Nov

8

India vs China- Comparison on E-Commerce potential

Filed Under E-Business, Energy, Healthcare, India Investment Opportunities, India vs China, Indian Companies, Intellectual Property, Internet in India, Mobile Telecom, New Media, Training & Education | Leave a Comment

The two giant Asian economies are competing on every front to be the biggest one in the world. One significant aspect of this race lies in E-Commerce. Both these economies are expected to have more Internet users than the U.S. by 2010.

While India got its first taste of Internet in 1986, establishing ERNET, China got Internet connectivity as late as 1993. But within one year it had 3.5 times as many Internet users as India. Despite the huge difference in numbers, the Economist Intelligence Unit (EIU) puts India in the group of “E-business followers” and China in the group of “E-business laggards”. The most apparent reasons for this difference are the government policies. China has only one guarded access to the World Wide Web. Internet users cannot access a range of foreign web sites. Domestic web sites are checked at the source through a registration process and content monitoring. This has hampered adoption of the Internet for a variety of commercial uses.

In India, on the other hand, while the government has been criticized for its late awakening to cyber laws, the initial un-monitored period proved a boon for E-Commerce. Though post 2000, India has taken measures to keep a check on the happenings on the Internet. A report by the Electronic Privacy Information Center (EPIC) discusses Indian government’s efforts to compel users to disclose keys or decrypted files to government agencies. Also, India’s IT Bill has a special section on offences dealing with the publication or transmission of “obscene material”.

Table 1: Relative advantages and disadvantages of China and India in Internet Development

Relative advantage

Relative disadvantage

China

Higher per capita GDP

No e-commerce and digital signature laws

Higher investment in telecom sector resulting in higher tele-density

Higher international bandwidth

Control on Internet content

Self-dependent in most IT products

Cheaper Internet access rates

India

Well-developed private sector with both domestic companies and conglomerates

Less Political leadership to create an E-Business hub in India.

Democratic tradition and transparent legal system

Stifling bureaucracy and red tape (though much reduced than 10 years back)

Large middle class aware of global brands

Large English speaking work force

Higher illiteracy rate

Extensive networks of contacts created by expatriates

World leader in software development and IT services

Numerous different languages to be addressed to reach the full range of population


Factors such as larger population, higher per capita GDP, indigenously produced IT products, well-developed data network, and higher international bandwidth make Chinese market more attractive for several e-commerce applications. The penetration rates of mobile and broadband technologies in China. In particular, China has a bigger market for applications such as stock trading and financial transactions. China’s recent entry in the WTO has further increased its telecom and Internet development potential. However, unlike India, China does not yet have formal laws to govern e-commerce transactions and companies have to rely on conventional laws in case of disputes.

On the other hand, availability of 50 million intelligent English speaking workforce at cheap rates, a large proportion of that being computer literate, make India an attractive place for outsourcing. Companies located in developed countries can significantly reduce their operating costs by employing Indian tele-workers in less critical steps of the value chain such as back-office services as well as in higher value-added services such as design and engineering and education. The upcoming bandwidth boom in India will further increase the tele-working potential by enhancing the quality of telecom services.

Since a large proportion of Chinese view information written in Chinese language, the best way to target Chinese Internet users is to provide content in Chinese language. Whereas about 50 million of Indians are fluent in English, remaining 950 million speak more than 500 different local dialects and the success of a company is a function of its ability to identify the linguistic segments that can be served profitably. But for any company looking to enter, it does put India at a severe disadvantage.

Unlike in western countries, most of the transactions in China and India are conducted on cash basis and thus e-commerce companies are required to provide alternatives such as cash on delivery, wire transfers and checks to facilitate e-commerce. This is quite different from the west, where plastic money has been in use for long, and online transactions have more or less been accepted as safe.

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