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Protocol | China

Alibaba's rural development is falling short

The ecommerce titan promised to turn Chinese villagers into businesspeople. It turned them into customers instead.

Alibaba's rural development is falling short

Alibaba's Village Taobao, an e-commerce platform for villagers in China, organized the "Black Technology in Villages" smart household appliances experience week.

Photo: Wu Fang/Getty Images

For years, Chinese ecommerce has been heralded by government and tech companies alike as a game changer for hundreds of million of poor rural residents. In particular, "Rural Taobao," an Alibaba-backed program that has connected thousands of villages to the online market, has held itself out as a job-creation engine that makes it easier for rural farmers to sell their products further afield.

But a recently published study suggests Rural Taobao's impact has been oversold. The study shows that while the program makes it easier for villagers to buy online, it has almost no effect on helping locals sell their own products.

The research paper, titled "Connecting the Countryside via E-Commerce: Evidence from China," appeared in the March edition of the quarterly journal American Economic Review: Insights. The authors from the University of California Berkeley, Georgetown University and China's Peking University studied Chinese villages before and after the rollout of Rural Taobao from 2015 to 2016. They also used internal Alibaba data.

Researchers focused on 100 villages in Anhui, Henan and Guizhou, three relatively poor provinces. They talked to thousands of households and visited local retail stores to collect data points and compare how people bought and sold before, and after, the implementation of Rural Taobao. "These three provinces all have large rural populations," Liu Lizhi, Assistant Professor at Georgetown University and one of the authors, told Protocol. "We figured the impact might be more transformative in places with larger rural populations, because they had not been exposed to ecommerce then."

Their findings suggest Taobao's potency as a poverty alleviation tool is limited. Rural Taobao started in 2014, at a time when the Alibaba-owned ecommerce platform had yet to reach into rural China, where approximately 45% of the country lived. The program set out to take 10,000 villages online by setting up in-village logistics centers and training local representatives to do the shopping and selling for the non-tech savvy. By 2018, the company said it had reached 30,000 villages throughout China.

Rural Taobao pledged that, by removing logistical and technical obstacles, it would help rural residents shop lower-priced goods online and sell their own products. Most villages that participated hoped to improve their local economies by finding new markets for local goods. But a few years after the program began, many villages in China began to doubt whether the program was actually meeting that goal.

Instead, the research found that the introduction of Rural Taobao did change how people shop one year later. Compared to villages not served by Rural Taobao, 14 percent more households began to order online after Taobao made it easier. New ecommerce users especially favored online shopping for durable goods like home appliances.

But the program did not make it easier to sell local products elsewhere, with no statistically significant difference in how much people sold via ecommerce after the first year, and a very small effect in the year after. Nor did average incomes change much.

"I was a little surprised," said Liu Lizhi. "We were indeed expecting it to have more effects on the selling side. At the time, Taobao Villages were discussed both inside and outside China. Other countries were paying attention to the model of 'rural ecommerce' and seeing it as a good tool for poverty alleviation." The program helped, Liu said, but only by introducing cheaper products to buy.

"The market interactions between rural and urban areas are a two-way street," said Gu Yizhen, another author of the paper who now teaches at Peking University HSBC Business School. "It seems like it's easy to make products flow from cities to villages, as long as you provide certain logistical subsidies. But if you want to sell from villages to cities, there's a lot more work to be done."

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