Virtual China: Information Technology - Press Reviews, June 7, 1999

Weekly Press Review

June 7, 1999

A handful of government actions aimed at controlling and censoring Internet activity and foreign information sources came during the week prior to the tenth anniversary of the June 4 crackdown at Tiananmen Square. Early last week, authorities in Shanghai ordered web sites to seek official approval before publishing any political content and commenced a new crackdown on unregistered and unauthorized Internet cafes. In the June 4th issue of the official "Liberation Daily," authorities reported punishing 278 unregistered net cafes with either fines or warnings under what they called "Public Action Number One." The newspaper report claimed Shanghai has over 2000 Internet cafes of which only 350 are authorized. In Beijing, Chinese web site directory Sohu announced the temporary closing of its popular chat room area to "improve the system and services." According to a Reuters report, an employee at the web site confirmed the chat room was closed down out of concern for possibly controversial June 4th postings. Another popular Chinese portal, Netease, continued the operation of its chat service throughout the week, however.

Also last week, Chinese authorities blocked access to CNN and other foreign news sources normally available in Beijing hotels and apartment buildings. The blocking of CNN is believed to have come at least in part because of a Tiananmen retrospective series the network has been running in the days prior to the 10th anniversary. Last Friday, former Tiananmen student leader Wang Dan announced his online petition campaign, calling for the Chinese government to take responsibility for the massacre, garnered more than 1000 signatures from mainland Chinese via the Internet, despite government efforts to block access. The campaign, hosted at june4.org, has received more than 20,000 online signatures so far and more than 100,000 in total.

Investor interest in China's Internet has and will continue to increase, despite this limited "information crackdown." A growing number of analysts understand that the government's enthusiasm for the Internet far outweighs concerns over its potential negative impact. According to IDG, China's total IT market was worth 9.24 billion last year and grew at a compounded annual rate of 27.8 per cent.

A recent SCMP interview with Tony Jansz, director, corporate business development for Hong Kong-based Intel Semiconductor, highlighted Intel's bullish sentiments toward China. Jansz oversees Intel's venture capital investments within China. Intel currently has two mainland Internet "plays": Sohu, the Beijing based web directory and Shenzhen Prosperity, China's first and largest e-commerce solution provider for the securities and financial industries. According to Jansz, Intel will be announcing "several more" investments in the next month.

Financing opportunities for Chinese Internet firms are likely to increase next October with the opening of the Growth Enterprise Market by the Stock Exchange of Hong Kong, the SAR's "second board." The new exchange has less stringent listing requirements than Hong Kong's main board and is expected to help small high-tech firms facilitate capital acquisition. According to Richard Peng, executive managing director of the exchange's China Development Division, more than 50 companies, primarily from the mainland, Hong Kong, and Taiwan, have already applied for listings. Interest in the second board is strong among mainland companies because current opportunities for public listings are limited. A-shares on China's Shenzhen and Shanghai exchanges are restricted to mainland Chinese investors, while the more open B-shares have performed poorly and are unattractive to new IPO candidates. US-based Nasdaq's listing requirements are too stringent for all but the top three or four Chinese Internet companies. "We hope a Chinese version of Yahoo can emerge from the Hong Kong second board in the future," Zhang Yaojin, an engineer from the Chinese Academy of Sciences, said in a recent China Daily Business Weekly article.

In other news, Shanghai officials announced the opening of the city's official web site, City Shanghai, at http://www.shanghai.gov.cn. The site features information on the local economy, culture, and tourism. An English version is also available.

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