Risk management for electronic commerce between Japan and China

This study aims at realization of electronic commerce (EC hereunder) through the Internet between Japan and China which have different systems. For this purpose, we have established the China Hosho Network (CHN hereunder) consortium which consists of universities and private research organizations. The consortium operates with an information disclosure policy, and is conducting a study on the credit guarantee system which will play a key role in facilitating the growth of EC between Japan and China [1].In EC, business is basically conducted on a credit basis; therefore many cases of failure are expected to occur in trade between Japan and China due to the difference in social and commercial systems and customs. Since the current civil codes of China do not provide regulations on international trade, there is a great demand among traders in Japan for establishment of credit guarantee systems for EC similar to damage insurance for international trade [2].This paper will discuss the development of the risk management system for EC between Japan and China, which functions as a credit guarantee system. The risk management system operates for its members who fulfil the terms of the membership agreement. It has a two-tire structure, consisting of risk control (preventive measures) and risk finance (financial arrangements including insurance coverage and/or other financial measures for possible trade failures). The risk control is a quality assurance system which can be realized by inspection before shipment. The risk finance is a guarantee insurance system which was developed incorporating conventional marine and fire insurance for trade. This paper also presents the results of a demonstrative application of the risk management system in order to prove its validity.