By Julius Černiauskas, CEO at Oxylabs
However, the very nature of the global digital economy makes it unlikely that one region's dominance will go unchallenged. Over the years, China has built itself up as a challenger to be reckoned with. Its e-commerce has been successful both in the West and in the huge domestic market, while Westerners struggle to compete in the latter. However, China's influence in cyberspace goes beyond e-commerce. The broader goal of the Chinese government is China's global digital dominance, which has already raised concerns in the West. By taking a closer look at e-commerce, we can also understand these broader concerns better.
The rapid growth of Chinese e-commerce
While eBay and the proverbial "everything store" Amazon might be the first brands that pop into an American's or European's mind when asked to name dominant e-commerce platforms, these and other West-born companies have a smaller global impact than their Chinese counterparts. In 2023, Chinese companies made $1.255 trillion in revenue globally, the most for any region, followed by $1.066 trillion made by businesses from the United States (USA).
Having the world's largest domestic e-commerce market helps to achieve this lead. The rising middle class and the government's support are among the factors that help to increasingly digitalize all commerce in China. This market is also responsible for the world's largest online shopping day. Known as Singles' Day and observed on November 11th (11/11), this unofficial celebration of people who are not in a romantic relationship leads to billions of dollars in sales for platforms like Tmall and Taobao. While Western shoppers are still more familiar with Cyber Monday and Black Friday, Singles' Day is also gaining traction outside China. It might soon become another major mark China's e-commerce leaves on Western culture.
The first marks were left when platforms like AliExpress entered the American and European markets with cheaper offerings. The advance of social commerce provided China with additional means to establish its leadership in digital commerce. Platforms like ByteDance's Douyin and its counterpart for foreign markets, TikTok, integrate social experiences with shopping. With this business model, they challenge China's domestic e-commerce leaders, such as JD.com and Alibaba's Tmall, as well as the main Western e-commerce platforms.
Advanced data analytics has been a major force that has helped Chinese marketplaces excel. Temu, especially, seems to be very good at utilizing data insights to create personalized shopping experiences and optimize the supply chain.
The risks that come with China's dominance
E-commerce, although the most visible to everyday consumers, is not the only area where the Chinese impact on cyberspace is growing. It is rather a symptom of the ruling Chinese Communist Party's (CCP) long-term strategy laid out in the 14th Five Year Plan for National Informatization, known simply as Digital China. The goals mentioned in the plan cover everything from strengthening the infrastructure that supports data storage and transferring to promoting Chinese standards for global data governance. Such ambitions and their unfolding success in e-commerce come with certain risks for Western consumers, businesses, and the current world order.
Risks for the businesses
China's digital achievements and goals result in two kinds of risks for businesses in the West. Firstly, the competitive challenges coming from China might reduce the performance of American and European companies.
In e-commerce, the toughness of the competition is exemplified by the fact that while China's platforms create value by utilizing data insights, they are adamant about keeping other businesses from collecting their public data. E-commerce platforms typically rely on web scraping, the automated extraction of publicly available data from the web to gather insights from their competitors, such as prices, product information, and stock availability. However, while Chinese companies also utilize web scraping to gather such information, they implement stringent anti-scraping measures to prevent competitors from getting the same information from their websites. Thus, Western companies increasingly depend on circumventing these measures to stay competitive.
Risks of another type come from doing business with China. Risk managers seem to struggle due to obscure laws and immense government powers to impose on businesses without giving reasons for their actions. There are also ethical concerns associated with some e-commerce brands regarding forced labor, intellectual property violations, damage to the environment, and other issues. Thus, doing business with such companies is subject to moral scrutiny and might lead to reputational damage. Of course, this is not to say that the operations of Western companies are immune to such scrutiny.
Risks for the consumers
The fact that many products on the Chinese e-commerce platforms are cheaper than expected invites caution regarding their quality. Cheap products that have the names of well-known brands attached to them are likely knockoffs.
Scams have always threatened online shoppers, especially on platforms offering looser buyer protections. However, with companies like Temu relying so much on customer data to provide personalization, data security and privacy risks have become more prominent. Temu app is said to collect data far beyond what is necessary for an e-commerce platform, requiring access to the device's microphone, camera, and contact list.
Furthermore, since Chinese companies are required to cooperate completely with the government's surveillance efforts, this might mean that the CCP has straightforward access to all such information about the consumers. Similar concerns led US officials to seek to force the Chinese company ByteDance to sell TikTok to a Western company or ban the app altogether in the US.
Big picture risks
All this brings us to the general threats that the potential of Chinese cyber dominance carries. China lives under very different ideological standards than we are used to, including a much tighter grip on the Internet and free speech in general.
Thus, the Pacific Forum's report on the Digital China strategy notes the risks of China's ideology-driven Internet and digital technologies standards shaping the future of cyberspace. If the Internet globally shifts toward isolationism based on ideology and hardcore censorship, the potential threats to cybersecurity and freedom all over the world are virtually limitless. Especially when the CCP has the most advanced tools to gather personal user data while simultaneously blocking the users themselves from free access to information.
Final conclusion: the importance of promoting free Internet
Chinese e-commerce companies seem to follow the CCP in establishing one-sided access to online information, which leads to consolidated power. They collect volumes of personal user data while blocking others from accessing public information. Thus, the answer from the West must be the opposite. Safeguarding private Internet users from undue surveillance must be balanced with promoting fair access to insights from public data. On the business side, utilizing improved anti-blocking technologies that allow scraping such public data from Chinese websites can help protect open Internet and fair competition globally.
