US online trading giant eBay yesterday cancelled transaction fees for its users in China amid intensifying competition from Taobao and Tencent.

It now also requires customers to trade only using its two payment tools, Escrow or Paypal, to complete transactions.

Escrow is a payment tool that eBay designed for the Chinese market, where trust and credit information are largely absent.

Buyers pay their money into eBay's escrow; sellers can retrieve the money only when buyers receive their goods and are satisfied.

The online auction giant also said it would guarantee all transactions on is website, saying it would compensate for any fraud if traders use the two payment tools.

Buyers have never had to pay transaction fees when using eBay; now sellers will not have to pay transaction fees either, although they will have to pay other fees if they want to promote their goods more prominently.

EBay said free transactions would be offered for the next couple of years, but gave no more specific details.

EBay saw its customers grow by 2.8 million in China to 17.9 million in the fourth quarter of last year over the third quarter, successfully defending its title as the largest online auction firm in terms of users.

"The majority of mainstream consumers are yet to be converted to online traders as safety and product quality still top their concerns," said Martin Wu, chief executive officer of eBay China.

Too much emphasis on the growth of users has led to complaints from sellers, who say many bidders do not really want to buy the products.

Ebay's arch-rival Taobao, owned by Alibaba, which itself is partly owned by Yahoo!, and new entrants like Tencent and the country's top customer-to-customer e-commerce website Dangdang.com have sparked intense competition in the market.

Now eBay is trying to increase transaction volume on the website and make its services more valuable to customers. In the past month, it has allowed sellers to open shops online, free of charge, and allowed traders to communicate with its Skype communications software.

Taobao, which claims to lead eBay in all key performance indexes except for the number of registered users, yesterday announced its results for 2005. It said the total transaction volume done on its website reached 8.02 billion yuan (US$1 billion).

In December, the transaction volume was 1.1 billion yuan (US$136 million), the total for the first quarter in 2005.

It gained 9.89 million new users to make the number of total registered users to 13.9 million in 2005.

Source: China Daily