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

Cheap Labor

One of the attractions to the foreign investors is cheap, but qualified labor force in China. This is also the truth in IT industry.

Due to the relative lower living level copared with the western countries and untighted labor market, Chinese IT industry is enjoying cheap workforce. But one challenge facing Chinese IT industry is how to attract and retain the IT workforce. More and more IT labors went abroad for better opportunity and hithg salary. It causes the serious brain drain to Chinese IT industry.

Government Policies 

The most significant strength of IT in China is its full support from Chinese Governments. Chinese 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 positive effects of IT on its economic development. The central government has enacted a national wide policy to attract foreign investment. The local governments also have created flexible and elastic investor policies. 

The success of China's IT firms and their prospects for future growth are closely linked to measures taken by government. China maintains a number of preferential policies for high-tech investments, including tax holidays and refunds. 

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. 

Chinese government expects that information industry to play a key role in its economic growth in the 21st century, with the software industry being the core of the information industry. China will strengthen its support of software industry in the next five years. 

High Market Demand

Currently, China's population is 1.2 billion and it is estimated that it will grow at a rate of 17 million annually. The potential customer base means huge demand.

Even though China's economic development slowed down in 1998, the IT industry remains robust. To keep up with this momentum and customer demands, the IT industry will be treated as a priority sector by the government with preferential policy and heavy investment.

Financial Systems 

The major problems in China IT finance are the low speed on-line payments, less mature venture capital financing system and inefficient stock markets. 

The practice of venture capital financing in China is still in its infant stage, although China’s huge technology and market potentials have been attracting much attention from Chinese governments and private sectors, and foreign venture capital communities. 

In China, the electronic payment generally takes three days to a week. China also does not have well-developed credits systems. 

The biggest issue of China's stock market is lack of transparency. Reporting requirements for listed company is not as compete and rigorous as the stock market in more developed countries (McGill, 2000). While China's A-Shares (owned by Chinese) is relatively growing fast. The B-Shares (owned by foreigners) should be made more palatable to foreign investors both in its sizes and efficiency. 

The year 2001 will see the first year of China's 10th Five-Year Plan, and the government will continue to reform and create financial and currency policies, following international high standards, as China prepares for World Trade Organization membership. 

Intellectual Property 

Protection Intellectual property protection is a major source of contention between China and foreign partners/competitors in IT sector. According to Privacy International, China piracy on video, CD, and software is widespread. In 1994, the piracy rate is 97%, a total of $364 million in losses to the copyright owners. Since then, China has taken considerable efforts to update its IP legal system and strengthen its legal enforcement, such as, steamrollers crushing counterfeit CDs collected on police raids. There is also a growing awareness in China of IP legal protections. Education in IP related laws also expended dramatically. China piracy rate has continually decreased, dropping from 97% of piracy rate in 1994, to 91% in 1999. 

Despite significant government efforts to shut down manufactures and retailers of pirated software, piracy continues to be serous problem. Furthermore, as IP enforcement become stricter, many CD pirates appear to have moved to Hong Kong to continue their illegal activities and put Hong Kong back on the radar screen of the U.S. 

Deregulation

Although China introduced officially competition in the telecommunication several years ago, 95 percent is still owned by the company that used to belong to the former monopolist China Telecom, while domestic competitor China Unicom holds 5 percent. (Expert wants 'US-style' deregulation of telecom, Internet (A Chinabiz-mail)). 

E-Commerce

The Payment network Online consumers in China often browse through a sales website only to find they must pay by mail or walk down the block to provide payment in person. This makes e-commerce more time-consuming, more costly, and less predictable than a traditional purchase. And it is a sure way to kill the prospects for internet business.

Telecom hurdles Telecom costs remain an impediment to the development of e-commerce in China. 71% of the users interviewed cited cost and speed as the key hurdles to extended and more frequent online activity. (www.chinaonline.com) 

Outmoded shopping concepts and methods Chinese customers shop by looking at, touching, listening to and tasting products. In general, they feel it is indirect and unsafe to shop on line.