September 10, 2010 / 5:04 AM / 9 years ago

eBay sees expanding China cross-border trade

* Sees cross-border trade from China up 80 pct to $4 bln

* Market being driven by SMEs looking to export

* iPhone app expected to log $1.5 bln in volume this year

By Doug Young

HANGZHOU, China, Sept 10 (Reuters) - Internet commerce giant eBay Inc (EBAY.O) said on Friday it expects cross border trade over its network from China to grow 80 percent this year to $4 billion, as smaller companies look to export their wares.

“There’s enormous opportunity for small- and medium-sized businesses in China to sell outside China,” eBay’s CEO John Donahoe told Reuters at an event in China hosted by Alibaba Group, parent of leading Chinese consumer e-commerce site Taobao.com and B2B site operator Alibaba.com 1688.HK.

“The Internet allows those factories, manufacturers to sell directly to consumers outside of China,” he said.

Donahoe’s appearance at the Alibaba event marked the completion of a circle of sorts for eBay in China, bringing together top executives of the U.S. giant and its former China archrival Taobao.

EBay made its grand splash into China in 2003, when it paid $180 million for EachNet, the country’s then-leading online auction site.

Taobao was a relative latecomer to the game at that stage, but rapidly gained ground on eBay by offering its services for free, in sharp contrast to the U.S. company that charged fees for transactions,listings and other services.

The pair engaged in a war both on the net and in the media, which ended in 2006 when eBay, rapidly losing share to a rising Taobao, put its eBay EachNet business into a joint venture run by HongKong-listed media company Tom Group (2383.HK), in what most considered a withdrawal from the market.

Since then, eBay has decided to focus on cross-border trading, mostly involving smaller export-oriented merchants and manufacturers selling their products abroad, leaving the domestic market to companies such as Taobao.

China’s business-to-business e-commerce market was worth 1.6 billion yuan ($235.9 million) last year, as Web commerce in the country has surged fuelled by buyers tapping the Internet for better deals from more suppliers in the nation’s highly fragmented distribution network.

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China e-commerce graphic: link.reuters.com/gem62p

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Donahue said eBay’s joint venture deal with Tom will expire next year, but that his company has not decided what it will do with the venture after that.

“The reality is we haven’t spent much time contemplating or worrying about it yet,” he said.

On a global basis, Donahue said mobile trading of goods is another fast growing area for eBay, with the company expecting $1.5 billion in volume over its application for Apple’s (AAPL.O) iPhone this year.

The company’s PayPal electronic payments unit expects to record about $500 million in mobile transactions over the same period, he added.

“Many merchants are now building mobile apps,” he said.

The Internet commerce giant in July posted a second-quarter profit that beat Wall Street estimates, helped by a record performance of PayPal and marketplace division sales in Europe.

But the company also warned that a stronger U.S. dollar would hurt itsfull-year results, and it trimmed the high end of its 2010 forecast.

($1=6.782 Yuan)

(Editing by Jacqueline Wong)

((doug.young@thomsonreuters.com; +852 2843-1631; Reuters Messaging: doug.young.reuters.com@reuters.net))

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