Liberalization & Deregulation

Internet Diffusion

Electronic Commerce

Hardware Manufacturing

Software Development 

Who uses IT?

IT Labor Market

IT Geographics

IT Financing

Government Policies

Legal Environment

Transborder Data Flows 

Analysis: IT Strengths & Weakness

Analysis: Impacts on the Business

Sources and Links

Hi-tech industry is the primary area that the Chinese government wants to promote and takes various measures to fund R&D initiatives/programs 32. Major programs include, 

• High Technology Research and Development Program (863 Program) ; and 
• Torch Program (to develop high tech industry). 

1.1. "836 project" and IT

The decision of the central committee of the Chinese government on the reform of the science and technology management system was issued in 1985, set the stage for the "863" strategic research program established in 1986 33. Through the program of the governments provide money to IT R&D projects and IT enterprises. In 1993, Information Technology is listed as one of the most important projects in China's "863 project". 

By the end of 1999, "836 project" has successfully completed 421 projects in IT sector. 7848 papers are published, and 48 of the technological innovations patented. The estimated the economic values of the products are about US$40 million. 

1. 2. Torch Program 

In 1986, China introduced the Torch Program, under the leadership of the State Science and Technology Commission (now Ministry of Science and Technology) to commercialize discoveries made by government research institutes and universities. The program provides facilities to serve as technology incubators. 

The Torch Program co-locates technology-rich enterprises in order to create new technologies through synergy 33. The State Science and Technology Commission has established 53 high-technology zones (which resemble research parks in the United States), produced an revenue of US$58 Million The successful enterprises include Legend Computer, a PC manufacturer; Stone Company, which produces a popular word processing program; and Founder Company, which produces typesetting software that is in worldwide use 34. 

Starting from 1995, the Torch Center began to select a number of excellent software parks and software enterprise groups as the China Torch Program Software Industry Bases and have given them strong support. By the end of 1999, the Fuzhou Software Park, Jinlu Software Park, Xian Software Park and Dalian Software Park, the China Torch Program Software Industry Bases at the state level have reached 12. " 35

It is hard to assess the output/cost ratio of these programs. Needless to say these programs has played a fundamental role in China's IT initiatives/programs and far beyond. 

2. Government Policies 

Chinese Government has attached great importance to the development of electronics and information industries. In 1985, the State Council issued "The Strategy for the Development of Electronics and Information Industries" defining the industries' development objectives and policies. The success of China's IT firms and their prospects for future growth are closely linked to measures taken by government. 

2.1. Defining Direction 36

As a key factor, decisions made by the central government have opened the road to rapid development for high-tech areas. The first key point of departure came in 1984, when the government chose to shift towards information technology development. In 1995, the government has stressed the importance of develop IT sector to the whole economic development of the country, with considerable commitments to massive investments in infrastructure. 36

2.2. High-tech Zones 36

China continues to be firm in its opening-up policy in economic and technological development zones to attract overseas investment, technology and management experiences. In these designated areas, high-tech startups could enjoy five years of significant tax breaks. According to the statistics from the Ministry of Foreign Trade and Economic Cooperation, China had 324,712 companies with foreign investment by the end of 1998. China has established 53 high-technology zones (which resemble research parks in the United States) by the end of 1999. In1999, Shenzhen set up a special software industry park. Guanzhou High -Tech Industry Development Zone merged with Guangzhou Economic and Technological Development Zone to lure more foreign investment and high-technology. The Silicon Dragon in Shanghai is about to reach critical mass. 37

2.3. R&D Tax Incentives

China maintains a number of preferential policies for high-tech investments, including tax holidays and refunds. One of the major Chinese Government taken is promote tax incentives for enterprises in China to develop new technology are tax treatment of research and development (R&D) expense 32. The business Tax and Value-added Tax (VAT) for software development or technology transfer have been dramatically reduced 38. Possibly, the foreign –invested enterprises (FIEs) can deduct 150% of their R&D expenses 32. Recently, the Government also grants domestic high-tech enterprises that meet certain conditions the right to directly import and export high-tech products and equipment. 

2.4. Seed Money 36

Notable seed money has come from governments to fund number of IT-related projects like a the R&D initial Programs and IT finance. 

2.5.Market Expansion 36

Chinese government has greatly enhanced the market for IT purchases and information services. The most of large customers were government agencies and state-owned companies. In the 1990s, the state sponsored three "Golden Projects" to create a networked infrastructure and applications in several sectors 39. In 1999 a highly publicized campaign got nearly all central government departments and many lower ones online 36. In January 1999, the Chinese government announced an ambitious program calling for 60 per cent of the ministries to have Web sites by the end of 1999 and 80 % by the end of 2000. Premier Zhu Rongji has called on governments at all levels to vigorously promote the use of advanced information technologies in the building up of a clean and highly efficient government. 

3. A vision for 21st century

The china’s government has a vision to develop next-generation mobile communications technology and the Internet as the cornerstones of China’s shot at succeeding in the increasingly high-tech global economy.” Chinese Government funded network developers contracted with Lucent Technologies for upwards of US$100 million in ATM equipment and services 40. 

Chinese government expects that information industry to play a key role in its economic growth in the 21st century, the software industry is the core of the information industry. China is to strengthen its support of software industry in the next five years. To help software ventures to become share holding ones and get listed on stock exchanges, Chinese government will launch training classes for senior administrative personnel from software ventures. Virtual China News, 08/15/2000). 

Virtual China News (05/19/2000) reported that China has a goals to increase domestic production of Mobile Switches from 40% of the market in 2001 to 70% in 2003, increase Chinese-made base stations, which broadcast cellular signals in 200 %, and increase domestic handset outputs from 10-15% in 2001 to 30% in 2003.