The last twelve months have seen a large increase in cross-border e-commerce traffic, primarily driven by China which has increased its share as the main origin of shipments. Chinese cross-border e-commerce growth in turn appears to have been largely driven two platforms, Temu and Shein, which together with the various Alibaba Group marketplaces and Amazon account for the bulk of international volumes. We estimate that Chinese cross border e-commerce trade grew by almost 30% last year and accounted for over 8% of the value of Chinese international trade.
The Role of China
China is the primary source of cross border e-commerce. Due to lack of cheap intercontinental air cargo capacity the China share decreased during the pandemic. In 2023 – as capacity opened up and platforms like Temu and Shein increased their share in key North American and European markets, the share of China as an origin of purchases increased to levels higher than in 2019. The chart below shows a time series that forms part of the most recent International Postal Corporation (IPC) cross border shopper survey that is published every year in January based on surveys of consumers in member countries.
On an aggregate level the role of China in the survey is somewhat understated as the bulk of the survey covers European countries where a lot of cross border traffic is from neighbouring countries. The China share is much higher in markets such as Brazil (73%), Chile (72%), Indonesia (56%), Poland (53%), Spain (53%) and the United States (53%).
The China share in markets such as the US and Germany increased substantially in the last year. We discussed the increase in the US on our last article. The chart below shows how cross border activity has increased across the European Union in 2023 since 2016. Here it appears that at least in terms of number of purchases, pre-COVID levels have not been reached.
In the light of much weaker economic performance in the European Union compared to the United States, this lack of recovery makes sense. In fact on an EU level, overall e-commerce sales did not outpace retail growth. In November 2023, e-commerce sales were up 3.3% compared to a year earlier, while overall retail sales were up 3.5%.
The table below shows the development across the EU, Germany, France, Italy, Poland and Spain.
Only smaller markets such as Poland or Spain were up strongly. Interestingly these markets are also the ones with the highest share of China as a source of cross border e-commerce.
Top Platforms
Based on both number of visits as well as source of purchase, Amazon is by far the largest platform, but most Amazon business is not cross border. Alibaba remains the largest cross border platform, but in 2023 Temu (run by Pinduoduo) and fashion marketplace Shein appear to have posted the strongest level of growth and a major factor in the surge in air cargo traffic out of China witnessed in the later part of 2023.
The Importance of Cross Border E-Commerce for China
Cross border e-commerce has been playing an increasingly prominent role in Chinese trade. In 2022, cross border e-commerce accounted for 6.4% of the value of Chinese exports and imports. For 2023, we estimate that this figure increased to 8.8% as e-commerce surged and overall trade value declined by around 7%. The chart below is based on data sourced from China customs as well as our own estimates.
Whether gross border e-commerce can continue to grow at similar rates to 2023 depends on whether the Temu/Shein driven spending binge in the US can continue and whether some kind of spending recovery in Europe is possible. Some of the fastest growth in e-commerce spending is in Southeast Asia, where the economic outlook is far stronger than in North America and Europe.
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