From Click to Boom: The Political Economy of E-commerce in China
(Forthcoming, Princeton university Press)
A fundamental challenge in the developing world is: market-supporting institutions are so critical to economic growth, yet governments frequently encounter technical or political barriers to provide them. This book indicates an alternative path: institutional outsourcing, namely the state strategic outsourcing institutional building and enforcement to digital platforms.
Examining the Chinese context, housing the world’s largest e-commerce market with 800 million users generating over 200 million daily shipping packages, the book explores how deficiencies in formal institutions propelled digital platforms to create sophisticated private institutions for contract enforcement, fraud prevention, and dispute resolution. Notably, Alibaba’s Taobao.com has pioneered institutions including an escrow payment service, a complex reputation mechanism, and even a jury-like system allowing ordinary users to vote on cases or modify platform rules. The government, on the other hand, strategically refrained from hastily regulating despite its long-held interventionist economic stance. For almost two decades before 2020, the government not only tolerated but actively endorsed the private provision of market institutions by platforms. The resulting e-commerce boom had far-reaching effects on China, as demonstrated by a combination of interviews, original surveys, platforms’ proprietary data, and a field experiment.
Nonetheless, this digital route toward institutional development has its unique challenges. Insufficient government oversight poses the risk of powerful platforms overstepping and exploiting their market dominance, while excessively strict regulations stifle platforms’ institutional innovation. China’s regulatory oscillations towards platforms, shifting from a laissez-faire approach (pre-2020) to a regulatory crackdown (2020-2023) and then returning to a supportive stance (2023-?), highlight the difficulty in striking the right balance.
Examining the Chinese context, housing the world’s largest e-commerce market with 800 million users generating over 200 million daily shipping packages, the book explores how deficiencies in formal institutions propelled digital platforms to create sophisticated private institutions for contract enforcement, fraud prevention, and dispute resolution. Notably, Alibaba’s Taobao.com has pioneered institutions including an escrow payment service, a complex reputation mechanism, and even a jury-like system allowing ordinary users to vote on cases or modify platform rules. The government, on the other hand, strategically refrained from hastily regulating despite its long-held interventionist economic stance. For almost two decades before 2020, the government not only tolerated but actively endorsed the private provision of market institutions by platforms. The resulting e-commerce boom had far-reaching effects on China, as demonstrated by a combination of interviews, original surveys, platforms’ proprietary data, and a field experiment.
Nonetheless, this digital route toward institutional development has its unique challenges. Insufficient government oversight poses the risk of powerful platforms overstepping and exploiting their market dominance, while excessively strict regulations stifle platforms’ institutional innovation. China’s regulatory oscillations towards platforms, shifting from a laissez-faire approach (pre-2020) to a regulatory crackdown (2020-2023) and then returning to a supportive stance (2023-?), highlight the difficulty in striking the right balance.
"The present…(is) in large measure the prisoner of a past...
and the past with its rules, its differences and its similarities, (is) the indispensable key to any serious understanding of the present."
(Fernand Braudel, The Wheels Of Commerce, 1982: 20)
and the past with its rules, its differences and its similarities, (is) the indispensable key to any serious understanding of the present."
(Fernand Braudel, The Wheels Of Commerce, 1982: 20)