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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 13

China Business Intelligence No. 13

Samsung Economic Research Institute Beijing Office

Dec. 22, 2006

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Highlights

I. How to Save Transaction Costs in a Credit Deficient Environment

  • Compared to those of eBay's, Taobao's consumer-to-consumer operations possess distinct competitive advantages in the areas of information exchange, payment and delivery system. Starting in 2003, Taobao introduced a series of free services for Chinese consumers including “Payment Bao,” “Taobao Wang Wang,” and “e-Youbao” that created a competitive foundation for its C2C operations.
  • In June 2003, eBay entered the Chinese market through the acquisition of Eachnet, the domestic auction leader at the time. eBay's acquisition of Eachnet symbolized its attempt to implement the existing business model in China .

II. Implications of Chinese Carmakers' Production Increase

  • Chinese automakers are increasing market share through release of a series of low-priced models. With superior price competitiveness, Chinese automobile manufacturers are accelerating their expansion abroad. According to a report by the Ministry of Commerce, Chinese automotive firms' exports have steadily increased. In 2005, Chinese firms exported a total of 173,000 cars, up from 78,000 units in 2004 and 43,000 units in 2003.
  • Rapid growth in the Chinese auto market is largely due to the undeveloped nature of the market. Chinese consumers' main consideration for new vehicles is price, with less emphasis on the car's brand, performance and durability. However, if consumers are disappointed with the car's quality, the less brand loyalty they will possess. Indeed, China's local makers, including Chery and Geely, are delaying their launch into the US, because they are unable to meet rigorous US requirements.
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