PayPal's Internet Payment Deal In China Fizzles Out

PayPal, the third-party Internet payment platform of eBay, has announced that it will terminate its cooperation with AliExpress, the worldwide site of the Chinese B2B e-commerce group Alibaba, from August 3, 2011.

PayPal said on its official blog that to provide quality services to users around the world, PayPal insists on making regular evaluations of its businesses and relationships with its partners. After a regular audit on the cooperation of PayPal and Alibaba, the company decided that starting from August 3, 2011, PayPal will end its cooperation with AliExpress and stop providing Internet payment services on the website. PayPal did not disclose the detailed reasons for the termination, but it could be related to Alibaba's own online payment subsidiary Alipay creating conflicts in the PayPal relationship.

However, Alibaba believes that the reason for the termination is because the rapid development of AliExpress has impacted eBay's business in China. AliExpress is a wholesale marketplace launched by Alibaba.com in 2009, offering wholesale prices on even the smallest orders. With minimum orders as low as one item, secure escrow payments, and express delivery with full tracking, AliExpress claims to be the one-stop shop for online sourcing and Internet shopping.

A representative from Alibaba revealed to the local media that at the beginning of 2011, PayPal asked Alibaba to raise the rate of payment fees of AliExpress members to 7% while PayPal offered about 3% payment fee rate to Dhgate.com, another B2B e-commerce website in China. Alibaba said it is an unfair condition, which aims to restrain the development of AliExpress.

The termination of the cooperation may affect PayPal's business development in China, because it will lose foreign trade customers introduced by Alibaba; meanwhile, Alibaba will lose a powerful tool for overseas market expansion, which will definitely affect the growth of its Internet foreign trade volume.

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