Li Keqiang Strongly Promotes Rural E-commerce, Seizing the Key to Boosting Consumption

At a time when the positive trend in consumption growth is not yet solid and downward pressure on the economy remains undiminished, the Chinese government has decided to accelerate the development of rural e-commerce in order to boost consumption growth.

Chinese Premier Li Keqiang chaired an executive meeting of the State Council on the 14th, calling for accelerated development of rural e-commerce, expansion of e-commerce applications in agriculture and rural areas, and encouragement of social capital, supply and marketing cooperatives and other entities of all kinds to build agriculture-related e-commerce platforms.

This is the first time this year that Li Keqiang has made accelerating rural e-commerce development a separate agenda item for special planning and deployment at an executive meeting of the State Council.

It is worth noting that since 2015, the Chinese government has frequently handed out "red envelopes" for rural e-commerce. After the State Council issued a document calling for actively developing rural e-commerce and strengthening the integrated development of the internet with agriculture and rural areas, the Ministry of Commerce released the "Internet Plus Circulation" action plan in May, proposing to further improve wired broadband and mobile network coverage, logistics distribution networks and other e-commerce infrastructure, and to support the development of the rural e-commerce service industry.

The government's growing emphasis on rural e-commerce development is closely related to the current weak domestic demand.

Official data show that after rebounding to 2% in August, a new high for the year, the monthly increase in the consumer price index (CPI) fell back into the "1 era" in September. Although year-on-year consumption growth in August rose 0.3 percentage points from the previous month, the foundation for the rebound is not solid. As Lin Tao, a senior statistician at the Department of Trade and External Economic Relations of the National Bureau of Statistics of China, put it, the rebound in consumption growth was related to rising retail prices and was not entirely caused by a recovery in consumption. If price factors are excluded, the real growth rate of total retail sales of consumer goods in August was flat compared with the previous month.

Under these circumstances, the executive meeting's call to accelerate the development of rural e-commerce will serve as a "four ounces moving a thousand catties" move to promote consumption and expand domestic demand.

As of 2014, the nominal growth rate of total retail sales of consumer goods in rural China had exceeded that of urban areas for three consecutive years. Zhao Ping, deputy director of the Department of Consumption Economics at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, told reporters that the rapid growth of rural consumption has a clear pulling effect on overall consumption growth. "Against the backdrop of the current slowdown in economic growth, to give full play to consumption's role in boosting economic growth, we must stabilize rural consumption."

And e-commerce is precisely a major bright spot in rural consumption. Data from the China Internet Network Information Center show that as of December 2014, the number of online shopping users among rural internet users in China was 77.14 million, with an annual growth rate of 40.6%; during the same period, the online shopping usage rate among rural internet users was 43.2%, up 12.1 percentage points from the previous year.

AliResearch estimates that by 2016 the national rural online shopping market is expected to grow to 460 billion yuan (RMB, the same below), becoming a new growth point for the market.

Zhao Ping said that rural e-commerce experts are far more willing to accept new products than those in first- and second-tier cities, and the intensity of rural willingness to accept e-commerce is also higher than in urban areas. In view of this, stepping up efforts to develop rural e-commerce will be more conducive to stimulating consumption and stabilizing economic growth.

Rural areas are both a major buyer market for e-commerce and have huge sales potential. In recent years, "Taobao villages" with annual e-commerce transaction volumes exceeding 100 million yuan have been constantly emerging, and more and more farmers are beginning to use the internet to open up sales channels and sell their own agricultural products across the country. Qingyanliu village in Yiwu, Zhejiang, known as the "No. 1 online store village," originally had more than 1,400 villagers. In 2014, it opened more than 1,800 Taobao online stores, accommodating more than 8,000 people in employment. As early as 2013, its online transaction volume had already reached 800 million yuan.

Undoubtedly, e-commerce plays a "multiplier" role in increasing farmers' incomes and promoting rural economic development, which will also pave the way for the steady and healthy development of China's economy.