China’s beverage king Zhong Shanshan: E-commerce is killing ‘real’ commerce

(Edited and refined by Grace Chong, with the assistance of AI translation.)

On 8 August, CCTV financial programme Dialogue (《对话》) aired its latest exclusive interview with Nongfu Spring founder Zhong Shanshan. The Chinese business magnate and former richest man was soon back in the headlines after his sharp criticism of e-commerce platforms.

The more than 40-minute programme was filmed in jasmine fields and a jasmine tea processing facility in Hengzhou, Guangxi. Alongside the industrial transformation of traditional agriculture, Zhong discussed China’s worsening price competition and offered a detailed critique of the country’s e-commerce platforms.

Zhong said bluntly that China’s biggest concern now should be the race to cut prices, rather than competition over high quality or the ability to command a premium. He argued that this is the form of competition that does the greatest damage to social productive forces. Chinese companies seeking to win market share by continually cutting prices, he said, are showing “how immature the market economy is”.

The new middlemen

He was equally forthright about e-commerce, which is now deeply embedded in Chinese life. Zhong described e-commerce platforms as “unquestionably middlemen”. Traditional trading platforms operate under fixed rules and standardised fees, he said. Chinese e-commerce platforms, by contrast, dynamically adjust charges for each order. Though they are branded as “technology platforms”, he argued, they still function essentially as “middlemen”.

When the host pointed out that e-commerce also allows farmers to reach much larger markets, Zhong went further. The e-commerce middleman is now everywhere, he said, and has “wiped out” many of the retailers in China’s cities. He also warned that e-commerce is killing off emotional and spontaneous consumption. People spend huge amounts of time staring at their phone screens, he said, which constrains their thinking and erodes their emotional responsiveness and creativity. “The power of platforms must be restricted,” he argued.

The remarks quickly sparked a polarised response. Supporters said Zhong had articulated concerns widely shared by people in the e-commerce industry and among consumers about “platform dominance” but are reluctant to say publicly. E-commerce platforms built their businesses on “disintermediation”, replacing the layers of middlemen that traditionally stood between manufacturers and consumers. Yet, they have ended up becoming even larger super-middlemen, squeezing both sides while ensuring themselves a steady profit.

Polarising responses

For small and medium enterprises, platforms wield enormous influence over prices and the allocation of traffic. Merchants seeking greater exposure have little choice but to spend heavily on buying traffic and offer discounts, leaving their profit margins ever thinner. Consumers, meanwhile, remain subject to the power of algorithms. Big data swindling (algorithmic price discrimination) continues despite repeated efforts to crack down on it, while the platforms’ tactics have become increasingly sophisticated and difficult to spot. They continue to “harvest” consumers, leaving no opportunity untapped.

Some internet users put it more bluntly: many of the entrepreneurs with discourse power today are beneficiaries of the platform economy. At the very least, Zhong is one of the few willing to stand up and say that “platforms have too much power”. Some went further, speculating that, as China’s state broadcaster, CCTV’s decision to feature Zhong’s remarks at this particular moment could be a sign that the country’s higher-ups are taking notice of the excessive power wielded by platform companies.

First, they argue that Zhong’s criticism overlooks the efficiency, competition and convenience that e-commerce platforms have brought. The rise of e-commerce has narrowed the huge information gap between consumers and manufacturers, allowing businesses to compete on quality, price and service rather than profit from information asymmetry. Consumers have gained more transparent prices and the convenience of shopping from home. Small businesses, meanwhile, have gained visibility. These are advantages the traditional model could not provide.

Second, critics say Zhong wrongly pits the platform economy against the offline and real economies without addressing the underlying causes of weakness in retail or the worsening price wars. By focusing on platforms, they argue, he sidesteps the more fundamental problems of weak demand and excess supply in the Chinese economy, effectively picking the wrong target while deepening tensions between different forms of commerce.

Some critics also accused him of clinging to the traditional economy and adopting the stance of an old-school businessman to attack the emerging platform economy. In their view, his criticism ultimately serves to defend the traditional, multi-tiered distribution system on which Nongfu Spring has relied for decades. As e-commerce has expanded and offline retail has declined, the distribution advantages Nongfu Spring built under the old commercial order have been eroded. Newer brands that once struggled to gain access to traditional offline channels have gained visibility among consumers, eating into Nongfu Spring’s market share. From this perspective, it is hardly surprising that Zhong has such strong feelings about the rise of e-commerce.

In fact, following the online backlash and boycott of Nongfu Spring two years ago, Zhong bore a grudge against internet platforms. Since then, he has repeatedly attacked internet platforms on various occasions, once denouncing e-commerce as “the meat grinder of the Chinese economy” and the “Zhou Bapi” of small and medium-sized businesses — a reference to the notorious character used to describe an especially exploitative landlord. There are clearly personal grievances and commercial calculations behind Zhong’s remarks. But that does not make the questions he raised in his CCTV interview invalid.

Bigger questions remain

Over the past few years, businesses have been forced by platforms into “either-or” arrangements; consumers have been subjected to discriminatory pricing through big data; and food-delivery riders working for platforms have found themselves trapped by algorithms and opaque systems. The problems generated by the platform economy have repeatedly made the headlines. Platforms broke down many of the barriers of traditional commerce. But has their control over distribution channels, traffic, data and even the rules of the game transformed them from transaction facilitators into market rule-setters? 

As algorithms become deeply embedded in the market and a handful of giants gain control over merchants and consumers, how can we prevent the concentration of power and the emergence of monopolies? Technological change inevitably reshapes the distribution of economic benefits. How, then, can we protect the interests of the small and medium businesses and flexible workers who rely on these platforms to make a living, as well as those of hundreds of millions of consumers?

Zhong’s position is far from unassailable, and his attacks may well be coloured by his own interests. But reflecting on these questions does not mean denying the value of platforms, still less does it mean turning back the clock on marketisation. Rather, it means maintaining the necessary vigilance over blurred boundaries around platform power and failures in market mechanisms. Only by doing so can we make markets more efficient and competition fairer.

This article was first published in Lianhe Zaobao as “钟睒睒炮轰电商撕裂舆论”.

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