THE CORRESPONDENT FEBRUARY-MARCH 2001

I have spent many, many dinners and lunches on the other end of this microphone and it's really great to be here.

I will talk a little bit about the Internet in China now and give you some ideas of how I think it's going...The Internet is going to be as significant to China as the rest of the world. It's going to become a part of the economy and society completely. It's my feeling that the Internet in China has had a far bigger impact on China than it has on the rest of the world, because it was such a closed society. The main impact of the Internet on the rest of the world so far, I think, has been on the e-commerce side, that is, the ability to pull out your credit card and make a purchase on-line. In China you can't do that... but in China the Internet has allowed - through e-mail, through chat rooms, through ICQ - ordinary people to interact with each other, to communicate with each other; to break out of the boxes in which China had traditionally placed people in. This has had an incredible impact on the psychology of Chinese people and Chinese society. The ec-ommerce revolution will come as well but it will take a little while for the banking system to get its act together... (and) for the regulators to get used to the idea of people, in a very free way, buying stuff by clicking on websites. It will also take time for consumers in China to get used to the idea, to overcome their inherent mistrust of the system and pull out their credit card and type in the number. But it will happen over the next two or three years and when it does happen. I think the e-commerce revolution in China will be even more profound in its impact on China than it has been in the West, again because the basic system is so much more primitive.

I have had the honour to be involved in these dot com things from the beginning. I wouldn't dare to call myself the launcher of Internet in China. let me make that quite clear from the start. However, I think I was there at the toss of this damn thing and I would have had probably one of the first ten or so Internet accounts in Shanghai. I was honoured to be one of the founders of China Now - one of the top portals. There (was an) enormous explosion of activity last year and early this year with people throwing money at business plans that made not the slightest sense... basing it all on just blind faith in concepts. A large number of those companies, of course, have gone and will go belly up. They will die. They will not be merged or acquired because these companies have nothing to merge or acquire. They have nothing except their name and a bunch of second-hand computers, some desks and some chairs these days.

The best strategy in most of these cases, I think, is for the competitors, who are able to see through this rather bleak winter of the Internet world, to grab up all the traffic, because traffic on the Internet has no loyalty whatsoever and when something is not available on one site, people just click on to the other. So the companies which survive are those that are well managed, who are cautious in their spending, cost control, revenue, profits, concepts that make sense (and) consistent implementation. These are phrases which sound boring but, of course, as we all know, the world has finally realised that the dot com companies are in no way exceptions to the basic rules of capitalism.

It's not clear what is going to happen; that is if dot coms have to die and real companies grow in their places. We have done a road show for Life and Death of a Dotcom in China... (with) conferences in Beijing, Shanghai and Hong Kong. My opening line has always been: "Ladies and gentlemen, I am hear to announce the dot com era is over. But the China Internet era is just beginning. "I think that sums it up. It's the end of the beginning, it's certainly not the beginning of the end. The Internet is going to be absolutely crucial to China and the companies that can find a way to get revenue... (and) integrate their operations (with the) regular economy.... are going to do very well. They are going to make enormous, indeed obscene, amounts of money in the next few years as the system grows, as the Internet becomes a more and more essential part of life in all economic activity.


The Life and Death of a Dot Corn in China
Edited and story by Graham Earnshaw
Asia Law & Practice, Hong Kong
ISBN: 962 936 081 0
PB. HK$1,658