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Posts Tagged ‘Ecommerce in China’

31st December 2010

2010 has been a watershed year in many respects, but the most remarkable thing about the year 2010, in this author’s opinion, was the global paradigm shift regarding Asia. Where once Asia might have been viewed by the North American and European press, business community, and public as a sort of afterthought, 2010 proved that one of, if not the, most important geographical regions in terms of economic growth and technological innovation is East Asia.

As always, Asia’s economic importance can be discerned by looking at currency imbalances, industry analysis, and economic growth figures. However, this blogger feels that one of the most significant indicators of Asia’s “coming of age” in the global arena is evidenced by the fact that many nations in Asia are flexing their muscles in terms of enforcing their will upon the internet. Where once Asian governments seemed to fall in line with Western attitudes toward the the regulation of cyberspace and all of the cultural changes that come with the spread of easy access to the World Wide Web, now it would appear as if governments, businesses, and organizations in North and Southeast Asia are coming up with their own strategies for regulating internet access, promoting ecommerce, and connecting people. Counter-intuitive as is may seem to those operating from a Western perspective, many of the strategies adopted by Asian governments are not designed to facilitate broader access to online technology.  In a recent article posted on the Telegraph’s official website www.telegraph.co.uk, it was noted that Chinese authorities are taking stringent measures against Skype, the online communications service. To quote directly from the Telegraph’s official website:

China on Thursday announced that it had made illegal the use of Skype, the popular internet telephony service, as the country continues to shut itself off from the rest of the world…

In the latest move dashing Western internet company hopes of breaking into China, it was announced that all internet phone calls were to be banned apart from those made over two state-owned networks, China Unicom and China Telecom.

“[This] is expected to make services like Skype unavailable in the country,” reported the People’s Daily, the official mouthpiece of the Communist party.

Skype is not the only web based company that has experienced its share of problems in the Chinese market. Increasingly, many companies seem to be finding themselves restricted from the internet in China as the Telegraph went on to note:    

Websites such as Facebook, Twitter and YouTube are already blocked in China and Google closed down its Chinese servers last year after heavy government pressure.

It should be noted that Mainland China (also referred to as the Peoples’ Republic of China) boasts a population of approximately 1.3 billion people. For many firms, especially those with a significant online presence, China represents an emerging market with virtually limitless potential. However, China is not the only nation in Asia which seems poised for a more dynamic place in the international business arena. Countries such as the Kingdom of Thailand and the Republic of Indonesia have proven to be fertile ground for the same companies which China is attempting to block. According to Internetworldstats.com the Republic of Indonesia saw 27,338,560 Facebook users as of the end of August 2010.   In an interesting posting on www.nickburcher.com, a fascinating website dedicated to providing information and insight regarding the evolution of advertising and media, this blogger found the following graph noting the the increase in Facebook usage as of 2009:

Rank Country Number of Facebook users July 2008 Number of Facebook users July 2009 12 month growth %
1 Indonesia 209,760 6,496,960 2997.2%
2 Romania 9,060 230,600 2445.3%
3 Slovakia 27,960 588,860 2006.1%
4 Czech Rep 51,860 1,088,020 2005.3%
5 Italy 491,100 10,218,400 1980.7%
6 Philippines 162,640 2,719,560 1572.13%
7 Argentina 417,980 4,906,220 1073.8%
8 Uruguay 40,920 395,800 867.3%
9 Taiwan 71,340 685,460 860.8%
10 Portugal 48,180 425,680 783.5%
11 Brazil 119,080 1,015,400 752.7%
12 Spain 695,900 5,773,200 729.6%
13 Paraguay 7,920 63,740 704.8%
14 Poland 83,180 619,180 644.4%
15 Bulgaria 60,240 436,480 624.6%
16 Austria 111,060 728,800 556.2%
17 Slovenia 53,740 343,320 538.9%
18 Lithuania 24,320 153,160 529.8%
19 Thailand 114,180 697,340 510.7%
20 Russia 67,760 412,840 509.3%

The growth percentages noted above are truly astounding especially when one bears in mind that a country such as China boasts a larger population compared to that of those countries surveyed. Furthermore, the above quotation merely notes increased Facebook usage as of 2009. 2010 likely showed further growth. This could be one reason why many online businesses are attempting to find a compromise with China in an effort to enjoy access to such a lucrative market.

In 2010, Google had some problems with the Chinese government as an article on Sky News’s official website pointed out back in July of 2010. To quote directly from that article:

Beijing has renewed Google’s licence in a move that allows the web giant to continue operating in China, the company has said…

Google revealed the development on its blog and said: “We are very pleased that the government has renewed our ICP licence and we look forward to continuing to provide web search and local products to our users in China.”

China is the world’s biggest internet market and Google’s right to supply the country’s users was suspended after a row over censorship.

To get around the restrictions, Google began to redirect its Chinese users to a landing page in Hong Kong.

If the licence had been rejected outright, as some analysts wrongly predicted, it could have spelled future trouble for Google’s non-search businesses in China.

As noted above, termination of direct access to the Chinese market could have been particularly problematic even for a company as monolithic as Google since the sheer size of the Chinese market is enough to make the thought of being shut out unthinkable for virtually any company, especially companies whose profitability depends upon open access to their website. Enter Mark Zuckerberg, the “Young Turk” who took the online world by storm with the creation and subsequent expansion of Facebook.com, the online social networking website which is currently unavailable in the Peoples’ Republic of China. Recently, it was reported that Mr. Zuckerberg went to China on what seems to have been a sort of vacation/fact finding tour. To quote directly from a recent article on iol.co.za:

In China Mark Zuckerberg is almost unknown. Now, after pictures of him visiting Beijing’s biggest internet company have appeared online, feverish speculation has erupted over whether he could be set to change that by taking his social networking site, Facebook, into the one country that has resisted its charms.

That Mr Zuckerberg is in Beijing this week might alone be enough to trigger rumours as to his intentions – even if it is nominally for a holiday with his girlfriend Priscilla Chan and no other entourage.

But when he was spotted yesterday at the headquarters of Baidu, the giant Chinese search engine company, with its chief executive, Robin Li, the reaction reached a pitch of excitement far beyond what is good for most people’s health.

Any alliance was denied by Baidu’s spokesman. But there is little doubt that the Chinese market remains a tempting prize for the 26-year-old Mr Zuckerberg. Facebook has been blocked by the Chinese government, denying him access to the country’s 300 million regular internet users.

The most striking piece of information to be gleaned from the above quotation, in this blogger’s opinion, is the fact that the article points out that China boasts regular internet usage by approximately 300 million people. That is almost the ENTIRE population of the United States of America. As can be quickly inferred, such large numbers of potential users make China a very critical market for firms, in virtually any industry, with a major online presence.

On a related note, Mr. Zuckerberg’s Asian journey did not end in China. To quote directly from a recent article on the Daily Mail’s official website dailymail.co.uk:

The Facebook cofounder was photographed in Bangkok, Thailand on Wednesday night looking dressed for a trip to the pub rather than a party, wearing a pair of blue jeans and green collar-less shirt.

Zuckerberg reportedly came to Thailand to attend the wedding of Chris Cox, a close friend and a vice president at Facebook…

The internet mogul is known for his casual style. In the early days of Facebook he famously went to a meeting with top venture capital firm Sequoia Capital in his pajamas, a scene seen in ‘The Social Network’, the film about his meteoric rise.

Zuckerberg, Time magazine’s newly-crowned Person of the Year,  is in Thailand fresh off a visit to China, where his social networking site is currently blocked by authorities.

First off, it is interesting to note the reaction of many to Mr. Zuckerberg’s informal dress. It is this blogger’s opinion that casual dress will become more the norm as ecommerce businesses and web based companies allow owners, managers, operators, consumers, and users to operate from virtually any location regardless of one’s wardrobe. It is interesting that the founder of Facebook is visiting China and Thailand because both countries seem poised to show strong growth in the coming years especially in areas such as information technology.

It is likely that the reader who has come this far in the post will ask: Yes, but what does all of this have to do with “the end of the beginning” in Asia? One could argue that the beginning of the modern relationship between Asia and the USA began with President Nixon’s famous “Opening of China”. Although the United States had been diplomatically and economically engaged in other areas of Asia prior to opening diplomatic relations with China (most notably in South Korea, Japan, and Thailand). The opening of China marks a pivotal moment for Asia and the beginning of a new phase in economic and political relations between Asia and West. From the 1970′s up until the present time, the United States (and in many ways Europe and the UK) has been the country which, for the most part, has held the dominant negotiating position as the “West” has had something of a technological advantage over its Asian counterparts. In the last decade, many of the comparative advantages of the United States have eroded leaving many Asian nations in a new, more advantageous, position vis-a-vis the USA, EU, and UK.

Mark Zuckerberg represents a new generation of mogul. Where once fortunes were made in America by industrialists in areas such as steel or railroads, now fortunes are made on the internet through control of online platforms and access to information. As Sir Ben Kingsley’s character in the movie Sneakers, a truly prescient film about the confluence of government, business, and information technology, pointed out:

There’s a war out there, old friend. A world war. And it’s not about who’s got the most bullets. It’s about who controls the information. What we see and hear, how we work, what we think… it’s all about the information!

If the information business were to be analogized in terms of World War II, then this blogger would liken Mr. Zuckerberg to General Douglas MacArthur as he has proven himself to be a shrewd analyst and strategist in the field of information technology. In fact, Mr. Zuckerberg’s preternatural ability to find and control strategic aspects of the way people use the internet could be likened to General MacArthur’s elegant “island hopping” strategy employed in the Pacific Theater during WWII. With this in mind, this author feels as though this is not the last of Mr. Zuckerberg’s forays into Asia nor the Asian markets. In fact, one can almost read “I shall return” between the lines of the recent press releases documenting Mr. Zuckerberg’s travels throughout Asia.

How Asian markets will ultimately view different types of e-businesses remains to be seen, but one thing is clear: Asia is no longer a backwater in terms of the global economy. In fact, many jurisdictions in Asia seem especially poised to be trendsetters in terms of information technology and ecommerce.

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