Infrastructure Lacking

Which helps explain why business is still conducted offline. The creators of the online exchanges may be familiarwith how Internet technology is being used in the West because some of them - such as Jack Ma at Alibaba - havestudied at Harvard University or other Western colleges before coming back to China to catch the emergence of electroniccommerce in its early stages.

Which helps explain why business is still conducted offline. The creators of the online exchanges may be familiar with how Internet technology is being used in the West because some of them - such as Jack Ma at Alibaba - have studied at Harvard University or other Western colleges before coming back to China to catch the emergence of electronic commerce in its early stages. But for millions of business managers like Bi, who have built careers in China from the beginning, the benefits of e-commerce need to be proven.

There is almost no infrastructure to support online commerce, even through electronic exchanges. For consumers, credit-card usage is almost nonexistent, and for businesses, traditional payment mechanisms still hold forth. There is no such thing as digital cash; payments are handled through letters of credit and telex transmissions. The main concession to the Internet for Inner Mongolia Autonomous Region Metals, Minerals & Chemicals and other trading outfits like it: E-mail has replaced the fax machine for communication during business negotiations.

It's the equivalent of 1996 in the North American chronology of commercial use of the Internet. Those Chinese manufacturers, textile companies and engraving artisans that use the Web are mainly producing what Westerners used to call "brochureware" - sites that are devoid of transaction technology, but give varying degrees of information, current or otherwise, on products for sale, as well as contact information, which may or may not produce contacts.

For China National Aero-Technology Import and Export, the Web is a matter of "convenience and communications," not commerce. So far, said Director Frank Yao, its impact on business is almost indiscernible. "It's just starting up," he said. "You can't measure it in numbers."

Indeed, backers of Internet businesses in this nation that houses one-fifth of humanity figure the numbers are sometimes close to meaningless. The official numbers, when cited at all, give the unmistakable impression that few Chinese actually use the Web.

Anthony Fan, managing director at AsiaTech Ventures, isn't buying the numbers. While he may circulate among the cognoscenti, he finds that essentially every person in China he comes in contact with has an e-mail address - which means they're finding access to the Net in some fashion. Maybe the 300 million urbanites in China dominate wealth. Maybe there's only one computer that everyone's using. But Fan is betting instead that the real number of computers is determined by a staple of the Chinese version of a free-market economy: smuggling.

Fan figures the government's tally radically understates the number of computers in daily use in Chinese residences and businesses - that instead of 7 million mainlanders with access to the Web, it's easily 20 million. And, given the vastness of the populace, it's not unusual to see forecasts that the number of Web users is doubling every six months or so in the dragon nation. "I'm not worried about the growth," Fan said. "It's going to be vast enough."

Indeed, in Hong Kong, the free-enterprise dynamo of the Chinese economy, investors have exhibited the same degree of abandon as Wall Street in picking up shares of Internet companies. A site called Tom.com, without a clear business plan, raised US$598 million from the public, mainly because it was associated with Li Ka-Shing, the legendary plastic flower maker and real-estate billionaire.

With just a couple of years under its belt, Pacific CyberWorks, launched by his son, Richard Li, bought Cable & Wireless' local phone business in Hong Kong for US$40 billion. And crowds literally lined up to buy shares of SUNeVision, a collection of Web sites brought to market by another famous, wealthy Hong Kong business family. Yet, just as in the U.S., the value of such Net stocks here fell precipitously as fickle investors found they held shares in businesses with no track record.

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