Virtual China: Information Technology - Press Reviews, August 13, 1999

Weekly Press Review

August 13, 1999

Hacker assaults across the Taiwan Strait dominated the news this week. Someone claiming to be in the mainland kicked things off by hacking into several Taiwanese government and academic websites to post pro-China messages.

Apparently provoked by Taiwanese President Lee Teng-hui's call for 'special state-to-state' relations with Beijing - comments that many interpret as a thinly-veiled claim to statehood - the mainland hacker put up one message that read, ''Only one China exists and only one China is needed."

Taiwan's government webmasters apparently had not thought firewalls were necessary before the weekend's attacks. "It is a public website containing open information, so we didn't think firewalls were necessary," one official said. "Now we know it's a problem and we will fix it in the next few days."

Taiwanese Internet mavens responded quickly, attacking several Chinese government sites on Monday. One particularly creative hacker reportedly inserted a sound file that played the island's national anthem along with the anthems' lyrics and a picture of Taiwan's flag. Another put in a revolving image of 'Hello Kitty,' an Asian icon akin to Furby. Most were content to put up anti-Communist, pro-Taiwan slogans or pictures of Taiwanese politicians.

China's Internet also figured prominently in a Reporters San Frontiéres report on 45 countries that restrict access to the Internet. China merited inclusion in the list of "20 enemies of the Internet" for its close monitoring of Internet, periodic blocking of overseas websites, closings of Internet cafes, and the harsh punishment imposed on Lin Hai, the computer technician who supplied a US-based dissident site with Chinese e-mail addresses.

On a more prosaic note, China Telecom announced that it had been granted a 20% large volume discount on leased line fees to provincial telecoms authorities. The reduced charges will save the company roughly US$60 million dollars.

China's near-monopoly operator apparently needs the cash as it has plans to issue US$6 billion in bonds to finance the purchase of three mobile communications networks, according to Sohu News. Although a company spokesman denied the report, Sohu News reported that a who's who of financial institutions has helped arrange the issuance.

China Telecom not surprisingly landed sole distribution rights for services provided by Globalstar, an international satellite communications consortium founded by China Telecom and Loral Space & Communications. China Telecom will run three ground stations and connect Globalstar with China's existing landline and wireless networks. Testing of the system's first gateway in Beijing has already begun.

Another company has decided to challenge China Telecom's dominance. Netcom, short for China International Network Telecommunications Co. Ltd., will jump into the fray by offering leased lines and IP telephony telephone service. Relying heavily on government loans for funding, the company hopes to offer lower prices than China Telecom. Unfortunately, IP telephony prices are already controlled and leased lines may soon follow suit.

If the venture attracts foreign investors, they will want to learn the lesson painfully impressed on those who fell into bed with Unicom, China's second largest telecoms company. Most of Unicom's remaining foreign partners are preparing take their woes to court, normally a last, desperate measure in China. The heyday of Chinese-Chinese-Foreign ventures thus comes to a sad close.

Several reports on China's IT industry came out this week, with mixed tidings. The industry as a whole grew 17.7% in the first half of the year, with total IT sales reaching US$9.78 billion according to the Chinese Overseas News Agency. On the downside, China's telecommunications equipment manufacturing industry slowed in the first five months of 1999 according to a National Bureau of Statistics report.

China's official experiment with IP telephony has proved disappointing, at least for China's three leading telecoms companies. During the first half of a six-month trial, usage was lower than anticipated. Domestic calls outnumbered international calls by over three to one, suggesting that offering a 40% discount on normally expensive international rates may not be enough to lure traffic away from unlicensed operators.

Y2K problems reared their collective heads with an announcement form China's millenium bug mandarin, Zhang Qi, that state-owned enterprises lagged behind in their efforts to clean up their code. She also predicted a spate of nasty legal spats in the new year. All this leaves foreign companies worried about how Y2K glitches will affect their operations.

Finally, Wave Wireless Networking's deal with Mudanjiang City in northeastern China may mark the beginning of a trend toward wireless solutions for high-speed communications in China's congested urban centers. Chinese cities hoping to attract foreign investors with advanced communications networks may find wireless systems a faster and cheaper option.

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