CBEC giants like Alibaba, Tencent and JD.com, and e-commerce players Tiktok and Xiaohongshu, have grown their footprints in emerging markets, especially Southeast Asia. Here, they profit from booming local digital economies and young populations. According to a 2022 report on the region’s digital economy jointly released by Google, Temasek and Bain, total Southeast Asian e-commerce transaction volume reached US$131 billion in 2022, growing by 16 percent y-o-y, and expected to reach US$211 billion by 2025.
Intense competition among local and PRC e-commerce platforms is crowding the ASEAN market, but logistics services still present a huge potential. JD.com may have shut down its e-commerce businesses in Indonesia and Thailand at the beginning of 2023, but its local storage and logistics arm remains active. Alibaba’s presence in ASEAN is run by AliExpress and Lazada, a local e-commerce platform acquired by Alibaba in 2016, with a local delivery network. Currently, Cainiao Logistics and Lazada co-run over 400,000 square metres of bonded warehouses covering six ASEAN countries.
The lack of adequate transport infrastructure, modern digital payment methods and a skilled labour force are outstanding challenges facing PRC e-commerce logistics expansion in Southeast Asia.
On the other hand, RCEP (Regional Economic Partnership Agreement) that came into force in January 2022, presents Chinese CBEC firms with new opportunities in China-ASEAN trade
- reduced tariffs on imported raw materials and intermediate goods
- unified rules of origin, customs procedure, quarantine and inspection requirements and technical standards, etc.
- streamlined cross-border logistics via simplified customs clearance and authorised economic operator (AEO) mutual recognition; will face little competition from nascent local logistics industries
- comprehensive IP regulations and dispute settlement mechanisms
In addition, emerging markets in Latin America, Middle East and Southeast Asia, such as Brazil, Mexico, Gulf countries, Kenya, etc, have been targeted by PRC e-commerce giants and logistics firms as the next growth points. Jitu Express 极兔速递, China’s top express delivery firm, set up in Brazil in May 2022. Its international services network offers customs clearance storage and ‘last mile’ delivery services to Chinese CBEC sellers with independent websites.
E-commerce has streamlined, digitised and personalised cross-border transactions. If done well, this should ensure direct and faster global delivery of tailored products from the PRC. If local regulation allows, sellers’ own websites and PRC-run overseas warehouses should underpin trade with PRC brands that will become ubiquitous in some markets. PRC agencies wholeheartedly support the sector’s growth in emerging markets, above all in Southeast Asia, where RCEP is cutting transaction red tape.
Beijing is stepping up its ambitions to lead the drafting of global digital services trade rules, recognising they are critical to the longterm sustainability of the CBEC industry. But shrinking global demand and an increasingly political trade environment are challenging business strategies. Transforming from a quantity to a quality and innovation business model is ever more urgent in an overcrowded and costly sector. IP infringements remain conspicuous. PRC firms need to raise their game in compliance, standards, and risk, to hold onto e-commerce markets.