IDG Gambles On China Despite Uncertainty

Unfazed by impending restrictions to foreign investment, Boston, Massachusetts-based International Data Group (IDG) announced today that it will pour much of a $100 million (US$) risk fund into Internet sites in China.

IDG intends to slip through a gray area in current restrictions by investing in application services providers (ASPs) rather than content providers.

Mixed Signals

Within the last few weeks, officials from China’s Ministry of Information Industry (MII), have given mixed messages on policies regarding foreign investment in the Internet. Over a two week period, Zhang Cunjiang, head of China’s telecommunications bureau within the MII, warned of coming Internet investment restrictions when China releases its revised policies.

The revisions are an attempt to eliminate the gray areas of China’s 1993 ban on foreign investment in Internet content and services.

“Those already invested here must bear full responsibility for losses caused by clashes with government policies,” said Zhang in September. “We cannot ignore the disordered situation in the current Internet financing market, which is dominated by foreign investors,” he added. Yet in the same month, he hinted the government might open the Internet to foreign investment.

Many U.S. Companies Confident Despite Confusion

IDG joins a number of U.S. companies such as Yahoo!, Rainbow Technologies and MyWeb that have continued to invest deeper into the Chinese Internet market in spite of the September warning from MII.

“We’re politically safe,” said Quan Zhou, managing director of IDG Technology Venture Investment. “Our sites are not involved with providing content or Internet service. They’re promoting a business service.”

Zhou did, however, emphasize that the choice to favor e-commerce over news and information services was commercial, not political.

Economics Expected to Overcome Politics

MyWeb, a set-top TV portal that is heavily invested in China Internet services, believes the MII will ultimately welcome foreign investment. “We’re working closely with China’s agencies,” Wong told the E-Commerce Times. “The Government wants to promote international investment because they understand its importance to their economy.”

IDG’s Zhou has a similar confidence that China will ultimately embrace foreign investment. “You should look at the big picture,” said Zhou. “China needs money and management knowledge.”