Option analysis-Zhiqian Huang

Revised policy question:

“What actions, if any, should be taken by Ministry of Commerce of China to prevent over-development of E-commerce to respond to concerns that an “E-economic bubble” may develop in China?

Client:
The policymakers in Ministry of Commerce of China.


Background:

In the recent year, more and more major IT companies start to invest huge amount of money to develop the E-commerce, even some investors from different field also invest the E-commerce directly. They believe that E-commerce will become more and more popular. The E-commerce has lots of market potential. [1] However, uncontrolled development, unhealthy competition, and blind investment have occurred, all these may cause the market disorder. [2] Therefore, the new policies need to be made, in order to prevent the over-development of E-commerce to respond to concerns that an “E-economic bubble” may develop in China. [3]

Options:
1. Status quo: This option will make the policymakers keep the current situation, nothing will be changed. The over-development will continue; companies will keep unhealthy competitions.
This option may let the over-development keep going, which may form the "E-commerce bubble".

Advantages:
1). No financial investment: for this option, almost no money cost. The policy system has been already built.
2). Simple regulatory procedures: To found a company to develop E commerce, there is no deeply background check needed. Only simple application and enough required starting fund.

Disadvantages:
1).Taking the weak control for E-commerce development.
2). Cannot prevent over-development of E-commerce.


2. Adding Regulatory framework:
To develop E commerce, a lot of paper work needs to be done, including detailed application, strict review, increasing the amount of starting fund. And deeply background check will be processed. The major company who want to develop the E-commerce must be issued a permit by the government. This will make sure the commercial situation is safe. Every year, the company needs to submit summary report of previous year to government to recheck. Control the risk of "bubble".

Advantages:
1.) Small amount financial investment: the money only cost for processing paper work and background check. Some part cost will be taken care by the companies.
2). The safety and credit background is guaranteed. The order of the market becomes more formal.

Disadvantages:
1). The policies of the standard may need some time and research date to develop.
2). Complex regulatory procedures:  Need professional legal group to finish.

3. Economic policy: Building official platform to help SMEs or private sellers to develop their own small size "E-commerce". It will be more personalized and have more interaction with customers; the government also can give them the development direction, reducing over and blind development. And, the government needs to break the monopoly from major companies. Also, the economic policy may give the special policy or promotion to encourage companies who develop the SMEs E-commerce software development.

Advantages:
1). No Complex regulatory procedures: Only some paper works and enough required starting fund.
2.) The policy will provide a positive development situation for the whole market.

Disadvantages:
1). Large amount financial investment: the money cost for building platform, promote SMEs and private sellers development, encourage software R&D.
2). Slowly process, may take some time to make everything reach the balance.

In general:

Options	Efficiency	Effectiveness	Equity	Ease of political acceptability
Status quo	十	一	？	〇
Adding Regulatory framework	十	十	一	一
Economic policy	〇	十	十	十

   

Reference:

[1]. http://news.xinhuanet.com/tech/2014-09/12/c_126978488.htm

[2]. http://tech.qq.com/a/20130620/003502.htm

[3]. http://www.chinaacc.com/new/207_437_201106/14ba2020261320.shtml