Jump in Chinese Internet Users To Spark E-Commerce

In what could represent a boon for e-commerce in the world’s most populous nation, newly-released figures from the China Internet Network Information Center (CINIC) show that online users in China grew more than four-fold from 2.1 million in 1998 to 8.9 million last year.

The report indicates that more than 75 percent of Chinese users are under age 30, and that the average use is 17 hours per week. Of these users, 58 percent use the Internet as an information resource, 12 percent use it as an educational tool, and just under 10 percent use it for entertainment. The most widely used service is e-mail, at 72 percent.

The majority of users are in major population centers, including Shanghai, Beijing and Guangdong.

Foreign Investors Anticipate E-Commerce

While Chinese online commerce is all but non-existent today, foreign companies see great potential in the market. The companies expect that the sharp increase in users will lead to an increase in e-commerce activities.

Significantly, plans are underway for additional portals in China that will operate in both Chinese and English. However, many industry observers are skeptical that the Chinese government will allow the portals to develop, because the state sometimes limits information that it deems harmful or subversive.

Also, the Chinese Ministry of Information has indicated that the government could open up its ISP industry soon to foreign investors. A November trade agreement allows for foreign ownership of half of all Chinese content providers by 2002, and 49 percent of Chinese ISPs by 2006.

Armed with that possibility, U.S.-based ISP GRIC Communications announced earlier this month that it would extend its international network of service providers to China through a partnership with China Telecom.

B2B Efforts

Also, eCommerce.com, Inc., another U.S.-based company, signed a partnership earlier this month with Extant-Asia Limited to launch an e-commerce portal for business-to-business (B2B) and business-to-consumer (B2C) transactions. The B2B portal, which will operate under the name China.eCommerce.com, will feature both English and Chinese, and is targeted to go live in July.

Foreign interest in the impending wave of Chinese online business is substantial, with technology companies, venture capitalists and investment banks all weighing their options for Chinese Internet investments.

China.com Raises $395 Million

Meanwhile, China.com, a Hong-Kong-based Internet portal operator, raised $395 million (US$) this week with an $85 per share secondary offering. A total of 4.65 million shares were sold.

The portal operator has operations in 10 Asian countries, and fully expects to take advantage of e-commerce opportunities in China.

“We see tremendous opportunities in Japan and Korean markets, as well as in China,” said China.com CFO Peter Hamilton. “I think China is making a lot of progress to clarify what the regulatory status is regarding the status of Internet providers, which makes it much easier to determine our investment strategy. It has been very positive.”