BDA In The Press

BDA In The Press 2000 + 1999 + 1998 + 1995-97

Time
Monday 28 February 2000

'China Dot Now'
by Terry McCarthy in Beijing
Original article: Time Magazine

[...]

The Internet has hit the Chinese government with all the force of an electromagnetic burst. Net users, now 10 million strong, are doubling every six months--the fastest growth in Asia. Money is pouring in from American venture capitalists. Some 50,000 Chinese domain names--those Internet monikers like Netease.com and Sohu.com--have already been registered. BDA China, an Internet consultancy in Beijing, calculates that by 2005 China will have the largest population of Web surfers in the world after the U.S. Such a frenetic buildup would delight most governments. It terrifies the leaders in Beijing, who fear the Internet will vaporize their power over the masses. "It is not like anything they have ever experienced before," says Ding.

[...]

"The question is not whether China will pull the plug on the Internet," says Ted Dean of BDA. "It is whether China will regulate it in a way that will make it commercially unviable." After the phenomenal success last July of Hong Kong-based Chinadotcom's initial public offering (IPO) of shares, which valued the company at $1.5 billion, mainland firms have been keen to follow suit. Netease and Sohu both want to list on nasdaq this spring--Sohu has even made a preliminary filing with the U.S. Securities and Exchange Commission. According to bankers and industry sources, however, Beijing has blocked the ipo of a third contender, Sina, China's largest Internet company. Sina was seen to have bragged too openly about its ipo plans at the end of last year, and the government apparently decided to make an example of the company to reaffirm its own power.

[...]

The conviction that China is riding the back of the technology tiger and cannot get off is widely shared in the industry. "It is a dilemma for bureaucrats," says Duncan Clark, a partner in BDA. "If they don't open up to the Net, they lose the economy. If they do open up, they lose control over society."

[...]

"The interesting thing the Internet has brought to China is role models," says Clark of BDA. "In the '80s the winners were corrupt party cadres. Today people can look up to William Ding, Jerry Yang or Wang Zhidong." Now there is a reason to stay in China--or come back from a lucrative career in the U.S. Says Jack Ma, head of Alibaba, a business-to-business electronic commerce site based in Hangzhou: "This is the first time we Chinese see a way we can catch up. It's a new industry defining the new century. Just like the auto industry defined the Japanese economy--if you catch the wave, you can move the whole country forward."

[...]

The most serious hurdle is the uncertainty over foreign funding and IPOs, which has brought out the worst instincts of the government. "All these bureaucrats say to the entrepreneurs, 'You young guys, you have some American friends and loads of money, where do we get our share?'" says Xie Wen, executive vice-president of CIS, a Beijing company that runs an online games site. Asks Clark of BDA: "When you get private entrepreneurs in China who are billionaires, is that acceptable? How will that go down? This is Chinese culture mixing with New York capitalism. You are going to have some pretty bizarre side effects."

[...]

Asia Internet News
Thursday 3 February 2000

'Can etang Stamp a Web Brand on China?'
by asia.internet.com Staff in Boston
Original article: asia.internet.com

[...]

Duncan Clark, a partner in BDA China Ltd., a Beijing-based Internet consulting firm, likened the Internet to "an asteroid heading toward Asia." And he brushed aside the typical concerns raised about developing Net businesses in China.

"The big obstacles are being overcome," Clark said, noting that investment capital is flowing in, telecommunications infrastructure is being built at a furious pace, and phone and ISP charges are dropping.

Clark, along with other members of a panel at a weekend Harvard Business School conference on Asia, was also sanguine about two other potential Net hurdles in China: e-commerce payment and government regulation.

Anthony Chang, an executive with Web startup Renren.com (and no relation to etang's Dave Chang), predicted that a payment system for goods ordered online in China would be developed within a year. While credit card use is non-existent, Chang and Clark said a melange of methods are already being used: cash-on-delivery, bank payments, collections by postal agents, even collections at local convenience stores.

The watchful eye of the communist government may pose a stiffer challenge. Just last week, the Chinese announced a trio of regulations of concern to Net entrepreneurs: the need for approval from three state agencies when issuing stock; rules governing release of "state secrets" through news services or chat rooms; and the need to register encryption software with the government, potentially allowing e-mail and e-commerce to be tracked.

Clark described the presence of Chinese regulators as a "cloud on the horizon that will always be with us," but he said the government was unlikely to choke off the burgeoning industry.

[...]

New York Times
Monday 31 January 2000

Business/Financial Desk; Section C
'Rolling With China's Web Punches'
by Mark Landler in Hong Kong.

Of all the requirements needed to invest in the Internet in China these days, the most important may be steady nerves.

The Beijing government announced a raft of new regulations last week governing the release of material on the Internet. The rules would crack down on Internet providers who distribute information the government deems to be "state secrets," either through news services or electronic chat rooms.

Also last week came word of rules requiring Chinese Internet companies to receive approval from three state agencies before they issue shares of stock. These regulations could hobble several promising start-up concerns, which had hoped to go public this year to capitalize on the pell-mell growth of online usage here.

Most troubling to some experts, Beijing has set a deadline of Monday for companies to register their commercial encryption software with the government. Companies use encryption codes to prevent outsiders from monitoring their confidential electronic communications. By requiring companies to disclose details of the software, the authorities could keep tabs on e-mail and other data transmission.

Taken together, these new regulations can be seen as a frontal assault on the Internet by a government that is afraid of losing control. Yet most local entrepreneurs and foreign investors shrugged off the latest blasts from Beijing. As long as China's policy toward the Internet is still inchoate, they are content to go about their business and leave the worrying for another day.

"The potential rewards are so great that people are ignoring the risks," said Duncan Clark, a partner in BDA China Ltd., an Internet consulting firm in Beijing. "You won't see people panic unless the government does something draconian, like throw an Internet executive in jail or shut down a company."

Mr. Clark said the companies were betting that China would be able to carry out only a fraction of its new rules. With the number of Internet users here more than quadrupling, to 8.9 million in 1999, and with new online ventures proliferating, they think that the government will have neither the resources nor the ingenuity to monitor every chat room or to vet every business plan.

China has been struggling to get a handle on the World Wide Web ever since its leaders decided to harness the new medium rather than suppress it. Initially, some officials favored building a domestic Internet that was walled off from the Web. But the concept of a Chinese "intranet" foundered when it became clear that the government could not stanch the flow of information into the country.

Now, experts said, officials seem to have abandoned an overarching Internet policy in favor of a piecemeal approach that relies on ribbons of bureaucratic red tape and the occasional stern warning.

"They're saying, 'We're going to take the best of the Internet, but we will

not allow the influences we consider inappropriate or harmful,' " said Gordon G. Chang, a lawyer in Shanghai who advises Internet companies.

This kind of scattershot approach reflects a fierce debate within the government about who should supervise the Internet. The Ministry of Information Industry had originally been expected to oversee virtually all aspects of its regulation, and investors pored over the comments of its minister, Wu Jichuan, like tea leaves.

Mr. Wu caused alarm last fall when he unexpectedly reaffirmed a prohibition on foreign investment in Chinese Internet providers -- only to back off after China signed a landmark trade deal with the United States.

Last month, Mr. Wu appeared to retreat further when he said in an interview with a Chinese magazine that his ministry had jurisdiction only over Internet service providers. Internet content companies -- news services, community groups and the like -- were to be regulated by "relevant departments."

That set off a stampede by other ambitious officials eager to lay claim to various patches of cyberspace. The State Press and Publication Administration said it is drawing up guidelines on how companies should disseminate news on the Internet, while the Administration for Radio, Film and Television said it must approve services that deliver online broadcasting.

Beijing's motivation seems to be as much economic as political. "There is a land grab going on by different government departments, who recognize the billion-dollar valuations that Internet I.P.O.'s are getting," Mr. Clark said. "Some of the ministries are saying, 'We can do this ourselves.' "

The Internet entrepreneurs have responded to Beijing officials' discomfort by steering clear of the areas that arouse the most sensitivity. Two of the best-known Chinese portals, Sina.com and Sohu.com, originally made news a key part of their services -- even signing partnerships with Western media companies like Dow Jones and Reuters. But after a warning from the government, they dropped nonfinancial foreign news from their Web sites and cut links to the sites of foreign news organizations.

"News content is not going to drive the Internet in China," said R. Mark Mecham, an analyst at Claydon Gescher Associates, a technology consulting firm in Beijing.

The latest rage among investors are ventures that specialize in electronic commerce, online auctions and other activities that are less likely to touch nerves in Beijing. Among the most prominent of these are Netease.com, which sponsors online auctions, and 8448.net, an e-commerce company.

But even electronic commerce may not evade the long arm of the government. Experts said Beijing's demand that companies register encryption software had especially worrisome implications for e-commerce businesses. They predicted that some companies would leave China rather than risk having their transactions monitored.

"No foreign company wants to give up its source code," Mr. Chang said. "They'll have to end up with some sort of a negotiated compromise."

Not everyone is confident that Beijing and the Internet will find common ground. Asia Tech Ventures, a venture-capital firm in Hong Kong, has shunned mainland Internet companies, focusing instead on Hong Kong and Taiwan. It has only one China holding, a Shanghai-based online auction service called Eachnet.

"We didn't make a single investment in the mainland until last November because the regulations are always changing," said Hanson Cheah, a partner at Asia Tech Ventures. "I'm not dismissing China. I'm just extremely cautious about it."

Copyright © 1998-2000 BDA China Limited.

	Time Monday 28 February 2000
			'China Dot Now' by Terry McCarthy in Beijing Original article: Time Magazine [...] The Internet has hit the Chinese government with all the force of an electromagnetic burst. Net users, now 10 million strong, are doubling every six months--the fastest growth in Asia. Money is pouring in from American venture capitalists. Some 50,000 Chinese domain names--those Internet monikers like Netease.com and Sohu.com--have already been registered. BDA China, an Internet consultancy in Beijing, calculates that by 2005 China will have the largest population of Web surfers in the world after the U.S. Such a frenetic buildup would delight most governments. It terrifies the leaders in Beijing, who fear the Internet will vaporize their power over the masses. "It is not like anything they have ever experienced before," says Ding. [...] "The question is not whether China will pull the plug on the Internet," says Ted Dean of BDA. "It is whether China will regulate it in a way that will make it commercially unviable." After the phenomenal success last July of Hong Kong-based Chinadotcom's initial public offering (IPO) of shares, which valued the company at $1.5 billion, mainland firms have been keen to follow suit. Netease and Sohu both want to list on nasdaq this spring--Sohu has even made a preliminary filing with the U.S. Securities and Exchange Commission. According to bankers and industry sources, however, Beijing has blocked the ipo of a third contender, Sina, China's largest Internet company. Sina was seen to have bragged too openly about its ipo plans at the end of last year, and the government apparently decided to make an example of the company to reaffirm its own power. [...] The conviction that China is riding the back of the technology tiger and cannot get off is widely shared in the industry. "It is a dilemma for bureaucrats," says Duncan Clark, a partner in BDA. "If they don't open up to the Net, they lose the economy. If they do open up, they lose control over society." [...] "The interesting thing the Internet has brought to China is role models," says Clark of BDA. "In the '80s the winners were corrupt party cadres. Today people can look up to William Ding, Jerry Yang or Wang Zhidong." Now there is a reason to stay in China--or come back from a lucrative career in the U.S. Says Jack Ma, head of Alibaba, a business-to-business electronic commerce site based in Hangzhou: "This is the first time we Chinese see a way we can catch up. It's a new industry defining the new century. Just like the auto industry defined the Japanese economy--if you catch the wave, you can move the whole country forward." [...] The most serious hurdle is the uncertainty over foreign funding and IPOs, which has brought out the worst instincts of the government. "All these bureaucrats say to the entrepreneurs, 'You young guys, you have some American friends and loads of money, where do we get our share?'" says Xie Wen, executive vice-president of CIS, a Beijing company that runs an online games site. Asks Clark of BDA: "When you get private entrepreneurs in China who are billionaires, is that acceptable? How will that go down? This is Chinese culture mixing with New York capitalism. You are going to have some pretty bizarre side effects." [...]

	Asia Internet News Thursday 3 February 2000
			'Can etang Stamp a Web Brand on China?' by asia.internet.com Staff in Boston Original article: asia.internet.com [...] Duncan Clark, a partner in BDA China Ltd., a Beijing-based Internet consulting firm, likened the Internet to "an asteroid heading toward Asia." And he brushed aside the typical concerns raised about developing Net businesses in China. "The big obstacles are being overcome," Clark said, noting that investment capital is flowing in, telecommunications infrastructure is being built at a furious pace, and phone and ISP charges are dropping. Clark, along with other members of a panel at a weekend Harvard Business School conference on Asia, was also sanguine about two other potential Net hurdles in China: e-commerce payment and government regulation. Anthony Chang, an executive with Web startup Renren.com (and no relation to etang's Dave Chang), predicted that a payment system for goods ordered online in China would be developed within a year. While credit card use is non-existent, Chang and Clark said a melange of methods are already being used: cash-on-delivery, bank payments, collections by postal agents, even collections at local convenience stores. The watchful eye of the communist government may pose a stiffer challenge. Just last week, the Chinese announced a trio of regulations of concern to Net entrepreneurs: the need for approval from three state agencies when issuing stock; rules governing release of "state secrets" through news services or chat rooms; and the need to register encryption software with the government, potentially allowing e-mail and e-commerce to be tracked. Clark described the presence of Chinese regulators as a "cloud on the horizon that will always be with us," but he said the government was unlikely to choke off the burgeoning industry. [...]

	New York Times Monday 31 January 2000
			Business/Financial Desk; Section C 'Rolling With China's Web Punches' by Mark Landler in Hong Kong. Of all the requirements needed to invest in the Internet in China these days, the most important may be steady nerves. The Beijing government announced a raft of new regulations last week governing the release of material on the Internet. The rules would crack down on Internet providers who distribute information the government deems to be "state secrets," either through news services or electronic chat rooms. Also last week came word of rules requiring Chinese Internet companies to receive approval from three state agencies before they issue shares of stock. These regulations could hobble several promising start-up concerns, which had hoped to go public this year to capitalize on the pell-mell growth of online usage here. Most troubling to some experts, Beijing has set a deadline of Monday for companies to register their commercial encryption software with the government. Companies use encryption codes to prevent outsiders from monitoring their confidential electronic communications. By requiring companies to disclose details of the software, the authorities could keep tabs on e-mail and other data transmission. Taken together, these new regulations can be seen as a frontal assault on the Internet by a government that is afraid of losing control. Yet most local entrepreneurs and foreign investors shrugged off the latest blasts from Beijing. As long as China's policy toward the Internet is still inchoate, they are content to go about their business and leave the worrying for another day. "The potential rewards are so great that people are ignoring the risks," said Duncan Clark, a partner in BDA China Ltd., an Internet consulting firm in Beijing. "You won't see people panic unless the government does something draconian, like throw an Internet executive in jail or shut down a company." Mr. Clark said the companies were betting that China would be able to carry out only a fraction of its new rules. With the number of Internet users here more than quadrupling, to 8.9 million in 1999, and with new online ventures proliferating, they think that the government will have neither the resources nor the ingenuity to monitor every chat room or to vet every business plan. China has been struggling to get a handle on the World Wide Web ever since its leaders decided to harness the new medium rather than suppress it. Initially, some officials favored building a domestic Internet that was walled off from the Web. But the concept of a Chinese "intranet" foundered when it became clear that the government could not stanch the flow of information into the country. Now, experts said, officials seem to have abandoned an overarching Internet policy in favor of a piecemeal approach that relies on ribbons of bureaucratic red tape and the occasional stern warning. "They're saying, 'We're going to take the best of the Internet, but we will not allow the influences we consider inappropriate or harmful,' " said Gordon G. Chang, a lawyer in Shanghai who advises Internet companies. This kind of scattershot approach reflects a fierce debate within the government about who should supervise the Internet. The Ministry of Information Industry had originally been expected to oversee virtually all aspects of its regulation, and investors pored over the comments of its minister, Wu Jichuan, like tea leaves. Mr. Wu caused alarm last fall when he unexpectedly reaffirmed a prohibition on foreign investment in Chinese Internet providers -- only to back off after China signed a landmark trade deal with the United States. Last month, Mr. Wu appeared to retreat further when he said in an interview with a Chinese magazine that his ministry had jurisdiction only over Internet service providers. Internet content companies -- news services, community groups and the like -- were to be regulated by "relevant departments." That set off a stampede by other ambitious officials eager to lay claim to various patches of cyberspace. The State Press and Publication Administration said it is drawing up guidelines on how companies should disseminate news on the Internet, while the Administration for Radio, Film and Television said it must approve services that deliver online broadcasting. Beijing's motivation seems to be as much economic as political. "There is a land grab going on by different government departments, who recognize the billion-dollar valuations that Internet I.P.O.'s are getting," Mr. Clark said. "Some of the ministries are saying, 'We can do this ourselves.' " The Internet entrepreneurs have responded to Beijing officials' discomfort by steering clear of the areas that arouse the most sensitivity. Two of the best-known Chinese portals, Sina.com and Sohu.com, originally made news a key part of their services -- even signing partnerships with Western media companies like Dow Jones and Reuters. But after a warning from the government, they dropped nonfinancial foreign news from their Web sites and cut links to the sites of foreign news organizations. "News content is not going to drive the Internet in China," said R. Mark Mecham, an analyst at Claydon Gescher Associates, a technology consulting firm in Beijing. The latest rage among investors are ventures that specialize in electronic commerce, online auctions and other activities that are less likely to touch nerves in Beijing. Among the most prominent of these are Netease.com, which sponsors online auctions, and 8448.net, an e-commerce company. But even electronic commerce may not evade the long arm of the government. Experts said Beijing's demand that companies register encryption software had especially worrisome implications for e-commerce businesses. They predicted that some companies would leave China rather than risk having their transactions monitored. "No foreign company wants to give up its source code," Mr. Chang said. "They'll have to end up with some sort of a negotiated compromise." Not everyone is confident that Beijing and the Internet will find common ground. Asia Tech Ventures, a venture-capital firm in Hong Kong, has shunned mainland Internet companies, focusing instead on Hong Kong and Taiwan. It has only one China holding, a Shanghai-based online auction service called Eachnet. "We didn't make a single investment in the mainland until last November because the regulations are always changing," said Hanson Cheah, a partner at Asia Tech Ventures. "I'm not dismissing China. I'm just extremely cautious about it."

			Copyright © 1998-2000 BDA China Limited.