In terms of size, the Chinese internet market is nothing to get excited about. Personal computer penetration is estimated at about one percent and the country only has 1.5m internet subscribers.
But in cyberspace, where four-year old Yahoo! is something of a dinosaur, every-thing moves at Net-speed. According to the growth rate of internet hosts, China is a world leader. The country has a long way to go, but it is catching up fast. Moreover, the increasing number of Chinese organisations which are exploiting this new technology are also looking to reach out to an international marketplace.
Getting connected
If you want to go online, first you need a telephone line and a personal computer. China already has the world's second-largest telephone network with 126m lines and 106,642,000 subscribers at the end of October, thereby recording a penetration rate of 10 percent. During the first 10 months of last year, China added 23,099,000 telephone subscribers, more than the total for the 35 years between 1949 and 1994, according to People's Telecom newspaper. In 1992 only 200 computers were sold in Chengdu, but the number skyrocketed to 200,000 in 1997 and was likely to double again in 1998. In November the president of Intel, Craig Barrett, on his fourth visit to China, officiated at the opening ceremony of the 1998 Chengdu Computer Festival. He followed in the footsteps of his chairman Andy Grove who met President Jiang Zemin in May. Computers are a hot-selling item in China.
Connecting your computer through the telephone line to the internet is the next step. In China 85,000 computers are permanently on-line in addition to the 500,000 connected through dial-up. The number of internet subscribers has reached 1.5 million but according to Mr. Daniel Chang, chairman of Richsight International, internet users on the Mainland are expected to exceed 10 mil-lion by 2002, surpassing Japan.
Richsight International came into being through the merger of Beijing Stone Rich-sight Information Technology, well known for its Richwin Chinese language software, and the US-based Sina Media. On December 1, the new company set up the world's largest Chinese language website Sina Net. More than half of the profits of the new venture will come from web site advertising. It will directly compete with the likes of Yahoo!, America Online and Excite, but aims to provide much more localised Chinese-language content.
Government takes a lead
When China and the internet are mentioned together in the media, there usually is a negative connotation. The government still tries to censor pornography and politically sensitive information. Recently, a Shanghai computer company executive was arrested in March for ‘inciting the overthrow of the state power' was put on trial. He had sold 30,000 Chinese e-mail addresses to a US pro-democracy electronic journal. However, while the darker side of internet development in China should not be overlooked, the real action is taking place on the business front.
During recent months there has been a tremendous push by Chinese companies to go online (see box). Importantly, China is building its own internet called China C-Net. On November 18 a contract was signed in Beijing to set up the interconnection centre of the network, which China Trade News touted as the China's ‘own internet project'. The 21-city network formally started operations on October 8. Over the next three years 360 service centres on the second level and more than 10,000 service stations on the third level will be interconnected. More than one mil-lion Communist party and government offices and companies will be put online.
Last August the Ministry of Foreign Trade and Economic Cooperation (Moftec) launched its Online Technology Export Fair, offering a forum for Chinese exporting enterprises to reach out to the world market. This followed in the footsteps of the China Market web site. Even the conservative State Development Planning Commission launched a web site on December 1, offering information on the last two five-year plans and inviting suggestions from the public for drafting the 10th five-year plan (2001-05). China Youth Daily heralded the move as a ‘revolution in the way the Government operates.' The webmaster however warned that illegal opinions and those threatening state security would be prohibited and promptly deleted.
The Net-craze is not just confined to the central authorities in Beijing. For example, on November 28 the biggest governmental network in Fujian province came online. The Fujian Economic & Trade Information Network forms the backbone of the Golden Enterprise project and connects many economic and trade organisations, industrial groups, localities and enterprises in Fujian province. The network also offers an enter-prise and products database, commercial information and a government regulation database, laying the foundation for the e-commerce of the future.
In neighbouring Guangdong province, the Guangzhou Posts and Telecommunications Bureau (GZPTB) runs one of the biggest Chinese language web sites as part of ChinaNet. In October the homepage of this site received 17,000 hits a day. The site hosts mirrors for Microsoft and Tucows and runs the free web-based 163 e-mail service with 350,000 to 400,000 users. The 163 e-mail site is one of three Chinese web sites, which so far have received more than 10 million visitors. The other two are Shanghai Online and Shanghai Stock Star. Along with the Guangzhou Real Estate Association, GZPTB has set up the Real Estate Exchange Network and in partnership with the Guangzhou tourism authority runs Guangzhou Tourism World. On October 1 it started round-the-clock internet radio broadcasts. The site also aspires to become a portal to the Chinese language net.
Improving web infrastructure
Web-based music distribution poses another challenge to the music industry, already severely battered by rampant piracy. The China Records Corporation and Yinghaiwei Information Communications jointly set up the Audiovisual Market, following on the heels of international retailers such as Amazon.com and CD Now. Zhu Hua became the first Chinese singer to publish her own homepage. People's Telecom even mentioned the example of David Bowie, who has distributed songs free to download. For now, officials at the China Records Corporation are not too concerned. Chinese artists still need the support of record companies and the development of the internet in China is lagging behind, at least for now.
China Telecom recently convened a meeting in Changsha, Hunan province, to explore all aspects of electronic commerce and to tackle the most pressing problem ?putting in place a solid security and authentication system. While the government is pushing internet development, some hurdles remain. Use of the web in China is predominantly a young male affair. About 93 percent of all surfers are male and 79 percent are aged between 21 and 35 years. To make e-commerce successful, women must be enticed to hold up not just half of the sky, as Chairman Mao Zedong tried to promote, but also half of cyberspace.
Another roadblock is the cost of going online, which is still fairly high. On top of that, most if not all of China's internet service providers (ISPs) are in the red due to the high fees China Telecom levies to connect through its gateways to the international section of the Net. China Telecom is facing increasing pressure to lower its fees to bring them into line with international levels. Some ISPs are bailing out altogether. On November 26, 15 executives from the Beijing Information Highway Technology Company resigned because its major shareholder, Zhongxingfa, wanted to get out of the ISP business to concentrate on financial information. Other internet companies look across the border for support. China's largest internet content provider, the China Internet Information Centre under the information office of the State Council, signed an agreement on December 3 with US-based GTE to enlist its assistance to improve the speed and performance of its web site, enhance its design and rebuild it on the database concept.
This year there will be a host of initiatives to bolster electronic commerce. From May 18-20, the Ministry of Information Industry (Mil) will co-organise the 1999 Internet Conference and Exhibition. MI is expecting more than 1,000 participants, including representatives of the Internet Society, the International Telecommunications Union and the US Federal Communications Commission. The aim is to stimulate a broad discussion on the development of the internet in China and inter-nationally, including such topics as e-commerce, venture capital and distance learning.
Even the Communist Party's publicity department has discovered the benefits of cyberspace. On the occasion of the 100th anniversary of the birth of Liu Shaoqi, a web site commemorating the former president was set up by the Central Party Literature Research Institute, becoming the first official web site devoted to a Chinese leader. And in Hong Kong, legal professionals can use LiveNote software to download court hearings in progress. For now, the service is quite expensive and limited to those directly involved, but that may change. In the US an entire murder trial has already been put on the internet. China's Supreme Court has decided to open up the judicial system to the public's supervision. Maybe they are next in line to discover the lure of the Net.
A useful guide to Chinese language sites is Chinese Internet Website Collection (in Chinese) published in October 1998 by the China Commodity Prices Publishing House.