Many developing countries have been voicing concerns over the year 2000 (Y2K) problem and China is no exception. Increasing government attention is being given to potential problems on timing devices on computer systems.
This all comes a bit late, however. Many government bodies, state industries and private sector firms have not been able to implement the government's Y2K policy, originally because of a lack of awareness and then from lack of funding. Beijing officials themselves have acknowledged that China is at least nine months behind Western countries in solving the millennium bug.
The State Council identified the Y2K issue in July 1997, when the former Ministry of Posts and Telecommunications (now incorporated into the new Ministry of Information Industry) was called upon to examine the problem and propose solutions. However, the issue was given scant public attention until April 1998, when the People's Daily published a feature written by an acclaimed science and technology expert. The article discussed measures taken in the US and UK to deal with the Y2K problem and called upon China to match their efforts with 'war-like urgency.’
In July 1998 the State Council finally issued a circular decreeing that the Y2K problem be addressed by all regions and government departments, to “forestall unfavourable effects on the national economy, social development and people's daily lives caused by the millennium computer bug.” The Ministry of Information Industry was called on to ‘supervise the necessary procedures' and co-ordinate quality and safety standards with various other departments. The ministry's director-general of its electronics and information technology products department Zhang Qi is overseeing the Y2K efforts, helping to increase awareness of the Y2K issue since the circular was issued.
The laudable efforts of the Ministry of Information Industry aside, the circular's unrealistic demands complicate Y2K compliance. It stipulates an optimistic timetable of completion of system changes by March1999, with testing and fine-tuning by September 1999. Each region and government department is responsible for funding its efforts to resolve the Y2K problem. The circular also says that those individuals responsible for resolving the Y2K problem will be held personally liable.
… but general apathy
The Y2K issue remains poorly understood at the local government level and within many Chinese companies. Some do not recognise the problem at all, while others expect the problem to be resolved by foreign vendors. Accordingly, some foreign businesses have become concerned that state enterprises will neglect Y2K testing and then blame foreign vendors for the problems that arise.
The Ministry of Information Industry has prepared training materials, set up a home page and organised several groups to help carry out Y2K compliance in China. Despite this, the rest of China has been slow to catch up. By the end of 1998, only 13 of the 80 ministries had started to deal with the bug.
Many of China's government departments, state industries and private sector firms find that funding the resolution of the Y2K problem is low on the priority list. Financial problems are pressing, with so many industries failing and China's exports in certain sectors suffering from the Asian economic crisis. Some mention has been made that the People's Bank of China, China's central bank, would make loans to help finance Y2K solutions, though the results are unclear. The World Bank has pledged more than US$500,000 towards solving the problem, a small sum compared with the US$30m loan that will be given to Malaysia.
Some important organisations in China have been actively tackling the bug, including the People's Bank of China, the Civil Aviation Administration of China, China Petrochemical Group, the State Metallurgy Administration and Ministry of Communications. The China Securities Regulatory Commission is ensuring that the country's two stock exchanges will attain Y2K compliance according to the State Council's strict deadline. China's leading computer firm, Founder Group, is also reportedly protecting its computers from the Y2K bug.
The United Nations in December 1998held a global conference in New York on the Y2K problem. Reports from the conference said that assessments of what may happen in developing countries like China continue to vary wildly. Those voicing concern note that developing countries use much less sophisticated technology and rely on software that cannot be updated to be made Y2K compliant.
China is different from most developing countries in that much of its computers and software are later models which are already Y2K compliant. Its computerisation happened only in the last few years, and Chinese consumers demand the most up-to-date products. Others note that with just 10 million computers in total, China is less computerised than many industrialised nations.
However, there has been a rapid growth of computer use in China, which will obviously have spread the Y2K problem to all areas of society – ominously reported to include the control systems for nuclear power plants, building safety and monitoring systems, communications systems and the Chinese military. Already, some banks have not been able to set three-year fixed rates for deposits because their computers cannot handle the Y2K change; chains of automatic teller machines have started malfunctioning.
Y2K compliance in China is also affected by the widespread use of pirated software. Pirated software is estimated to comprise up to 98 per cent of the software used in China. Not only may the use of pirated software limit the legal recourse available to Chinese users, but it may also make it difficult for users to approach the software vendors for technical information on problems and solutions. Pirated software may resist the application of off-the-shelf corrective programmes – and the state and private sectors are too badly hampered by a lack of expertise and financial support to hire the necessary outside help.
How millennium failure in one country will affect other systems is still in open debate. However, businesses dealing with China should be aware of the possible effects of Y2K problems in various areas affecting foreign trade and investment, and should check on their Chinese partner's awareness of the problem.
Freshfields 1999. Freshfields is an international law firm. Most of its offices through-out Asia, Europe and North America include China specialists. For fits-ther details, contact Lucille Barale (telephone: 852 2846 3400) or by e-mail(email@example.com)