Is China killing its social commerce golden goose?

No. But Beijing makes sure livestreamers are in check.

A screenshot of Huang Wei (Viya)

Viya, 36, was one of the most celebrated influencers in China. It took one day for her to disappear from the public view.

Screenshot: Protocol

For five years, Viya was the face of China’s $363-billion livestreaming sector. She was a billionaire with a powerful social commerce empire and emerged to become a political icon. Until suddenly, just days before Christmas, she became a national subject of scorn: The top Chinese ecommerce influencer was fined a whopping $210 million for tax evasion, and her online presence was completely erased.

The downfall of China’s livestreaming queen signals Beijing’s determination to play catch-up in regulating the booming live ecommerce sector that not only is shaping China’s digital economy but also is defining the global live ecommerce landscape.

Beijing routinely cracks down on tax evasion by celebrities to keep industries in line. The fine imposed on Viya, however, was higher than any previous fines on high-profile entertainers. Given Chinese authorities’ year-long strikes against ecommerce, online education and gaming throughout 2021, many observers wondered: Is Beijing killing the live commerce golden goose?

The short answer is: No. Livestreaming sales not only have become an integral part of ecommerce, but also are now economically critical to China’s agriculture and manufacturing sectors. But the impact is still widespread. Since Viya’s success is emblematic of Chinese ecommerce giants’ growing commercial power and social influence, “this severe punishment reinforces authorities' stance of reining in the disorder, [or] barbaric growth in the online ecosystem,” Xiaomeng Lu, a director in Eurasia Group's geo-technology practice, told Protocol.

Taobao, a subsidiary of ecommerce giant Alibaba, first introduced live commerce in 2016. The innovative approach to sales now accounts for more than 30% of China's entire ecommerce business — while the figure for the United States is only 3%. The streamers play a critical role, linking consumers and suppliers. Many of them live broadcast for hours uninterrupted, entertaining hundreds of thousands of viewers while selling heavily discounted products in real time.

Since 2016, Viya has emerged to become a strong sales force and one of the sector’s most celebrated entertainers. In 2020, she sold $31 billion worth of goods, including a rocket-launch service, on her livestream show. This was an annual gross transaction volume larger than that of the most profitable shopping mall in China.

Her exponential success in the live commerce sector earned her not just wealth but also social and political prominence. With a net worth of $1.25 billion, she ranked among China's wealthiest 500 individuals in 2021. And the state promoted her to a public figure who embodied virtues of a self-made female entrepreneur.

Looking back, however, Viya’s fall from stardom was not entirely unexpected. About a month before Viya was named and shamed, two other less-prominent live commerce influencers, Zhu Chenhui and Lin Shanshan, together were fined $15 million for tax evasion. Last September, the State Administration of Taxation encouraged livestreaming influencers to self-report and “timely correct tax-related problems” by the end of 2021 to avoid harsh punishment. The notice had prompted more than 1,000 influencers to pay back taxes, according to state news agency Xinhua. But Viya failed to see which way the wind was blowing.

Though the mega-fine on one of the most high-profile Chinese influencers caught insiders as well as observers off guard, experts don’t think Beijing’s move means reversing the broader industry trend favoring the livestreaming sales model.

Viya’s stellar commercial and political ascendancy collided with Beijing’s pursuit of policies to stimulate the rural Chinese economy with ecommerce, modernizing agriculture and digitizing traditional manufacturing. Her abilities to promote agriculture products from far-flung regions made her a quasi-ambassador for the industry’s "poverty alleviation” agenda. Last October, she won a prestigious National Poverty Alleviation Award for helping sell farm products on her platform.

“Livestreaming sales is here to stay and will continue to grow,” said Xiaofei Han, who researches social commerce in China at Carleton University. “It has tremendous economic potential … It drives spending and generates employment, but the state is going to standardize industry practices to ensure its long-term, healthy growth.”

An unintended consequence of subjecting dominant influencers like Viya to deep regulatory scrutiny could be redirecting traffic and businesses to less-prominent influencers, experts say. But the change may take a while to materialize. Viya’s tax evasion enraged the public, which has been keenly critical of individuals and companies accumulating tremendous power and wealth since Ant Financial’s IPO fiasco in late 2020.

“It takes a long time for influencers to build trust with their followers, “Han said. After Viya’s descendancy, “it could take an equally long time for her colleagues to regain public trust in their business practices.”


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