China Daily European Weekly - - Front Page - By DAVID BLAIR david­blair@chi­

E-com­merce al­le­vi­at­ing poverty by help­ing ‘Taobao vil­lage’ farm­ers sell to, and buy from, ci­ties “What we now face is the con­tra­dic­tion be­tween un­bal­anced and in­ad­e­quate de­vel­op­ment and the peo­ple’s ever-grow­ing needs for a bet­ter life.” XI JIN­PING Gen­eral sec­re­tary of the CPC Cen­tral Com­mit­tee

Vil­lage en­trepreneurs are us­ing China’s bur­geon­ing e-com­merce mar­kets to cre­ate new op­por­tu­ni­ties for them­selves and their neigh­bors by sell­ing spe­cial­ized agri­cul­tural goods, cul­tural hand­i­works or light in­dus­trial prod­ucts on­line. By the end of 2017, more than 1.3 mil­lion new jobs had been cre­ated by ru­ral e-com­merce na­tion­wide, and to­tal trans­ac­tions hit 120 bil­lion yuan ($18.7 bil-

lion; 15.2 bil­lion eu­ros; £13.5 bil­lion) in 2017, ac­cord­ing to Alibaba re­search.

The num­ber of “Taobao vil­lages,” in which at least 10 per­cent of the pop­u­la­tion sells goods on Alibaba’s on­line plat­form with rev­enues of at least 10 mil­lion yuan, has soared from 20 in 2013 to more than 2,100 in 2017.

The nation’s top lead­er­ship is strongly fo­cused on im­prov­ing the liv­ing con­di­tions of ru­ral res­i­dents. In his re­port to the 19th Na­tional Congress of the Com­mu­nist Party of China in Oc­to­ber, Gen­eral Sec­re­tary Xi Jin­ping said, “What we now face is the con­tra­dic­tion be­tween un­bal­anced and in­ad­e­quate de­vel­op­ment and the peo­ple’s ever-grow­ing needs for a bet­ter life.”

In a De­cem­ber speech at the Min­istry of Trans­port, Xi urged trans­porta­tion au­thor­i­ties na­tion­wide to be ded­i­cated to the con­struc­tion and main­te­nance of ru­ral roads to speed up ru­ral mod­ern­iza­tion.

Also in De­cem­ber, the Na­tional De­vel­op­ment and Re­form Com­mis­sion and the Asian De­vel­op­ment Bank held a work­shop in Bei­jing to present the con­clu­sions of a two-year re­search project on “Ru­ral Eco­nomic Trans­for­ma­tion with In­ter­net Plus.”

The re­port said e-com­merce has the po­ten­tial to tran­sform ru­ral life, but also pointed out the need to over­come big ob­sta­cles. In many ar­eas, the roads, broad­band and cold-chain in­fra­struc­ture needed to move prod­ucts to mar­ket are not yet de­vel­oped. Small farm­ers are also hav­ing prob­lems in the food safety cer­ti­fi­ca­tion process. And many ru­ral res­i­dents need fur­ther busi­ness and tech­ni­cal ed­u­ca­tion to ex­ploit op­por­tu­ni­ties fully.

Wu Xiao, di­rec­tor-gen­eral of ru­ral econ­omy for the NDRC, kicked off the Bei­jing work­shop by not­ing that the nation is work­ing on a tar­geted strat­egy for trans­form­ing ru­ral ar­eas through e-com­merce and in­ter­net plus farm­ing tech­nolo­gies. In or­der to let ru­ral res­i­dents share the ben­e­fits of de­vel­op­ment, ways need to be found to co­or­di­nate in­dus­trial chains and mar­ket­ing, to in­crease the scale of pro­duc­tion, and to cre­ate brands and make agri­cul­ture more com­pet­i­tive, he said.

Be­fore e-com­merce, ru­ral res­i­dents had to buy con­sumer goods and farm­ing ma­te­ri­als alike from lo­cal stores or mid­dle­men. For many highly spe­cial­ized prod­ucts, there was no way for sell­ers to find buy­ers in ci­ties.

Us­ing e-com­merce plat­forms, some vil­lagers have built busi­nesses sell­ing tra­di­tional hand­i­works. For ex­am­ple, the peo­ple of Xin­hua vil­lage in Yun­nan province make sil­ver­ware us­ing tech­niques passed down since the Tang Dy­nasty (618-907). Sell­ing on Taobao, and other plat­forms, they have in­creased their in­comes while pre­serv­ing the nation’s in­tan­gi­ble cul­tural her­itage.

Other vil­lages are able to sell spe­cial­ized agri­cul­tural prod­ucts di­rectly to city buy­ers. Yonghe county in Shanxi province spe­cial­izes in pro­duc­ing ju­jubes, also known as Chi­nese dates. In 2015, Yonghe har­vested 20,000 met­ric tons of ju­jubes but was able to sell only about half. Many of the ju­jubes rot­ted on the ground be­cause there was no way to con­nect buy­ers to pro­duc­ers.

Ac­cord­ing to the on­line jour­nal chi­na­di­a­, Liu Dong­dong, a Yonghe na­tive who had mi­grated for work to the pro­vin­cial cap­i­tal of Taiyuan af­ter earn­ing his univer­sity de­gree, re­turned to his na­tive vil­lage to start an on­line store sell­ing ju­jubes to buy­ers through­out China.

Other en­trepreneurs have been able to turn their vil­lages into light-in­dus­trial clus­ters spe­cial­iz­ing in one prod­uct. For ex­am­ple, start­ing in 2013, the vil­lage of Daiji in Shan­dong province, which was pre­vi­ously a highly im­pov­er­ished area, has trans­formed it­self into the na­tional cen­ter for mak­ing act­ing and dance cos­tumes.

In many vil­lages, a sin­gle en­tre­pre­neur first de­vel­oped an on­line busi­ness and then was fol­lowed by the growth of a clus­ter of sim­i­lar busi­nesses and sup­pli­ers in the area.

Goods don’t just flow from the vil­lages to the ci­ties. More than half of China’s ru­ral res­i­dents now shop on­line. In the first eight months of 2017, ru­ral on­line re­tail sales reached 729 bil­lion yuan, an in­crease of 38.1 per­cent, ac­cord­ing to chi­nain­ter­net­

Farm­ers’ ef­fec­tive liv­ing stan­dards soar when they get ac­cess to cheaper, bet­ter and more var­ied goods than are avail­able at the lo­cal gen­eral store. In The Rise and Fall of Amer­i­can Growth, econ­o­mist Robert Gor­don de­tails how 100 years ago, ru­ral life in the United States was trans­formed by Sears cat­a­log mail-or­der stores and other na­tional re­tail­ers. A sim­i­lar change is now hap­pen­ing in ru­ral China.

The po­ten­tial for in­ter­net tech­nol- ogy to tran­sform ru­ral life is just now be­ing tapped. The growth rate of Taobao vil­lages, where much of the pop­u­la­tions sells on­line, is very fast, but they still num­ber only 2,100 out of the more than 600,000 ad­min­is­tra­tive vil­lages through­out the coun­try.

Cur­rently, 90 per­cent of Taobao vil­lages are con­cen­trated in east­ern coastal prov­inces, and more than 70 per­cent are in south­ern China, es­pe­cially in the highly com­mer­cial prov­inces of Guang­dong and Zhe­jiang, ac­cord­ing to Alibaba re­search.

A to­tal of 1.28 mil­lion kilo­me­ters of ru­ral roads have been built in the past five years, ac­cord­ing to the Trans­port Min­istry. But fur­ther im­prov­ing ru­ral in­fra­struc­ture is a key goal of top na­tional lead­ers and gov­ern­ment agen­cies.

Yang Guangyun, gen­eral man­ager of the Ru­ral E-com­merce Op­er­a­tions Cen­ter in the Zhenyuan Yi, Hani and Lahu au­ton­o­mous county in Yun­nan province, says: “Without de­vel­op­ing the ru­ral ar­eas, there is no speak­ing of de­vel­op­ing the en­tire nation. It’s a long way to go. We need the sup­port of the gov­ern­ment and uni­ver­sal train­ing pro­grams for the lo­cal peo­ple. We are still short of tal­ent and have very weak in­fra­struc­ture. It’s easy for in­dus­trial prod­ucts to reach the coun­try­side, but it’s not easy the other way around.”

An­other prob­lem em­pha­sized at the Na­tional De­vel­op­ment and Re­form Com­mis­sion-Asian De­vel­op­ment Bank work­shop is that Alibaba’s Taobao may have a near mo­nop­oly as a sales plat­form for many vil­lages, and many fees are too high for small pro­duc­ers.

How­ever, Zhang Ruidong, di­rec­tor of ru­ral af­fairs for Alibaba Group, says the com­pany is cur­rently los­ing money on its Taobao vil­lage pro­grams, since large in­vest­ments are needed to build e-com­merce cen­ters through­out the coun­try.

The com­pany’s Ru­ral Taobao arm is train­ing Taobao as­sis­tants in vil­lages and build­ing lo­gis­tics branches in ru­ral ar­eas, says Li Tianyu, a project man­ager at Ru­ral Taobao. It is also pro­mot­ing agri­cul­tural prod­ucts on the front pages of on­line shop­ping web­sites, pro­vid­ing un­se­cured loans for farm­ers and an­a­lyz­ing big data to pro­vide feed­back to help farm­ers to im­prove pro­duc­tion ef­fi­ciency, says Li.

As of March last year, the com­pany had es­tab­lished a pres­ence in 600 coun­ties, cov­er­ing 30,000 vil­lages in 29 prov­inces or pro­vin­cial-level re­gions.

Ac­cord­ing to the NDRC-ADB re­port, many farm­ers face dif­fi­cul­ties in learn­ing how to mar­ket their prod­ucts on­line.

“They get used to in­ter­act­ing with the peo­ple they are fa­mil­iar with in the trans­ac­tions and sales of their prod­ucts, but in e-com­merce they are fac­ing a kind of in­tan­gi­ble cus­tomer,” says Wang Libin, pro­fes­sor of ru­ral de­vel­op­ment at China Agri­cul­tural Univer­sity and team leader of the NDRC-ADB re­search. “They can­not ac­tu­ally see them or talk to them, so it is dif­fer­ent from their old way of sell­ing. They don’t know how to at­tract cus­tomer vis­its to their on­line stores.”

How­ever, many farm­ers do have the skills to grab mar­ket op­por­tu­ni­ties. For ex­am­ple, Wu Yim­ing, a rice farmer from Xinzhuang, Jilin province, says he has been to Bei­jing once and was dis­ap­pointed by the rice he ate in restau­rants.

“I use the best type of rice seed, which comes from the coun­try’s north­east. The rice smells great when be­ing boiled and tastes soft and good. Peo­ple liv­ing in ci­ties like Bei­jing and Shang­hai can hardly get such good rice in su­per­mar­kets,” Wu says.

“I saw that the price of rice from the north­east reached more than 30 yuan per kilo­gram. That is triple what I can of­fer.” Wu says that’s where the idea of open­ing a Taobao store be­gan for him.

Al­though a new food safety law was en­acted in Oc­to­ber 2015, re­quir­ing that any­one sell­ing food on­line, ex­cept for un­pro­cessed agri­cul­tural prod­ucts, must have a li­cense, the need for such cer­ti­fi­ca­tion has been an ob­sta­cle for small farm­ers who want to sell on­line.

The NDRC-ADB re­port says the prob­lem of li­cens­ing non­stan­dard food is “very prom­i­nent in Gansu and Yun­nan prov­inces”. It goes on to say that “the tra­di­tional work­shop-style process will be re­placed by fac­tory pro­duc­tion, which will have a huge im­pact on tra­di­tional lo­cally pro­cessed spe­cialty food. It is very dif­fi­cult to main­tain the orig­i­nal taste and fla­vor of the food.”

Lan Haitao, co-au­thor of the NDRCADB re­port and an agri­cul­tural eco­nom­ics ex­pert and se­nior re­searcher at the In­sti­tute of In­dus­trial Econ­omy and Tech­ni­cal Econ­omy, a re­search in­sti­tute af­fil­i­ated with the NDRC, says the gov­ern­ment needs to at least dou­ble its cur­rent in­vest­ment in ru­ral in­fra­struc­ture.

“Farm­ers are very clever. ... But they have many prob­lems they can­not solve by them­selves. They need the gov­ern­ment to help them to solve pub­lic prob­lems. This is a pub­lic pol­icy prob­lem, not a mar­ket prob­lem,” he says.

In 2014 and 2015, 256 coun­ties were se­lected by the Min­istry of Com­merce for pi­lot­ing of e-com­merce in ru­ral ar­eas. Pi­lot coun­ties re­ceived, on av­er­age, 18.75 mil­lion yuan from the cen­tral gov­ern­ment for ru­ral lo­gis­tics, e-com­merce ser­vice sta­tions and pri­mary pro­cess­ing fa­cil­i­ties, as well as qual­ity con­trol sys­tems and help with brand es­tab­lish­ment.

The July 2016 Na­tional In­forma­ti­za­tion De­vel­op­ment Strat­egy Out­line said that “we should con­tinue to vig­or­ously develop ru­ral e-com­merce to drive the de­vel­op­ment of ru­ral in­dus­tries in poverty-stricken ar­eas”. In ad­di­tion, a Novem­ber 2016 guid­ance from the State Coun­cil, China’s Cab­i­net, called for a qua­dru­pling of ru­ral e-com­merce sales by 2020.

The Dec 13 ex­ec­u­tive meet­ing of the State Coun­cil fo­cused on projects that will sup­port the de­vel­op­ment of new busi­ness en­ti­ties in agri­cul­ture. Tax and fi­nan­cial pref­er­ences, land poli­cies and train­ing pro­grams will be drawn up to cul­ti­vate new types of pro­fes­sional farm­ers and spur en­trepreneur­ship and in­no­va­tion in ru­ral ar­eas.

The Min­istry of Agri­cul­ture fol­lowed up by an­nounc­ing that it will help new agri­cul­tural busi­nesses with fi­nan­cial sup­port and will train more than 1 mil­lion farm­ers in busi­ness and en­trepreneur­ship skills.

De­spite the ob­sta­cles, ex­perts are bullish on e-com­merce’s role in rais­ing in­comes and cre­at­ing op­por­tu­ni­ties in ru­ral ar­eas.

Jan Hin­richs, a nat­u­ral re­source econ­o­mist at the Asian De­vel­op­ment Bank who is the point man for the bank’s e-com­merce loans in North­west China’s Gansu province, is op­ti­mistic about the prospects for ecom­merce-based agri­cul­ture there.

“One of the ob­sta­cles is the lo­gis­tics chal­lenge,” Hin­richs says. “You just have to re­duce de­liv­ery times. But, then, the ad­van­tage is that you have spe­cial prod­ucts — you have spe­cial nuts, you have mil­let, you have ap­ples of a spe­cial sweet taste that come out of these cli­mates. They may not re­ceive the same rev­enues as on the east coast any­time soon ... but it will slowly im­prove.”

Wang Libin from China Agri­cul­tural Univer­sity says things are im­prov­ing in the west­ern ar­eas. “Things are get­ting bet­ter, our gov­ern­ment has in­vested a lot for the in­fra­struc­ture such as roads and broad­band. In terms of the ad­min­is­tra­tive vil­lage, the cov­er­age is good. But if you go to the sub­vil­lage, the nat­u­ral vil­lage and marginal­ized moun­tain ar­eas, it is still a prob­lem.

“It’s a big chal­lenge in terms of in­fra­struc­ture. But I think you will see a lot of im­prove­ment 10 years from now,” she says.



The vi­su­al­ized agri­cul­tural big data sys­tem at An­hui Qianmo Net­work Tech­nol­ogy Co, Ltd.

Top: E-busi­ness ser­vice cen­ter at Gucheng town­ship of Zhenyuan, Yun­nan province. Above: Work­ers pack pre­served duck eggs for on­line sales at Chuda Duck In­dus­try in Yicheng, Hubei province.

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