China’s digital trade is developing at a rapid pace. Exports of digital service trade, categorized as “digital delivery trade,” grew to account for 56.7% of China’s total services exports in 2023. In cross-border e-commerce, also categorized as “digital order trade,” China became the world’s largest B2C trade market in 2022. Comprehensive policy support on the part of the Chinese government has been instrumental in promoting this development of China’s digital trade. The Chinese government has been supporting technology development and institutional opening-up measures in the digital domain for several years now, in order to promote the quantitative and qualitative development of digital trade. In addition, China’s digital platforms have been able to expand overseas rapidly because smartphone-based mobile cross-border payment platforms have enhanced the affordability and convenience of international payments. The development of China’s mobile cross-border payment platforms has been largely influenced by the government’s institutional support. In addition, it is noteworthy that the Chinese government has been increasingly developing policies related to the construction and management of data infrastructure systems over the past year or two, and since the announcement of the Regulations on Facilitating and Regulating the Cross-border Data Transfers in March 2024, it has been piloting the implementation of negative lists in free trade pilot zones. China’s main focus has been to ease “the measures affecting cross-border data flows,” which have been criticized as a major digital trade barrier in China. However, it is difficult to detect a change in China’s basic stance as the deregulation measures of the above Regulations have only made detailed adjustments through subordinate laws, such as sectoral bylaws, while maintaining the overall framework stipulated in China’s three data laws. At the same time, it is significant that the Chinese government is attempting to make institutional changes to support China’s rapid digital trade growth in preparation for joining the DEPA and expanding its voice in international digital norm-setting and Chinese digital standards.

Meanwhile, the digital platform industry, which plays a key role in China’s digital trade, is also developing rapidly, with e-commerce and social commerce platforms at its center. Major players such as Alibaba, Jingdong, Pinduoduo, and Kwaishou adopt short-form video-based sales methods having a significant impact on the market. This growth has been driven by policy support and regulation from the Chinese government, as well as a rapidly changing market environment. The government has enacted various legal norms and policies to ensure the safe and transparent operation of digital platforms, with a particular focus on ensuring consumer protection and market order.

China’s position in the cross-border e-commerce market is further strengthened by the increasing overseas expansion of Chinese digital platforms that are competitive in the Chinese e-commerce market. The United States has emerged as the largest market for Chinese cross-border e-commerce exports, and China has become the largest source of online shopping services in Europe. As Chinese platforms showed rapid growth after gaining entry into the Korean market, China has emerged as Korea’s largest overseas direct purchasing destination. Chinese platforms have targeted overseas consumers with aggressive strategies such as building efficient production and logistics networks and flexible supply chains, real-time data analysis, convergence strategies using shopping apps, large-scale advertising, targeting consumers (Generation Z), and price competitiveness. The biggest challenges for China’s digital trade policy in the future is how to balance domestic and foreign demand and integrate it with international digital trade rules to facilitate the overseas expansion of Chinese digital enterprises and enhance their international competitiveness. Meanwhile, as the global digital economy gradually expands in scale, the Chinese government is actively establishing a digital platform management system. In particular, the balance between “innovation incentives” and “regulatory fences” and the integration of domestic systems with international rules may expand the scope of the Chinese government’s influence in the digital realm. In response, companies conducting business with China need to pay close attention to the Chinese government’s data supervision practices and details, strengthen data and supply chain management across the company, and prepare in advance to comply with regulations.

This report makes several policy recommendations. First, China’s digital trade norms need to be taken into account in the follow-up negotiations of the Korea-China FTA. The digital trade norms in China’s regional trade agreements do not yet contain a full e-commerce chapter, and mainly focus on measures related to e-commerce facilitation. The privacy and e-commerce cooperation provisions in the e-commerce chapters of China’s pending FTAs are vaguely worded and lack specific implementation details, which may make it difficult to resolve disputes in the future. It is important to keep this in mind when negotiating a follow-up FTA with China, and ensure that the text of the agreement is detailed and precise from the outset. Another characteristic is that the content of the digital trade norms in the agreement differs depending on the target country and its interests with China. This suggests that when Korea negotiates a follow-up FTA with China in the future, it may be possible to revise the text of the agreement in accordance with circumstances in the two countries. China highly praises the Korea-China FTA, which was signed in June 2015 and entered into force in December 2015, as China’s first agreement to include an e-commerce chapter. However, the China-Australia FTA, which was signed and entered into force around the same time, includes provisions that are not included in its FTA agreement with South Korea, such as consumer protection and data protection. In addition, FTAs with other countries that were signed or revised after the Korea-China FTA include the same provisions as Australia. In addition to consumer protection, the China-Chile FTA, revised in September 2017, includes articles on cooperation in cross-border payment supervision and support for SMEs to overcome e-commerce barriers. As consumer complaints continue to rise about goods sold on large Chinese cross-border e-commerce platforms that have recently entered Korea, it is necessary to explicitly include the phrase “consumer protection” in follow-up negotiations. In addition, when conducting follow-up negotiations with China, it is necessary to supplement the agreement to support the overseas expansion of SMEs, as both countries are facing a difficult situation due to sluggish domestic demand. Based on the examples of the China-Chile and China-New Zealand FTAs, it is worth considering adding phrases such as “opening up markets for SMEs through e-commerce” and “helping SMEs overcome barriers to e-commerce” to the e-commerce chapter. This could be an institutional and policy support measure to support the development of cross-border e-commerce platforms as a sales channel for products in which Korean and Chinese SMEs have a comparative advantage.

Second, Korea needs to take a more forward-looking stance on China’s participation in global digital norms. As industries move toward AI and data-driven forms in the future, if DEPA’s new technology governance specifications become a global consensus, the embedded intellectual property rights will determine the competitive space of our products in related markets, such as related smart devices or smart gadgets. China’s accession to DEPA will expand the scope of digital trade governance norms discussions, and proactively identifying relevant technological innovations and best practices will impact the long-term competitiveness of existing industries in the digital economy.

Third, we suggest that the government balance its regulatory and supportive policies for platform companies. As China’s digital economy grows in size, the country has been active in establishing institutions related to the digital economy. In the past, China has been wary of the monopolistic influence of large platform companies over entire industries. However, it now recognizes the role of large platform companies in the digital economy. As such, China’s future policies are likely to focus on building an orderly system while encouraging platform operators to operate in a compliant manner. China first announced a government-level policy to promote the digital economy in 2019, and has since announced more specific and proactive measures to foster related industry infrastructure, data resources, digitization of industry and government, digital industries, and international cooperation. This can be interpreted as an attempt to encourage China’s large platform companies to go abroad and expand the domestic economy. While this may have a negative impact on China’s domestic economy, the government hopes that large Internet companies can play a greater role as national growth engines, creating jobs, helping traditional manufacturing enterprises and small and medium-sized enterprises develop, and increasing their international competitiveness. China’s regulatory measures for platform companies are not necessarily applicable to Korea’s situation. However, government policy should not be limited to regulating platform companies’ anti-competitive behavior or illegal activities in the six services of brokerage, search, video, SNS, operating system, and advertising. It is necessary to balance regulatory-oriented platform enterprise policies with supportive policies to encourage the development of derivative industries and create jobs, while allowing Korea’s globally competitive platform enterprises to expand overseas.

Fourth, we propose the following two measures as Korea’s response to the increasing overseas expansion of Chinese e-commerce platforms. Firstly, we believe that it is time to thoroughly prepare for the rapid entry of Chinese platforms into the Korean market. It is necessary to review the cross-border e-commerce related systems, including domestic market protection, safe trade and consumer protection, privacy and cybersecurity, etc. Secondly, as concerns grow over the problems arising from the expansion of Chinese e-commerce platforms overseas, regulations in major economies such as the U.S. and EU have been strengthened. As a result, Korean e-commerce platforms seeking to expand overseas should prepare for trade risks arising from the regulation of cross-border e-commerce platforms in major countries. The U.S. and the EU have abolished the tax exemption system for cross-border e-commerce platforms and are strengthening regulations on the import of goods related to environmental degradation and forced labor. As such, it is important to recognize that factors such as labor and environment may also be subject to trade regulations. Therefore, in order to expand cross-border e-commerce, Korean companies need to proactively prepare for new trade regulation risks by preparing overseas expansion strategies that consider ESG management in addition to enhancing their own competitiveness. In addition, as major economies including the U.S. and the EU are expected to expand cross-border e-commerce regulations, it is necessary to monitor new regulatory trends and proactively assess their potential impact on Korean companies.