<<Monday, April 5, 1999 LA Times Science and Technology....
Web Is Newest China Trade Route
For peasant farmers as well as urban entrepreneurs, the Internet is opening a
world of business opportunities.
By MAGGIE FARLEY, Times Staff Writer
SHANGHAI--When a group of banana farmers in southern China's Guizhou
province found their fruit sales disappointing, they got on the Internet and
found great demand for lean pork instead. So they switched to raising low-fat
pigs and boosted their income.
A chicken farmer in Tianjin discovered through the Web that Romania
needs poultry, so he is planning to open a hatchery there. The farmer, He
Jijian, says he has also doubled his domestic business in the last year through
Internet orders.
And a Shanghai factory that makes airplane armrests realized it could
sidestep the government monopoly and sell directly through its Web site.
"Before, we had only one buyer: the Shanghai Import-Export Co.," said Li
Yajing of Wanghui Information & Engineering Co. "Now we're thinking, why
not cut out the middleman? We can have more choices and make more
money."
From a new breed of techno-peasants in the hinterland to a growing class
of urban entrepreneurs, the Internet is changing the face of business in China.
The number of Internet users is still relatively small, but as computers pop up
in local libraries, cafes and government offices, traditional barriers to trade,
information and access are melting away.
The Internet is not just a potential equalizer, but a singularly powerful
modernizer, doing more than anything to bring China hurtling into the world
marketplace of ideas and commerce.
"There are 800 million peasants in China," says Internet entrepreneur
Edward Zeng, who plans to open a network of cybercafes across China.
"We're trying to find a way to make the Internet relevant to everyone, not just
students and rich people. When that happens, China will transform."
At the rate Chinese users are getting online, that may happen soon. Public
access to the Internet in China became available in 1995. By the end of last
year, there were 2.1 million Internet users, according to the China Internet
Network Information Center. By the end of this year, that number is expected
to at least double, and some projections call for 10 million users by the end of
2000. Most people are using the Internet for e-mail and Web surfing,
according to a December survey by the center.
But until last year, doing business on the Web has been a tough sell.
"E-commerce in its pure form--buying and paying over the
Internet--hardly exists in China," says Duncan Clark, a partner with
consulting firm BDA China Ltd. "But there is a lot of exchange of information
[online] that leads to sales, and that's an important first step."
The obstacles to e-commerce are considerable. Not many people own their
own computer. There are about 2.5 million computers in China, and less than
10% are connected to the Internet, so many Internet users have to log on to
public terminals. Even fewer Chinese have true credit cards. And even if they
did, only a handful of domestic sites can securely process credit information
online. And then there's the distribution problem.
But Chinese computer users are making the Internet work in unexpected
ways. To solve the credit card shortage, the German-owned Bertelsmann
Book Club in Shanghai uses its own fleet of pedicabs to deliver books and
take cash-on-delivery for purchases made online. Other companies use the
post office network as their de facto partner for payments and quick
distribution around the country. If it takes a bicycle rickshaw to get around
the potholes on China's information highway, so be it.
"China is such a huge market--it can't be ignored," says entrepreneur Zeng,
based in Beijing. "But you can't just copy the U.S. model, where there is no
language barrier, payment problem or lack of PCs. We have to come up with
our own solutions here."
Already, the Internet cafe visitor in China can buy books or stocks on the
Web, look for a job or even bid for extra textile quotas.
The best bets for e-commerce seem to be business-to-business
networking, like the Chinese government's Chinamarket.com
site--http://www.chinamarket.com.cn--where buyers and sellers meet in a
virtual trade fair and can go into encrypted chat rooms to negotiate prices.
In Dongguan, about 40 miles north of Hong Kong, a third of township
enterprises promote their goods on the Internet. Last year, more than $10
million worth of orders were received online, according to the Dongguan
government.
A Christmas light factory, Rui Guang Electric Co., is one of Dongguan's
success stories. Its sales had been lackluster, so it paid about $600 to set up a
Web site. After one month, said General Manager Su Zhengliang, they
received via e-mail an order worth $500,000 from Japan and another from a
U.S. firm for $150,000.
"To pay $600 for $600,000," marveled Su. "Isn't it wonderful?"
Would-be e-tailers--with an eye on the U.S., where consumers spent about
$10 billion on Internet purchases last year--are quickly learning what sells
well online. Simple purchases like books, computer software and CDs do
better than clothes or merchandise that customers want to see, feel or try on.
But Dell Computer is proving that people will buy even big-ticket items
sight unseen if they are familiar with the product. Since Dell started selling
computers online from its newly opened factory in Xiamen, sales have
doubled every month.
But Shanghai's government found that it is not just a simple case of "If you
build it, they will come." They had a site, an e-commerce program from IBM
and official support. But when they put it on the Web, few visitors came,
teaching them that e-commerce takes as much work in terms of marketing and
simplifying transactions as real-life selling does. Maybe more.
"E-commerce has huge potential, but it's just not there yet," says Graham
Earnshaw, a Shanghai-based Internet designer and consultant. "Give it
another year and things will really start to happen."
That's because China's biggest impediment to e-commerce--secure
payment online--may be solved by the end of the year, says Franklin Fan, the
e-commerce project manager in Visa International()'s Shanghai office.
In February, Shanghai launched the first site in China able to safely take
credit or debit card orders online, Shanghai Book Mall. Visa is working with
Bank of China and 11 commercial banks to set up a nationwide settlements
center and certification authority so that China's 30 million bank card holders
can use their plastic--mostly debit cards and credit cards secured by cash
balances--on the Web. That may vault the mainland past supposedly
sophisticated Hong Kong, which is still struggling to get its banks in sync with
Internet communications protocols.
"I think Shanghai will pass Hong Kong soon," Fan says. "The government
here is very committed."
Despite the Internet's virtue as the great anarchic wall-breaker, government
support is what is going to make the difference in China's transition from
developing country to global player. To help spread Net access in the home,
Beijing just slashed Internet access fees and allowed residents to install a
second telephone line for free--though Chinese still pay several times as much
as Americans to get online.
Shanghai plans to have free public computers and Internet access in every
city district by the end of this year.
Even with the new technology, the same old security concerns remain.
"Chinese have the same skepticism about paying on the Internet as people
in the West do," says Visa's Fan.
Merchants have similar worries.
When the Beijing Railway Bureau started to sell tickets online in January,
350 people booked seats in the first week. But four out of five never paid.
And in proof of how quickly Chinese can adapt to the new technology,
during the standing-room-only Spring Festival holiday, hackers broke into the
railway computer and booked blocks of first-class seats.
Copyright 1999 Los Angeles Times. All Rights Reserved |
