PayPal making massive inroad to China
By Kathrin Hille in Beijing
Published: December 29 2010 13:07 | Last updated: December 29 2010 13:32
PayPal, the world’s largest online payment platform, is planning an expansion in China, a move that could strengthen its parent Ebay in the expanding e-commerce market.
Through a co-operation agreement with the government of Chongqing, China’s largest municipality, PayPal plans to offer a range of services – including, for the first time, a foreign exchange settlement solution – to Chinese entrepreneurs selling to consumers overseas.
Chinese authorities have set a ceiling for individuals to convert foreign currency into local currency of $50,000 a year. PayPal said this regulation hindered small businesses and entrepreneurs from building a cross-border e-commerce business, and its payment platform would help small merchants get quick access to an export licence, which allows a higher conversion ceiling.China’s online payment market had a transaction volume of Rmb725.5bn in the first nine months of this year and is expected to hit Rmb1,000bn ($151bn) for the whole year, according to Analysys, a Beijing-based internet research firm.
“The Chongqing government will be working with the relevant local authorities, like the Safe Administration of Foreign Exchange, to get the necessary regulatory approvals,” said Dickson Seow of PayPal Asia Pacific.
The service has begun testing, and PayPal hopes to offer it to merchants all over China in the second half of 2011.
If successful, the platform should attract small Chinese vendors, the main customer base of Alibaba, the world’s largest online marketplace for trade between companies, which had proved the nemesis for Ebay on its first foray into the Chinese market. The country has the world’s largest online population with 440m users.
Ebay initially entered China with an auction site closely resembling its international service. After losing most of its market share to Taobao, the unlisted affiliate of Alibaba Group which dominates China’s consumer-to-consumer e-commerce market, the US group changed strategy in 2006 and offered a platform for cross-border online trade.
Over the past year, Alibaba and Ebay have worked on opportunities for co-operation. However, AliExpress, a site launched by Alibaba this year that allows small online transactions between merchants and customers overseas, again put Alibaba in competition with Ebay’s business in China.
Alibaba also has its own online payment service, Alipay, which dominates the Chinese market.
The Chongqing government’s partnership with PayPal is an attempt to attract services linked to China’s booming e-commerce industry to set up in the city. Hangzhou, the city where Alibaba’s headquarters is located, has already succeeded in attracting services such as logistics, boosting the local economy and creating service sector jobs.
PayPal and Chongqing said that, in additional to the foreign currency settlement platform, they would set up five international e-commerce centres providing services such as training and verification to merchants.
The alliance comes as China prepares to regulate its third-party payment services more clearly. Providers of such payment platforms are required to apply for a licence by September next year, according to the central bank.
PayPal said it was not clear yet whether its cross-border payment settlement services would fall under this regulation but it was prepared to apply if required.
Through a co-operation agreement with the government of Chongqing, China’s largest municipality, PayPal plans to offer a range of services – including, for the first time, a foreign exchange settlement solution – to Chinese entrepreneurs selling to consumers overseas.
Chinese authorities have set a ceiling for individuals to convert foreign currency into local currency of $50,000 a year. PayPal said this regulation hindered small businesses and entrepreneurs from building a cross-border e-commerce business, and its payment platform would help small merchants get quick access to an export licence, which allows a higher conversion ceiling.China’s online payment market had a transaction volume of Rmb725.5bn in the first nine months of this year and is expected to hit Rmb1,000bn ($151bn) for the whole year, according to Analysys, a Beijing-based internet research firm.
“The Chongqing government will be working with the relevant local authorities, like the Safe Administration of Foreign Exchange, to get the necessary regulatory approvals,” said Dickson Seow of PayPal Asia Pacific.
The service has begun testing, and PayPal hopes to offer it to merchants all over China in the second half of 2011.
If successful, the platform should attract small Chinese vendors, the main customer base of Alibaba, the world’s largest online marketplace for trade between companies, which had proved the nemesis for Ebay on its first foray into the Chinese market. The country has the world’s largest online population with 440m users.
Ebay initially entered China with an auction site closely resembling its international service. After losing most of its market share to Taobao, the unlisted affiliate of Alibaba Group which dominates China’s consumer-to-consumer e-commerce market, the US group changed strategy in 2006 and offered a platform for cross-border online trade.
Over the past year, Alibaba and Ebay have worked on opportunities for co-operation. However, AliExpress, a site launched by Alibaba this year that allows small online transactions between merchants and customers overseas, again put Alibaba in competition with Ebay’s business in China.
Alibaba also has its own online payment service, Alipay, which dominates the Chinese market.
The Chongqing government’s partnership with PayPal is an attempt to attract services linked to China’s booming e-commerce industry to set up in the city. Hangzhou, the city where Alibaba’s headquarters is located, has already succeeded in attracting services such as logistics, boosting the local economy and creating service sector jobs.
PayPal and Chongqing said that, in additional to the foreign currency settlement platform, they would set up five international e-commerce centres providing services such as training and verification to merchants.
The alliance comes as China prepares to regulate its third-party payment services more clearly. Providers of such payment platforms are required to apply for a licence by September next year, according to the central bank.
PayPal said it was not clear yet whether its cross-border payment settlement services would fall under this regulation but it was prepared to apply if required.
EBay’s Paypal to Set Up Global E-Commerce Hub in China
December 29, 2010, 9:20 AM EST
Dec. 29 (Bloomberg) -- EBay Inc.’s PayPal business will set up an international e-commerce hub in Chongqing, China, as the company aims to boost exports from the nation by helping merchants conduct faster cross-border trade.
PayPal agreed with Chongqing’s municipal government to set up the center to offer foreign exchange settlement, telesales, training, verification and other services, Dickson Seow, a Singapore-based spokesman, said in an e-mail today. He didn’t disclose financial terms.
Helping local companies connect with global customers will boost EBay’s transaction volume from China more than 80 percent to $4 billion this year, Chief Executive Officer John Donahoe said in September. EBay is counting on PayPal and local partnerships to expand revenue from China after failing to gain a foothold to compete against Alibaba Group.
“This is the first time in the world for PayPal where we are doing such a wide-ranging, comprehensive partnership with a government,” Seow wrote in the e-mail. “In this case, we are looking to develop the local e-commerce industry in inland China to help Chinese merchants build up their capabilities to conduct cross-border trade.”
San Jose, California-based EBay first entered China in 2002. Competition from Alibaba’s auction business Taobao.com cut its market share by half, prompting it to shut down its China site in 2006.
PayPal will have more than 1 million merchants in Greater China, which includes Hong Kong and Taiwan, by the end of this year, Seow said.
The foreign exchange settlement solution that PayPal will develop with the Chongqing government is needed because China currently allows individuals to convert to yuan overseas payments of only up to $50,000 a year, Seow said.
The Chongqing government will work with agencies including the State Administration of Foreign Exchange to get regulatory approval for a settlement service that is expected to begin in the middle of next year, he said.
PayPal Taps Cross-border Trade Potential With New China Deal
By Michael Kan, IDG News
EBay's online payment service PayPal is hoping to hit a "sweet spot" in China's e-commerce market by making it easier for Chinese merchants to make money from overseas sales.
On Tuesday, PayPal signed an agreement with the Chinese city of Chongqing to jointly develop an international e-commerce hub that seeks to build cross-border trade between Chinese merchants and buyers from abroad.
PayPal, with access to 190 countries and regions, has become an important tool for Chinese merchants wanting to make sales to Internet users abroad. At the end of this year, the company expects China to have more than 1 million users of its online service, most of them small and medium-size businesses.
Chinese merchants, however, still face obstacles with online transactions, said PayPal spokesman Dickson Seow.
One major challenge is that Chinese merchants making sales to the U.S. are limited to converting under $50,000 each year, unless they apply for the right license. Exchanging the foreign revenue into Chinese currency can also be cumbersome, with merchants forced to go to a bank and wait days before they receive the money, Seow said.
PayPal's agreement with the Chongqing government is meant to help resolve these problems. Next month, the company is launching a pilot program with the municipal government that will work toward finding solutions and streamlining those processes for Chinese merchants.
"Our goal is to unleash the full potential of Chinese small businesses and entrepreneurs to sell to the world," said Chris Yao, PayPal's vice president of Greater China, in a statement.
PayPal believes the partnership has the potential to benefit Chinese merchants across the country, including mobile app developers wanting to find better ways to sell their products. The two parties will also be working to set up five international e-commerce centers that focus on business development, merchant training and other areas.
While PayPal has an extensive network abroad, the online payment service has yet to catch on in China. Instead domestic companies dominate the market. The biggest is Alipay, a part of Chinese e-commerce giant Alibaba Group. The service has a 50 percent market share, according to Beijing-based research firm Analysys International.
PayPal's new move, however, plays to its strength. "Our sweet spot is cross-border trade," Seow said. "We have 90 million active accounts, they have the purchasing power."
At the same time, China's e-commerce market is booming. The online payment market recorded a total transaction volume at 725.5 billion yuan (US$ 109 billion) for the first three quarters of 2010, according to Analysys International.
PayPal also stands to benefit from partnering with Chongqing's municipal government, said Mark Natkin, managing director for Beijing-based Marbridge Consulting. Chongqing, located in southwestern China, has a population of more than 31 million and is developing a growing IT sector.
The Chinese government has increasingly worked to regulate the online payment service market, requiring the companies to receive official approval, Natkin noted. "It's a challenging market for a variety of reasons and one of those is the regulatory issues," he said. "Another one of those is the competitive landscape."
"It's hard to say at this point whether this will be the secret sauce that suddenly propels PayPal's business in China," Natkin added. "But the first step is making sure you are in the game."
Paypal to help set up e-commerce hub in China mega-city
SHANGHAI — US online payment service Paypal has agreed to help set up an international e-commerce hub in southwestern China as more foreign companies cash in on the country's fast-growing Internet sales market.
Paypal and the government of Chongqing have signed a deal to jointly develop a foreign exchange settlement platform in the mega-city to enable users to pay for cross-border online shopping transactions, they said in a joint statement.
They also agreed to set up five international e-commerce centres over the next few months for verification, investment promotion, national telesales, merchant training and regional business development.
Chongqing has become a popular destination for foreign companies wanting to set up operations away from coastal regions, where rising wages and a labour shortage have driven up their costs.
The city's mayor, Huang Qifan, said the deal with Paypal "will help Chongqing become China's settlement centre for international e-commerce".
"It will also contribute to the development of Chongqing into the financial services centre of west China," he said in the statement.
The transaction volume of China's online payment market totalled 725.5 billion yuan (109.5 billion dollars) in the first nine months of the year, boosted by the booming e-commerce market, according to Analysys International.
The value of online payments is expected to hit one trillion yuan for the full year, the Beijing-based research company said in a note.
PayPal, a subsidiary of US e-commerce giant eBay, has more than 84 million active users around the world and allows payment in 24 currencies.
Alipay, a unit of China's largest e-commerce company Alibaba Group, dominates the Chinese online payment market with a share of 50.5 percent, according to figures from Analysys.
Alibaba owns the country's dominant online auction site Taobao.com.
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