First policy guidance on rural e-commerce issued: support for various types of capital to participate in the entire industry chain

The first document to comprehensively deploy rural e-commerce has officially been released.

On August 31, 19 departments including the Ministry of Commerce, the National Development and Reform Commission, and the Ministry of Industry and Information Technology jointly issued the "Guidance on Accelerating the Development of Rural E-Commerce" (hereinafter referred to as the "Guidance").

"This is the first time the Ministry of Commerce has specifically proposed guidance on rural e-commerce development. Although the industry calls it a blue ocean, by the first half of this year China's rural e-commerce accounted for only about 2.5% of total agricultural product sales, while e-commerce sales in other sectors generally account for more than 20%," Zhang Li, deputy director of the E-Commerce Research Department at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said in an interview with 21st Century Business Herald.

Compared with this year's No. 1 Central Document, which proposed "supporting e-commerce, logistics, commerce, finance and other enterprises to participate in the construction of agriculture-related e-commerce platforms," this "Guidance" opens up more to social capital, not only encouraging various types of capital to develop rural e-commerce, but also further explicitly proposing to "support e-commerce, logistics, commerce, finance, postal services, express delivery and other various types of social capital in strengthening cooperation."

Policies repeatedly stepping up support for rural e-commerce

As a new business model, from 2010 to 2015, content such as "developing e-commerce," "strengthening the construction of agricultural product e-commerce platforms," and "carrying out comprehensive demonstrations of e-commerce entering rural areas" all explicitly appeared in the No. 1 Central Documents.

Since the beginning of this year, support policies for rural e-commerce have continued to intensify. In May, the State Council specifically issued the "Guidance on Vigorously Developing E-Commerce and Accelerating the Cultivation of New Economic Momentum"; subsequently, the Ministry of Commerce also successively formulated the "Internet Plus Circulation" Action Plan, specifying that within 1-2 years, 200 comprehensive demonstration counties for e-commerce entering rural areas would be created and cultivated nationwide, with the annual average growth of e-commerce transaction volume in demonstration counties no less than 30% on the existing basis.

Recently, the central government finances have allocated 3.7 billion yuan in support funds to 200 counties in 26 provinces, mainly in the central and western regions, to carry out the 2015 comprehensive demonstration of e-commerce entering rural areas.

Rural e-commerce not only provides a publicity platform for agricultural product sales, but also further opens up the supply chain, which is conducive to agricultural products "going out" and to expanding the rural consumer market in both directions. However, in the view of Cui Pengliang, an analyst in the Huinong E-Commerce Department of Zhuochuang Information, based on factors such as the short shelf life of agricultural products themselves and transportation efficiency, "for farmers, the Internet is more just a publicity platform, and the actual effect of online driving offline consumption is not obvious."

Compared with the vigorous development of e-commerce in China today, the rural consumption of nearly 600 million people presents an asymmetric pattern of a "large market" and "small farmers," and rural e-commerce development is currently still in its initial stage.

"The penetration rate of rural e-commerce is still very low. Taking logistics costs, known as the CPU of e-commerce, as an example, in some places the single delivery cost is around 10 yuan, even higher than the selling price of the product itself," Zhang Li found during research that at present China's e-commerce entering rural areas needs to overcome layer upon layer of obstacles, including farmers' acceptance of Internet business models, the construction of rural network and other infrastructure, logistics distribution efficiency, product standardization, talent and management experience, and many other hurdles.

In response to the problems existing in the current development of rural e-commerce, the "Guidance" proposed 10 measures from aspects including cultivating diversified e-commerce market entities, strengthening rural e-commerce infrastructure construction, and creating an environment for rural e-commerce development: first, support e-commerce, logistics, commerce, finance and other various types of capital in developing rural e-commerce; second, actively cultivate rural e-commerce service enterprises; third, encourage farmers to start businesses relying on e-commerce; fourth, strengthen the construction of rural broadband, roads and other infrastructure; fifth, improve rural logistics distribution capacity; sixth, build multi-level development platforms; seventh, increase financial support; eighth, strengthen the training of rural e-commerce talent; ninth, regulate the order of the rural e-commerce market; tenth, carry out demonstration publicity and promotion.

Encouraging various types of capital to participate across the entire industry chain

It is worth noting that the 10 measures put support for e-commerce, logistics, commerce, finance, postal services, express delivery and other various types of social capital in strengthening cooperation in first place, showing that the next step in developing rural e-commerce will further increase openness to social capital.

"Because for a long time the scale of many external capital flows into the agricultural sector has still been insufficient. In recent years the government has begun to increase social capital investment in agriculture, but could not find direction and investment points, so this time one investment point has been encouraged —— rural e-commerce," Zhang Li said. "This not only indicates the government's investment direction, but also shows that during the '13th Five-Year Plan' period, 'Internet Plus Agriculture' may see major development."

In Zhang Li's view, rural e-commerce itself is a long investment chain, and is not only about building e-commerce platforms, but also includes a series of industries such as rural e-commerce logistics, standardized packaging of agricultural products, inspection and testing of agricultural products, and research and development of agricultural products. Social capital can invest around these fields, and the profit space is considerable.

A recent research report by BOC International showed that by 2014, China's rural e-commerce had developed rapidly, and agriculture-related transaction e-commerce companies had reached nearly 4,000. AliResearch predicts that by 2016 the total national rural online shopping market may exceed 460 billion yuan.

With policy support plus market demand, rural e-commerce will usher in explosive growth in the future, and the capital market is also moving accordingly. On July 20, Suning Commerce joined hands with Chongqing, becoming Chongqing's first rural e-commerce strategic partner; on July 31, Alibaba partnered with Shaanxi, and the two sides signed a strategic cooperation framework agreement to focus on fields such as e-commerce and smart logistics.

"The entry threshold for rural e-commerce is relatively low, and rushing to establish a presence can easily lead to disorderly competition, causing mutual destruction," Zhang Li warned, saying that future investment in rural e-commerce needs to be combined with local agricultural characteristics to avoid the phenomenon that "when no one does it, it is hard for everyone to do it, and when everyone does it, there is disorderly competition."