July 11, 2005

eBay Sees $400 Million-Plus in 2005 China Volume

SHANGHAI -- Online auctioneer eBay Inc. said on Monday it expects its China transaction volume to jump 30 percent or more in 2005, amid an aggressive expansion including a local launch of its PayPal online payment service.

"Based on our first quarter simple calculation of $100 million (in transaction volume), our full year should reach $400 million," eBay's China Chief Operating Officer James Zheng told Reuters at an event to announce the launch of the company's PayPal service in China.

But he added that if the volume increases from quarter to quarter, as it has in recent quarters, the actual transaction amount for the year should reach more than $400 million -- up sharply from about $300 million for 2004.

The strong growth is coming as eBay spends $100 million this year for a broader China expansion -- its biggest investment in a single country for the year.

The company had 11 million registered users on its China site at the end of the first quarter, up from 9.8 million at the end of last year, and is adding about one million users a quarter.

Its major competitors in the market include homegrown player Alibaba, and a joint venture between China's Sina Corp. and global Internet giant Yahoo Inc.

As part of its China expansion, eBay on Monday also officially launched its PayPal online payment system in China, forging a partnership with 15 Chinese banks, including China Merchants Bank and China Construction Bank

The PayPal service, called "Beibao," will initially allow account holders to pay for services from PayPal's China-based vendor partners, such as online game specialist NetEase.com Inc. and Tom Online

But it will be integrated with eBay's China site in September, becoming the first country-specific PayPal site in Asia, the company said.


PayPal, which eBay purchased in 2002 for $1.5 billion, naturally complements eBay by giving online buyers and sellers an easy way to electronically pay for and receive payment for their online trading activity.

The service could become particularly popular in China, where cash is still king and a scarcity of credit cards and other forms of electronic payment have limited growth in consumer spending.

The number of Chinese with international credit cards now totals just 5.5 million, or about four for every thousand people, according to Visa. By comparison, Hong Kong and Taiwan both have about one credit card per person.

PayPal's China entry comes as a number of other players also explore setting up electronic payment systems there.

Alibaba launched its own online payment system called AliPay earlier this year. That system now has about 3 million members, and posted a June transaction volume of $16.9 million.

Another venture-backed firm, SmartPay Jieyin Ltd., recently launched its own electronic payment system catering to the mobile phone market.

Despite the lack of easy payment systems, China is still one of the world's fastest growing e-commerce markets.

The number of online shoppers is expected to reach 16.2 million by 2007, with 29.6 billion yuan ($3.6 billion) in annual spending by then, according to Web-focused market research firm Shanghai iResearch.

China is already the world's second largest Internet market after the United States, with about 100 million users.

EBay is China's largest online auctioneer, having entered the market through its recent purchase of home-grown player EachNet for $180 million. Since then, it has installed its own management at the top of the company and embarked on an aggressive advertising campaign to popularise the service.


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