The Internet In China
- From: PaPaPeng <PaPaPeng@xxxxxxxxx>
- Date: Thu, 31 Jan 2008 18:55:45 GMT
The internet in China
Alternative reality
Jan 31st 2008
http://www.economist.com/business/displaystory.cfm?story_id=10608655
| HONG KONG
From The Economist print edition
China will soon boast more internet users than any other country. But
usage patterns inside China are different from those elsewhere
AP
ONE of the more striking end-of-year statistics pumped out recently by
the Chinese government was an update on the number of internet users
in the country, which had reached 210m. It is a staggering figure, up
by more than 50% on the previous year and more than three times the
number for India, the emerging Asian giant with which China is most
often compared. Within a few months, according to Morgan Stanley, an
investment bank, China will have more internet users than America, the
current leader. And because the proportion of the population using the
internet is so low, at just 16%, rapid growth is likely to continue
for some time.
That such a big, increasingly wealthy and technologically adept
country has embraced the internet is no surprise, but it has done so
in a very different way from other countries. That is in large part
the result of the government's historically repressive approach
towards information and entertainment. News is censored, television is
controlled by the state, and bookshops and cinemas, shuttered during
the Cultural Revolution, are still scarce.
The internet itself is also tightly controlled. Access to many foreign
websites (such as Wikipedia) is restricted, and Google's Chinese site
filters its results to exclude politically sensitive material. New
rules governing online video came into force this week. Electronic
retailing is in its infancy, thanks to an unwieldy
government-controlled payment system, so most shopping is still done
in person. The attempt by eBay, the world's leading online auction
site, to enter the Chinese market was a flop. Alibaba, a site often
described as the eBay of China, is in fact more an electronic yellow
pages, helping buyers find sellers, than an online auction room.
The Chinese way
Yet it is all these limitations, paradoxically, that make the internet
so popular in China. In the West online activities have transformed
existing businesses and created new ones; in China, by contrast, the
internet fills gaps and provides what is unavailable elsewhere,
particularly for young people. More than 70% of Chinese internet users
are under 30, precisely the opposite of America, and there is enormous
pent-up demand for entertainment, amusement and social interaction,
says Richard Ji, an analyst at Morgan Stanley. Rich rewards await
those entrepreneurial internet companies able to meet that demand and
establish themselves in the market: operating margins for leading
internet firms are 28% in China, compared with 15% in America. And
internet companies' share prices have shot up, with their collective
market capitalisation nearly doubling every year since 2003 to reach
over $50 billion today.
So what is the internet used for in China? Its most obvious use is to
distribute free pirated films, television shows and music. Even though
China's censors do an excellent job of restricting access to content
that might cause political problems, they are strangely unable to stem
the flow of pirated foreign media. On December 30th an appeals court
in Beijing ruled in favour of Baidu, China's leading search engine,
which had been accused by the world's big record companies of
copyright violation by providing links to pirated music files. Even
so, piracy is starting to worry the government, not least because the
availability of free foreign content is holding back the development
of the domestic media industry. But for the time being, the
free-for-all continues.
When it comes to making money online, the biggest market involves the
delivery of mobile-internet content to mobile phones. With over half a
billion mobile-phone users, China has more subscribers than America,
Japan, Germany and Britain combined, and more than half of them use
their phones to buy ringtones, jokes and pictures from mobile-internet
portals such as KongZhong and Tom Online. Each download costs a few
cents, most of which goes to the portal, but the mobile operators then
make money as subscribers send jokes and pictures to each other. It
all sounds trivial, but a few cents here and there multiplied by
hundreds of millions of users soon add up. The ringtone from a hit
song, "Mice Love Rice", generated over $10m in sales in 2005, for
example.
Another big field is online multiplayer games, which have become so
popular that the government has started to worry about their impact on
adults' productivity and children's education. Import restrictions and
fear of piracy mean that the big foreign console-makers-Sony, Nintendo
and Microsoft-have not made much headway in China. Instead, a
different model has emerged, based around PC games played online.
Generally the game itself is given away, so piracy is not a problem,
but players pay a subscription to play, and may also buy in-game
add-ons such as accessories for their characters. Big providers such
as NetEase and Shanda have millions of customers for games such as
"Fantasy Westward Journey", a cartoon game for children, and "World of
Legend", for teenagers and adults.
Although there are tight constraints on the provision of hard news,
internet sites such as Sina and Sohu provide a steady supply of
gossip, features, dabs of propaganda and slightly salacious stories
and photos, and are constantly testing the boundaries of what is
permissible. Video of America's professional basketball league and
English football games is also popular, and can be packaged with
streaming advertisements, another emerging business in China.
The most dynamic area, and the hardest for outsiders to understand, is
that of online communities, many of which are run by a company named
Tencent. Its site offers an instant-messaging service and a
MySpace-like social networking site, among other things. In each case
the basic services are free, but users pay for add-ons (such as new
backgrounds for their home-pages or more storage space). Often, says
Mr Ji, the members of these communities are people who, because of the
single-child policy, have no siblings and are searching for virtual
friendships. For them and for many users in China, the internet is not
truly a worldwide web: it is only as wide as China. But China's
internet community is evidently a world unto itself.
.
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