HERE COMES CHINA
Nov. 22, 1999 (ELECTRONIC COMMERCE NEWS, Vol. 4, No. 47 via COMTEX)
-- Entry Into World Trade Organization May Open Doors To World's Market
Prize
If last week's tentative China/World Trade Organization agreement
should say anything to e-commerce firms and Internet service providers,
it should be: Get motoring!
"This is the green light people have been waiting for," says Ken
Zita, managing director for New York-based Network Dynamic Associates,
a telecom investment advisory firm. "If people are interested in doing
business, they need to start now. A lot of people will be buying
airline tickets."
Alan Phan, president of Hartcourt [HRCT] a Long Beach, Calif.- based
telecom vendor, has been working the Chinese market for two years now
and still is scurrying to keep ahead of the wave of competition headed
to the politically turbulent country once it joins the World Trade
Organization.
"The size of the market is huge and the standard of living is
increasing," Phan says. "The price of computers continues to drop and
more people will have access to computers. By 2007 China will surpass
the U.S. in terms of Internet usage. This is what we are looking at."
Jumping The Gun
Hartcourt obtained a license to conduct e-commerce in China six
months prior to the potential China/WTO agreement, and plowed ahead
with an online trading service similar to E*Trade [EGRP].
If China joins the WTO, its markets will be easier to access, Phan
says. Before China and the United States harmonized foreign investment
issues, the Internet did not have a secure future in China. Sure, there
was plenty of public interest, but legal issues made investment banking
firms and private institutional investors wary of financially backing
start-ups.
"Right now we are getting calls, 'Do you still want the money or
not?'" Phan says. "We hope to keep our competitive edge, and continue
to move quickly, establishing ourselves in the market before big
competitors come in."
And the company is right to be concerned by the possibility of
competition - which some predict will be a stampede. Many companies
have been salivating at the gates of China, waiting to bite into its
1.3 billion person market - even if it is a miniscule piece.
It's those 1.3 billion people that many industry analysts predict
will make China the largest consumer of technology in the new
millennium. Currently, buying power lies in the hands of 10 percent of
Chinese who have a good standard of living. That's at least 130
million consumers ripe for the taking.
Global Crossing [GBLX], the Bermuda-based builder of a global fiber
optic network, has its eyes locked on China. The company just signed a
deal with Hutchison Whampoa Ltd. to form a 50/50 joint venture to sell
telecommunications and Internet services in Hong Kong.
Global Crossing CEO Bob Annunziata says the venture could be a
jumping-off point for selling services in greater China, depending on
whether the World Trade Organization pact opens up the telecom market
there.
"We now have the government's encouragement," says Bill Schrader,
president and CEO of Herndon, VA.-based ISP PSINet [PSIX]. "We don't
want to go in fighting with the government."
PSINet, which purchased over 10 carriers in Japan, Hong Kong and
Korea last year, has not purchased assets in China thus far.
"We didn't want to do that until signals were pretty clear from the
Chinese government," Schrader says.
The company, which has been preparing for entry into the Chinese
market for two years, will move forward this year, Schrader says.
Other Asian markets may be easier to gain entry to, but do not carry
the profit potential.
"It's difficult to make profits in Taiwan," Schrader says. "It's been
challenging to find a suitable partner because most companies are
losing money. It's a combination of the market status and market
evolution."
The Hard Part Begins
While the Chinese market still may prove to be a volatile one for
hopeful fiber carriers and ISPs even after the U.S. and Chinese
Congress sign the WTO accord, it's a huge market fiber carriers and
ISPs are determined to get into.
"Doing business in China is complicated, even for the Chinese," Zita
says. "They've got to [go] through a lot of rigmarole. WTO
streamlines these non-tariff trade barriers, but they have to work with
the cultural environment. You can't take an Asian approach. With
mainland China, you have to play along with 3,000 years of history."
(Tom Goff, Global Crossing, 310/385-5200; Alan Phan, Hartcourt,
562/426-9796; Bill Schrader, PSINet, 703/904-4100; Ken Zita, Network
Dynamics, 718/858-6618.) - Ruth Suarez
-0-
Copyright Phillips Publishing, Inc.
*** end of story *** |
