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Online shop owners may need licenses

By Wang Xing (China Daily)
Updated: 2007-06-01 10:14

Beijing municipal authorities are considering a draft regulation that would require web-based shop owners to obtain a license to operate, according to local media reports.

The draft, which was sent to the standing committee of Beijing municipal people's congress for approval on Monday, demands online shop operators get a license before they can sell products on websites registered in Beijing.

Virtual shop owners will also be asked to post their identities online, according to the Beijing Morning Post.

Zhu Yan, director of Beijing municipal office of informatization, said the upcoming regulation will not affect operators of current major C2C (customer to customer) websites such as Alibaba's Taobao.com, eBay EachNet and Tencent's Paipai.com, since they are registered outside Beijing.

Beijing authorities are considering a draft that would require online trading businesses to obtain an operating license. [newsphoto]

Song Xing, an analyst with the domestic consulting firm Analysys International, said the regulation is more symbolic than practical.

"The regulation will be hard to implement in the real world," he said. "But I think the government may want to show they're paying attention to the negative side of China's emerging e-commerce industry."

According to a report from the Internet Society of China, China's C2C market turnover reached 21.6 billion yuan last year and will increase to 41.2 billion yuan by 2008. Figures from Analysys suggest the number reached 8.69 billion yuan in the first quarter of this year.

"As online transactions in China continue to rise, the Chinese government will put more effort into keeping it under control," Song said.

In October 2005, the local government in East China's Jiangxi Province released a similar regulation.

Since last year, a public debate emerged in China concerning whether the government should charge taxes for C2C transactions.

Supporters said a large proportion of C2C transactions in China were made by B2C (Business to Customer) companies that want to avoid charging taxes. Some transactions reportedly involvedmoney laundering.

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Opponents charge that government over-regulation in the early stages of the e-commerce market could smother an industry that may create millions of jobs.

"Whether the government should charge taxes for C2C transactions and regulate the emerging e-business is still debated worldwide," Wang Fang, an analyst with iResearch, a domestic research firm. "I think the Chinese government has not found a practical way."

According to figures from Analysys, Zhejiang-based Taobao.com accounted for 74 percent in China's C2C market in the first quarter of this year. Shanghai-based eBay EachNet and Guangzhou-based Paipai.com made up 16 percent and 9 percent respectively.