Virtual China: Information Technology - Press Reviews, September 24, 1999

Weekly Press Review

September 24, 1999

Clarity eluded those seeking the meaning of MII Minister Wu Jichuan's remarks on the Internet. MII officials said that new regulations to be published by the end of the year will liberalize the market, making the market "more open and more standardized." A China Business Times article quoted an MII official saying that foreign participation would be welcome. When asked to clarify earlier comments that Internet companies, ISPs and ICPs, "are all prohibited from taking foreign investment," an MII spokesman tersely replied, "Last time I was very clear, and there has been no change whatsoever." Even the press seemed confused, with the Beijing Youth Daily praising foreign participation in the Internet while the China Daily ran a rambling two-part op-ed piece arguing for stricter controls on the Internet. MII officials attended openings of foreign Internet ventures, with MII vice minister Qu Weizhi attending the launch of Yahoo!'s new China website -- Yahoo!China. But then one her aides explained, "They are carrying out their business through a trustee -- Founder. No company was set up inside China's border."

Although the U.S. has invited MOFTEC chief Shi Guangsheng to Washington for more talks on China's WTO package, the tea leaves provide little more clarity on the fate of China's WTO bid. Shi continued to talk tough before leaving, "I think there is hope that both sides can smoothly complete an agreement, but I would also like to reiterate that negotiations are very difficult and we must go and fight." Rumors have China's 49% telecoms offer shrinking and longtime trade negotiator Long Yongtu staying at home, which if true lends further credence to Zhu Rongji's losing authority. Looking at the recent Communist Party Plenum's results, some analysts question both China's commitment to reform and the drive to enter the WTO. Still, one Chinese official insisted, "A decision was made by the [Chinese] government to make those offers, and it hasn't canceled that decision. This is what will be discussed in Washington." While announcing the record U.S. trade deficit (including a record $6.3 billion shortfall with China), U.S. Commerce Secretary William Daley, on the other hand, optimistically asserted that a deal before November's WTO meeting is "absolutely do-able."

Eastern Communications scored major press this week. ICANN made the Hangzhou-based company China's first registrar of international domain names, meaning that Eastcom can now register domain names in the .com, .net, and .org domains. Eastcom also agreed to use Canada-based Zi Corporation's Chinese language input software in its US-designed phones. And Business Week profiled the company's upstart challenge to long-time customer Motorola. "We used the Motorola brand to start business as a distributor", Eastcom's director and CFO said. "Now, we want to create our own brand." Et tu Brutus?

Not wanting to be left out, Konka Group Co., one of China's leading consumer electronics manufacturers, announced that it will use Lucent Technologies' GSM technology in its new mobile phones set for release next month. Konka plans to bring have its phones available Europe by by 2001. Konka also headlines a Los Angeles Times article on Chinese companies' efforts to establish brand names. "For a country of 1.2 billion people to be just making products under other companies' names, it's an embarrassment," remarked Konka's general manager Che Weirong. "It's a matter of national pride." It's also a matter of national policy, as Konka is one of 33 firms benefiting from preferential, WTO-unfriendly government policies.

China Daily's Business Weekly reported on Sunday that China Netcom would begin operations next month, several months ahead of previously announced launch dates. Owned equally by the Chinese Academy of Sciences, the State Administration of Radio, Film & TV (SARFT), the Ministry of Railways, and the Shanghai Municipal Government, the company joins the other putative contenders challenging China Telecom's dominance. China Netcom will initially focus on IP telephony and business data services, using $50.6 million in startup capital to build a 15-city fiber-optic network that will in part run over lines owned by the Ministry of Railways and SARFT. The Business Weekly piece oddly hailed China Netcom as "China's third government-backed telecom operator", neglecting lowly Jitong. Citing "insiders", the article predicted the company "will change the market landscape as much as Unicom has done in the past few years and give a shot in the arm to China's telecom industry with regard to technology, services and management."

Fortune devoted a two-parter to the Sina.com-China.com rivalry for Internet supremacy in China. Sina.com comes out on top in both content and traffic, attracting around 102 million page views per month versus China.com's measly 12 million. But China.com's Peter Yip discounts the eyeball race, arguing, "The main purpose of the Net in China is business to business right now." China.com at least has a leg up in the executive race, having poached its rival's manager of engineering and production operations, Edward Hsu, who become the company's chief technology officer. Hsu quickly had occassion to explain his new employer's 'sticky' multimedia occasionstrategy, "In future, we may have different kind of clubs, different kind of areas in special interest group. We will provide a platform for people coming in, we will get a party of users coming in, we will get a party pageview eventually. We can then change it into revenues." What? Well, Sina.com at least wins the Good Samaritan award for its earthquake relief drive.

Hong Kong's cyber-pretensions suffered a few slings and arrows this week. Dupont executive vice-president and chief operating officer Denis Reilly suggested that the territory's consumer market was too small to justify setting up a research facilities there. "In terms of putting in an asset base, take the money and resources to where the intellectual capital resides," he said. Well it doesn't reside in Hong Kong according to a panel of Hong Kong IT leaders, one of who commented, "At best, some of the graduates that are hired are well-trained, but few of them are educated." Perhaps Hong Kong might take solace from former Clinton Administration techno-sage, Ira Magaziner, who opined that the SAR had "the potential to catch up [with Singapore] and become a significant player."

A little over a week after meting out penalties for website plagarism, the Haidian District People's Court struck anotheplagiarismr copyright protection by awarding damages ranging between $86 and $1,570 to six Chinese authors whose works were posted by China Online without their permission.

Lies, Damned Lies, Statistics and Surveys: MII released its August statistics. Fixed line telephone subscribers grew by 14.06 million in the first eight months, bringing the total over 100 million. The total number of cellular phone subscribers jumped 10.91 million to reach 36.19 million in the same period. China's cellular phone business now accounts for nearly 50% of the country's total telecommunications business. In other reports, PC sales in Beijing topped 500,000 units during the first six months of the year, a jump of more than 63% over the same period last year. Beijingers bought 2.1 million mobile phones through July, a 260.3% increase. As for surveys, 44% of Internet users at companies surveyed by MII expressed dissatisfaction with their ISPs. Not surprisingly, s-l-o-w connection speeds topped the list. By contrast, 73% and 79% were satisfied with their cell phone providers and paging services respectively. Finally, a Gallup-Fortune survey of Chinese found that only 14% of those polled had heard about the Internet, just one in ten have ever used a computer and a tiny 2% had ever used the Internet. But within the China's urban areas, 44% had heard of the Internet, 39% had used a computer and 8% had used the Internet. Urban Gen-Xers not surprisingly are the country's Internet vanguard, with one in three Beijingers between the ages of 19 and 29 having surfed the Net.

Y2K Alerts: The once-dreaded '9999' bug actually crashed something, halting production at a pharmaceutical factory in Hainan. Meanwhile, the People's Bank of China pronounced China's banking sector "basically ready" for the new year after the third and final round of Y2K testing. China Telecom (Hong Kong) also declared itself prepared for the computer glitch after spending about $32 million on testing and verification. China's Civil Aviation Administration of China will complete its Y2K preparations next month, after which it will carry out a special year air traffic control exercise in Northeast China. Earlier rumors had the U.S. State Department issuing a travel advisory naming China among countries with suspect air traffic control systems, but the department declined to name specific countries in the actual report. All those Chinese airline executives flying on January 1, 2000 can rest easy...

U.S. Internet venture fund jugernaut, CMGI Inc., and Pacific Century CyberWorks will swap $350 million in stock, marking CMGI's first investment in Asia. CMGI will get a 5.5 percent stake in Richard Li's cybercompany, a slot or two in Hong Kong's Cyberport and access to PC CyberWorks's still-imagined viewers in return for providing the Hong Kong company with content. One of PC Cyberwork's shareholders, however, is not celebrating.

Potpourri: Hong Kong's New T&T will become the first Hong Kong telecom company to participate in a consortium, including British Telecom, AT&T, KDD, GlobalOne, Sprint and MCI Worldcom among others, laying fiber optic cable between Japan and the United States which will significantly increase the bandwidth across the Pacific. Oracle Corporation and ChinaByte will together promote e-commerce and e-business in China, with Oracle helping ChinaByte with consulting services, technical training and software support while ChinaByte markets Oracle products on its website. Chongqing Hechuan Wideband Information Network started services this week, providing users with 35 television programs, web surfing, e-mail, IP phone and video-on-demand services over 3Com-equipped network. Auction web site, LotusWorld.com, will next month launch a China auction site that will offer computers, cameras, furniture, stamps, books, cars, motorcycles and various industrial products up for trade or sale. Motorola sealed a deal to provide, together with the Nanjing Public Transport IC Card Co., a smart card system for Nanjing's public bus service. Sun Hung Kai Properties' subsidiary, Red-Dots, will next month launch Hong Kong's first full-service online auction site along the lines of eBay. The Hong Kong property company has also formed a venture to provide real-time financial information. Nokia China's joint venture, Nokia-Citic Digital Technology Co., will begin making a range of set-top boxes this year, including satellite TV, cable TV, earth TV and network units. Limai will begin selling 21" PC-TVs in Beijing later this month, charging Rmb 4,980 ($602) for each unit.

More Potpourri: Twinbays.com has signed the Xidan Department Store Group, Beijing's largest department store operator, as a vendor on US-based company's Chinese auction site, with shoppers able to use either domestic Chinese debit and credit cards or international cards. SmarTone Mobile Communications will conduct an OFTA-approved trial to gauge the suitability of LMDS wireless local loop systems in Hong Kong. City Telecom HK will test LMDS technology for its fixed network Internet service. Beijing now boasts a GPS satellite navigation-equipped command center that can follow the real-time movements of the city�s more than 7,000 buses, trains, and other public vehicles. Cable ↦ Wireless HKT announced the formation of Cable & Wireless Asia, a joint venture with Britain's Cable & Wireless Plc., that will use an initial investment of $13 million to establish ISPs across Asia. Provided $20 million by a consortium of investors that includes AsiaTech Ventures, GE Equity, Hambrecht & Quist Asia Pacific, Intel Pacific Inc. and Viacom Inc., asiacontent.com bought all of Tricast BVI Limited, thus acquiring brands that include CNET Asia, MTV Asia Online and E! Online. Phoenix-based Radyne ComStream Inc. inked a deal with Beijing Aerospace Satellite Applications Co. to supply China Qingdao Haier Group with a nationwide high-speed Intranet. China and Hong Kong will set up an online commercial customs service, allowing mainland and Hong Kong companies to file declarations and apply for licenses. Arrow Electronics, the world's largest distributor of electronic components and computer products, will publish a bi-monthly Chinese magazine, Arrow Times to promote its products.

Waste of Bandwidth?: Will Pacific Century CyberWorks actually fork over good money for a stake in money-losing Star East Holdings, and thus own part of entertainment website stareastnet.com? Stay tuned!

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