Rural economy booms in China

21 January 2016

Fierce competition between China’s e-commerce giants, Alibaba and JD.com, is invigorating the country’s rural economy, transforming distribution networks and may redesign the nation’s food supply chain.

More than 622m Chinese still live in the countryside. In 2014, according to BGTimes Beijing, rural shoppers spent £17.6bn. By the end of 2016, the same source expects their spend to have all but doubled, to £35bn. This boom reflects a growing rural middle class, a government war on poverty and the fact that city workers send home around £28bn home each year to relatives in the villages. The government’s investments are helping too,  particularly a £14bn plan to put 98% of China’s villages online by 2020.

This has incentivised investments by Alibaba and JD.com. The latter is building a network of 500 shops, 160 warehouses and 1,000 delivery stations. Alibaba will spend £1bn in a distribution network with 100,000 drop-off points and expanding the offering from its Taobao rural centres, which offer similar services to post offices and banks and are often run by villagers the company trains.

In the longer term, Alibaba plans to create a digital platform which will enable farmers to sell fruit and vegetables to the cities, using its own delivery network. Sun Lijun, vice-president of Alibaba with responsibility for its rural strategy, said: “Making use of the internet to help farmers is a smart strategy.”

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