The irony of e-commerce

China is now the world's largest e-commerce market, registering online sales of 1.85 trillion yuan ($300 billion) in 2013.

With China, the most populous country, set to replace the US as the largest global economy within one or two decades, it is no surprise that the People's Republic outperforms other countries in e-shopping.

A large population and fast economic expansion, however, are not the only factors behind China's e-commerce boom. Less regulation is actually a crucial anf often overlooked contributor to the explosive growth of Internet commerce.

As a transitional economy, China has had a hard-to-shake-off legacy of the planned economy — specifically, the state's intervention into the market.

Although the recent global financial crisis, originating from the free markets of the West, has brought home the lesson that a less-regulated market may not be the best for an economy, China still needs to reduce its role in market activities.

The recent vow by the central government to reduce the number of administrative approval items in the hands of government agencies is evidence of such need.

China is still heavily regulating on many parts of the economy. You will, for example, have to go through a lot of approval procedures if you want to open a business.

Even so, the virtual shopping sector has so far had the privilege of not receiving much attention from regulators. After all, it was a new thing in China, as well as the rest of the world, it started to take off 10 years ago.

For government regulators at the time, e-commerce had exciting potential and should be encouraged. Perhaps more important, they may not have known exactly how to regulate it.

Even industry experts and business leaders, including Alibaba's Jack Ma, did not know the direction of the industry and it is understandable that regulators the world over were also at a loss.

The lack of regulation provided a vital "grey" area for e-commerce websites to evolve. Some of these pioneering sites, such as Alibaba, have had and are expected to have blockbuster IPOs on Wall Street.

The room to grow without stiff regulation helped the explosive growth of the sector and, in turn, created an important source of growth for the Chinese economy.

Today, online sales account for 7.8 percent of the country's total retail sales, according to the Ministry of Commerce. That number might seem modest, but it is already exceptional considering that just six years ago the value of e-shopping was only about 1 percent of the total retail sales.

Online retail sales jumped by 52 percent in the first four months of 2014 from a year earlier, compared with a 12 percent gain in the broader retail sales, the weakest performance since 2004.

As China restructures its economy and plans to have consumers play a more important role in GDP creation, e-commerce is set to play an indispensible role in the economic environment.

Based on the strong momentum of current growth, the sector does not look likely to let the nation down.

By 2020, China's e-commerce sector will be larger than those of the US, Britain, Japan, German and France combined, according to a recent report from global accounting firm KPMG.

Less regulation, however, has not always been entirely constructive. While it helped the e-commerce industry expand rapidly, it has also brought some irregularities, such as selling of fake goods by online shops.

As regulation tightens, online sellers will find it more difficult to take advantage of regulatory loopholes in pursuit of profits. China's new consumer protection law, for example, will cover the online shopping sector. The law stipulates that consumers can unconditionally return the purchased goods to the online seller if they are not satisfied.

The new rules will protect the interests of consumers and provide much-needed structure to the industry. But such regulation may also temporarily slow down the expansion of online sales.

Moreover, now that the number of China's e-shoppers reaches 300 million, or about half of the total number Internet users, the market is ripe for saturation.

Although its growth is set to slow in the next two or three years, according to a May 28 report by the Chinese Academy of Social Sciences, e-commerce will continue to make a massive economic impact.

With stiffer regulation and a market already blown up to $300 billion, however, it will be almost impossible for China's e-commerce industry to repeat the eye-popping growth of the past.