value will account for 5% of agricultural product transaction value, cross-border agricultural product e-commerce transaction value will account for 1%, and agricultural product mobile commerce transaction value will account for 2%. The prospects for rural e-commerce development are very broad.

Third, in the construction of rural logistics networks, all parties are also making efforts. On the one hand, the postal service has traditional advantages. According to statistics, China Post has 35,000 outlets in rural areas, and basically every township has postal outlets and institutions, and these institutions have 250,000 convenience service stations, 110,000 “three rural” service stations, and 90,000 village postal stations in rural areas. On the other hand, other express delivery companies are also actively laying out operations in rural areas to seize share of the rural express delivery market. The gradual completion of the logistics network system will meet the logistics needs of rural e-commerce.

Of course, at present there is still a gap between agricultural and rural development and that of cities. The development of rural e-commerce faces problems such as informatization constraints, excessively high e-commerce transportation costs, slower logistics speeds, farmers' low level of scientific and technological knowledge, and their difficulty adapting to emerging economic formats. Especially in the development of e-commerce, enterprise operating costs are too high and profit space is limited. According to statistics, there are currently nearly 4,000 domestic agricultural product e-commerce businesses, but among those 4,000, only 1% are profitable, 7% have huge losses, 88% have slight losses, and 4% break even. This situation determines that the state must, from the perspective of major strategic development such as narrowing the urban-rural development gap, increasing the supply of rural public goods, and unleashing the rural consumer market, promote the deep integration of agricultural modernization and informatization and cultivate emerging economic development formats such as rural e-commerce, so as to increase farmers' income and improve their lives. The arrangements and government support measures made by the State Council executive meeting embody such a strategic deployment.