1. STUDY ON THE PROTOCOL OF E-COMMERCE FOR CHINA GAO Cong, LU Tingjie ， KAN Kaili, School of Economics & Management Beijing Univ. of Posts & Telecommunications (BUPT) 164# Beijing 100876, China

2. Abstract:  This article explains small-sum payments should have a high priority is second-best solution to China’s conditions where business services and management systems are comparatively immature. Moreover, it demonstrates that mobile payment is to be promising in the development of China’s small-sum payment services.

3. conclusion  The conclusion is that the SET protocol does not fit China’s situation, though it has been the de facto standard in the E- commerce in the world.

4. introduction  The payment system is the crucial infrastructure concerning economies.  There are three types of electronic payments:  money (cash or credit card payments),  notes (checks, cashier's checks, drafts),  quasi-money (various kinds of payment cards, including phone cards).

5. credit  SET protocol can be considered to a small-sum payments oriented from credit system  As demonstrated in the flowchart of SET (Figure 1), it can be seen that two fundamental elements are required:  a credit card company independent of banks,  well established credit records.

6. Flowchart of the SET protocol Flowchart of the SET protocol

7. debit  The bankcards based on debit are widely applied in small-sum payments in china.  By the end of 2000, the number of debit cards increased from a year ago by 54% to reach 252 million, while the number of credit cards (including quasi-credit cards) only increased 5% to reach 25 million, with only 130 thousand real credit cards accounting for roughly 0.05% of the total.

8. small-sum payment  A high priority should be placed upon small-sum payment is second-best solution to China’s E-commerce’s condition.  Asymmetric information worsens the efficiency of the payment system in the exchange in China’s economy, where business services and management systems are comparatively immature.

9. second-best solution  When the special restriction of lack credit idea in China’s payment system is taken into account, this kind of marketing efficiency remains restricted optimization.  Hence, only the second-best solution can be sought to E-payment system applicable in China’s E-commerce situation.

10. bottleneck bottleneck  The credit problem of exchange in China is a bottleneck of China’s economy.  Not only introducing commercial bills as an electronic payment method for corporations becomes difficult, but also introducing credit cards in China as a modern payment method for individuals is less applicable than in many other countries.