The Problems Faced by China in Devising an Online Landscape with Chinese

THE PROBLEMS FACED BY CHINA IN DEVISING

AN ONLINE LANDSCAPE WITH CHINESE CHARACTERISTICS

A thesis presented to

the faculty of the Center for International Studies of

Ohio University

In partial fulfillment

of the requirements for the degree

Master of Science

Shuho Otani

August 2005

This thesis entitled

THE PROBLEMS FACED BY CHINA IN DEVISING

AN ONLINE LANDSCAPE WITH CHINESE CHARACTERISTICS

Shuho Otani

has been approved

for the School of Science in International Affairs

and the Center for International Studies by

Don Flournoy

Director, Institute for Telecommunications Studies

Josep Rota

Director, Center for International Studies

Otani, Shuho. M.A. June 2005. International Development Studies

The Problems faced by China in Devising an Online Landscape with Chinese

Characteristics (60 pp.)

Director of Thesis: Don Flournoy

Abstract:

China has become the second largest internet user in the world. This fact is primarily due to the country’s rapid economic growth, especially in the telecommunication industry, but what does this fact mean? Although the growth of

the internet in China can be read as a positive sign, my thesis addresses questions

having to do with the development of an online landscape within China. It addresses

such issues as whether or not information technologies are a liberating force for

democracy in China, or whether or not they have lead to an increase in governmental

control; moreover, what is the relationship between information technologies and the

current status of the digital divide in China? These questions will be addressed within

the thesis.

Finally, my thesis explores the unique ways the internet has impacted the

development of society and the political economy of China. The Chinese government

has long faced big political, economic, and social challenges as a result of the sudden

growth of the Internet and telecommunication industry. What does the future hold for a

country that lacks a free information market; are the effects of a loosened

communication system likely to change China’s political economy, and if so in what ways? My thesis argues that the net results, either positive or negative, of the rapid growth of the Internet industry in China will depend on how fast it can make the transition to a political regime based on the rule of law and limited government.

Approved:

Don Flournoy

Director, Institute for Telecommunications Studies

ACKNOWLEDGEMENTS

I would like to thank Dr. Don Flournoy for his mentoring and patient guidance throughout the thesis process and especially for providing invaluable insights and the necessary motivation to see it through its completion. I would also like to thank Dr.

Elizabeth Collins and Dr. Ismail Ghazalah for their assistance as well. iv TABLE OF CONTENTS

INTRODUCTION ...... 1

CHAPTER ONE ...... 3

HISTORICAL REVIEW OF TELECOMMUNICATIONS AND INTERNET

DEVELOPMENT IN CHINA

1.1 Telecommunication Development...... 3

1.2 Internet Development...... 12

CHAPTER TWO ...... 17

THE CONTINUING PROBLEMS FACED BY CHINA

2.1 Telecommunications and Social Control: China’s Social Change Dilemma ...... 17

Perspectives on Information Technology and Development...... 17

Measures of Control taken by the Chinese Government ...... 17

Fragmented and Inefficient Government Control...... 20

2.2 Digital Divide...... 26

Understanding the Digital Divide ...... 26

Digital Divide in China...... 30

CONCLUSION...... 37

APPENDIX...... 40

BIBLIOGRAPHY...... 52 vii LIST OF FIGURES

FIGURE 1: Ownership chain of major telecommunication operators in China...... 6

FIGURE 2: The growing GDP in China during 1970 to 2002 ...... 9

FIGURE 3: The GDP growth rate in China...... 9

FIGURE 4: Personal computer growth in China / per 1000people during

1970 to 2002 ...... 10

FIGURE 5: IT expenditure per capita and percentage of GDP in China

(1991 to 2001) ...... 10

FIGURE 6: Telephone mainlines / per 1000 people in China during 1980 to 2002 ...... 11

FIGURE 7: Mobile phone subscribers/per 1000 people in China during 1989 to 2002 ..11

FIGURE 8: The growth of Internet users in China...... 16

FIGURE 9: Telephone mainlines in China and in its large cities...... 32

FIGURE 10: Internet Users in Western China ...... 32

FIGURE 11: Internet Penetration by Regional Population ...... 33

FIGURE 12: The Internet users by gender and marital status ...... 33

FIGURE 13: The Internet users by age groups ...... 34

FIGURE 14: The Internet Users by Income ...... 34

FIGURE 15: The Internet Users by Education Level ...... 35

FIGURE 16: The Reasons for not using the Internet ...... 36 viii LIST OF TABLES

TABLE 1: Market players in the Chinese telecommunications market ...... 6

TABLE 2: The break-up of old China Telecom ...... 7 1

INTRODUCTION

Since China sent its first email in 1987, it has become the second largest internet user in the world. This has been primarily due to the country’s rapid economic growth and the growth of its telecommunication industry. During this recent period of economic growth, the country has experienced two emerging parallel reform processes: economic liberalization and political deregulation. These have resulted in changes in China’s telecommunication industry and its Internet landscape.

In addition, the Chinese government has clearly identified the Internet as an agent driving force for economic development. Although China’s achievement of

Internet growth in double digits every year is a positive sign, this thesis investigates some of the problems that China faces in devising an online landscape. The thesis addresses the following questions: 1) how has China achieved a high level of growth in the telecommunication and Internet industry, and 2) do information technologies become a liberating force for democracy in the country, or do they lead to increased governmental control over society? The thesis will also address the issue of digital divide in China.

The thesis will show that the Chinese government has faced big political, economic, and social challenges as a result of the sudden growth of the Internet and telecommunication industry. One of the challenges is the conflict between a development leap forward in information technology and the Internet’s putative threat

2 to the power of China’s government. The other challenge is the digital divide in

China, which is mainly characterized in terms of regional differences, e.g., east versus the west, as well as along economic and social lines, that is, the differences between those who can afford it and those who cannot.

CHAPTER ONE

HISTORIAL REVIEW OF TELECOMMUNICATIONS

AND INTERNET DEVELOPMENT IN CHINA

1.1 Telecommunications Development

China has made remarkable progress in the telecommunication sector since the

end of the Mao Zedong era in 1976. Chinese telecommunication development has

achieved double-digit growth in the last two decades. Today, the market is continuing

to rapidly grow. According to OECD report (2003), China had become the largest telecommunication service market in the world by the September 2002. The market consisted of 207 million fixed line telephony users and 190 million mobile phone users in that year. In addition, the number of fixed line users increased 43.7 percent, and the number of mobile phone users increased 123.5 percent.

Beginning in the1980s, the Chinese government pushed the institutional

reforms and economic development by introducing a market economy into state

socialism. State-owned enterprise has reformed and privatization has transformed in

the Chinese economy to create an indigenous technological capabilities. The slogan,

“Four Modernizations: agriculture, industry, defense, and science and technology” was

popularized throughout the country during this period (Dai, 2003; Segal, 2003).

From the early 1980s, the Chinese government focused attention on telecommunications and information technologies as key to economic development.

The state promoted several programs that applied of ICTs to their development. The

most successful program was the “863” program, launched in March 1986. Its aim was

to achieve excellence in scientific research and the building of national capacity in

advanced technologies that could put China on equal standing with industrialized countries. Under this policy, the government provided funds to establish the Chinese

Academy of Science. Later, the Chinese Academy of Science led in Chinese science

and technology fields, and had an essential impact on strategic research and

development activities and helped China to take the lead in certain fields of science

and technology (Segal, 2003).

It should not be ignored that the state also made flexible financing policies in

1984. These included the well-known “three 90 percents”:

1. 90% of profit is retained by telecommunication corporations, which means

the tax rate is 10%, and is much lower than that of other industries, at 55%

tax rate.

2. 90% of the foreign exchange earnings are retained by the corporations.

3. 90% of the government’s investment is treated as non repayable loans (Wu

& Guo, 1992).

These flexible policies have promoted the telecommunication market’s liberalization

and privatization of management within corporations.

Although the Chinese public telecommunication sector was a state monopoly,

in practice several administrative bodies carried out its regulation. The most powerful

body was the Ministry of Posts and Telecommunications (MPT). However, other

ministries, including the Ministry of Railways, the Ministry of Electronic Industry

(MEI), and the Ministry of Power, negotiated with the state, and eventually succeeded not only in establishing private networks, but also in creating the basis for increased competition in telecommunications (Dai, 2003; Kalathil, 2003).

The liberalization of telecommunications was marked in 1994. In that year, the central government formally created China Unicom, a network backed by the other ministries, intended to compete with China Telecom which is under MPT. The MPT, however, still remained as a regulator. During the next few years, the Chinese government continued attempts to promote competition and standardize the telecommunications sector (Dai, 2003; Kalathil, 2003; Yan & Pitt, 2002).

The MPT and MEI were merged into the super ministry MII (Ministry of

Information Industry) in 1998. The MII manages and regulates the entire information industry, and also is responsible for policy making, administration, market regulation, and internal affairs (Yan, & Pitt, 2002). In the Appendix, Table 1 shows the structure of MII after merging MPT and MEI.

To build a competitive market system as in the Western countries, China implemented three major reforms: establishment of China Unicom in 1994 by the state council to compete with China Telecom (which monopolized this sector in past years), foundation of China Mobile in April 2000, and separation of the old China Telecom in

May 2002. Continuing to restructure the Chinese telecommunication sector has lead to the formation of six main operators within the market: China Telecom, China Unicom,

China Mobile, New China Network Telecom, China Satellite, and China Railcom

(OECD, 2003).

Figure1: Ownership chain of major telecommunication operators in China

MII On May, 2002, the old China Telecom was split into two

China Telecom (Old) China Telecom China Mobile

China Netcom Merged

Jitong MEI SARFT CAS Communication

China Netcom SMG China Unicom China United MOR Telecommunications 12% Goldman News Group China Netcom (HK) 16% 1oo% Sachs

MOP Bank of China Construction Hutchison Whampoa China Railcom Bank of China

Key: MII: Ministry of Information Industry; MEI: Ministry of Electronics Industry; MOP: Ministry of Powers; SARFT: State Administration for Film, Radio and Television; CAS: Chinese Academy of Science; SMG: Shanghai municipal government

(Source: OECD)

Table 1: Market players in the Chinese telecommunications market

Category Telecommunication providers Fixed line telephony China Telecom, China Unicom, China Netcom Mobile telephony China Mobile, China Unicom Paging Guoxin, Zhongbei, Lunxun, Wancheng, Wanlitong, etc. China Telecom, China Unicom, China Netcom, China IP telephony Railcom Satellite service China Sat

(Source: OECD)

Table2: The break-up of old China Telecom

China Netcom China Telecom 21 Southern Provinces/ Municipalities: 10 Northern Provinces/ Municipalities: Anhui, Chomgqing, Gansu, Guangxi, Heilongjiang, Liaoning, Jilin, Heibei, Hainan, Hunan, Jiangsu, Ningxia,Sichuan, Henan, Inner Mongolia, Shangdong, Xinjiang, Zhejiang, Fujian, Guangdong, Shanxi, Beijing and Tianjin. Guizhou, Hebei, Jiangxi, Qinghai, Shaanxi, Shanghai, Tibet and Yunnan Approximate population covered: 430.5 Approximate population covered: 828.6 million million Backbone for 17 major cities and provincial capitals; small VOIP long- distance business Fixed line, IP backbone Fixed line

(Source: OECD)

Through the years, the Chinese telecommunication sector has not only fought internal-ministerial level competition but also resisted against outside competition.

Due to its complicated history, the Chinese Communist Party tightly restricted foreign investment in this sector. Therefore, foreign businesses were not allowed to own, operate, or manage telecommunication networks or services anywhere in the country until China formally joined the WTO in December 2001 (Segal, 2003, Yan, & Pitt,

2002). When joining the WTO, the state approved seven licenses in all service segments of the telecommunications market (Kalathil, 2003; Yan, & Pitt, 2002).

China agreed to the deregulation of foreign investment in the telecommunication sector, hoping to become a large exporter in this industry as a product of globalization (Kalathil, 2003; Yan, & Pitt, 2002). For example, one year after becoming a member of the WTO, China approved foreign investment in value- added services up to 49 percent. In addition, two years after entry, China agreed to

8 allow 50 percent foreign ownership in production (Kalathil, 2003). As a result, foreign capital and new technology have become incubators and play a significant role in the development of the Chinese economy and telecommunication industries under the liberalization and deregulation movement.

Thus, emphasis on opening the telecommunication sector has effectively accelerated the telecommunication infrastructure, technology and service development, and manufacturing productivity. By the end of 2002, China had the largest mobile communication network and the second largest fixed communication network in the world. China’s network reached the largest number of mobile phone users (Dai, 2003; Yan, & Pitt, 2002). By 2003, China had the second largest number of Internet users in the World (CNNIC, 2003; China Daily, 2003).

It is clear that Chinese telecommunication development mirrors development in the wider Chinese society. The economic reforms and political transformations have created huge changes over the last two decades. In addition to economic liberalization and political deregulation, foreign investment was fundamental in the transformation of the Chinese economy. Foreign investment not only brought capital but also brought advanced technology. The Chinese telecommunication sectors grew from a very low base to one of the most advanced in the world. The following figures demonstrate the high level of economic growth and telecommunication development in China from the early 1970s to 2002 and 2003.

Figure 2: The growing GDP in China during 1970 to 2002

China GDP (current US$) (1970-2002) Billions $1,400

$1,200

$1,000

$800

$600

$400

$200

$0 1970 1975 1980 1985 1990 1995 2000

(Source: World Bank Report, 2003)

Figure 3: The GDP growth rate in China

GDP growth (annual %)

0 1971 1976 1981 1986 1991 1996 2001 -5

(Source: World Bank Report, 2003)

Figure 4: Personal computer growth in China / per 1000people during 1970 to 2002

Personal computers in China (per 1,000 people)

30 25 20 15 10 5 0 1988 1990 1992 1994 1996 1998 2000 2002

(Source: World Bank Group Report 2003)

Figure 5: IT expenditure per capita and percentage of GDP in China (1991 to 2001)

IT expenditure per capita (US$) and % of GDP in China (1991-2001) 60 52.7 IT expenditure 50 46 per capita (US$)

38.2 40 31.4 30 22.3 20.2 20 16.6 9.8 6.7 8.2 10 4.2 4.8 5.4 5.7 1.9 1.6 2.2 2.9 3.1 3.1 IT expenditure 0 (% of GDP) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

(Source: World Bank Group Report 2003)

Figure 6: Telephone mainlines / per 1000 people in China during 1980 to 2002

Telephone mainlines/per 1,000 people in China

180 16 6 . 9 160 137.4 140 120 111. 8

100 85.8 80 69.6 56.2 60 44.1 40 33.0 22.6 14 . 5 20 7.2 9.7 2.2 2.2 2.3 2.5 2.7 3.0 3.3 3.6 4.2 5.0 5.9 0

(Source: World Bank Group Report 2003)

Figure 7: Mobile phone subscribers/per 1000 people in China during 1989 to 2002

Mobile phone subscribers/per 1,000 people in China

180 160.85 160

140

120 110.32

100

80 65.82 60

40 34.18 19.00 20 10.58 5.50 0.01 0.02 0.04 0.15 0.53 1.30 2.95 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

(Source: World Bank Group Report 2003)

1.2 Internet Development

Internet usage has increased dramatically in China since the first e-mail left the

country in September 1987. The number of Internet users reached a total of 79.5

million by January 2004, and became the second largest Internet country in the world,

only exceeded by the United States (CNNIC, 2004; China daily, 2003). The reasons for the rapid Internet diffusion were that a strong government had pursued a strategy of development of the Internet. The Chinese Internet has benefited from the economic reforms and the telecommunication transformation begun in the late 1980s.

China’s Internet history began in 1986 with the Chinese Academic Network

(CANET) under the Chinese Academy of Science, located in the Beijing Computer

Application Technology Research Laboratory. It established the first computer

networks with its partner, the University of Karlsruhe in Germany. In 1987 the

CANET sent the country's first international e-mail “Across the great Wall we reach

every corner in the world” via a gateway in Germany. In 1989, the Chinese Planning

Committee launched the National Scientific Project its first Internet initiative with

funding mainly from the World Bank. The project was named the National Computing

and Networking Facility of China (NCFC), and also was funded and supported by

other scientific and education agencies of the Chinese government (CNNIC, 2003).

Since the late 1980’s, the Chinese government has realized that the potential of

the knowledge economy would depend on having a dynamic and efficient information

infrastructure. The telecommunication networks and information systems provide for

13 widespread access to information and communication. The Chinese government has emphasized building the information infrastructure to connect all citizens throughout the country (Dahiman, & Aubert, 2001; Hughes, & Wacker, 2003; Yan, & Pitt, 2002).

These decisions predate Chinese awareness of the Internet, but it has certainly facilitated its growth. Chinese telecommunication progress is illustrated by the rapid growth in the number of landline telephones. In 1990, China had 6 main lines per 100 people. In one year, 2000, China installed 35 million new fixed lines - more than in the entire developed world in 1999 and 2000 combined. China also surpassed the United

States as the world's largest mobile market with 145 million subscribers. This growth parallels growth in the general economy; the Chinese made the decision to invest in telecommunication, and they were able to afford it (The World Bank, 2001).

In the early 1990s, the State Education Commission started to build a more comprehensive academic network with Chinese government funding. At the same time, the MPT began to set up its own packet-switched network and to establish its early dominance in voice and data communication (CNNIC, 2003). To compete with

MPT, the Ministry of Electronics Industry (MEI) also began building its own networks, known as “Golden Projects,” whose goal was to link customs and financial networks in 1993 (Dahiman, & Aubert, 2001. the World Bank, 2001).

The “Golden Projects” included three initiatives: Golden Bridge, the National

Public Information Communication Networks; Golden Card, the Electronic Payment

Project; and Golden Gate, the Foreign Trade Information Network. These projects

14 have played a significant role in expanding information networks throughout China.

The Chinese later developed the national health network, the education and research network, and tax return and invoice system. These later programs focused more on applications in using the information infrastructure (Dahiman, & Aubert, 2001). These

Golden Projects have made a great impact on Chinese connectivity. Also the MEI's involvement in the process illustrates the early competition among various forces of government, and pushed the deregulation process in the telecommunication sector

(Kalathil, 2003; The World Bank, 2001).

Starting from 1989, with funding mainly from the World Bank, the first

Internet development project (NCFC) successfully connected China to the international Internet. The connection had a speed of 64Kbps through an operator of the United States Sprint. By 1994, China was finally officially accepted by the world as an Internet country and, by 1995, China Telecom of MPT was providing service in

Beijing and Shanghai. In addition to its 64Kbps private line, the Internet could also be accessed through a DDN private telephone line, and a X.25 network. In the same year, the Chinese Academy of Science started to expand a network among academic organizations in Beijing to 24 cities throughout China. It was called “China Science

Network” (CSTNet). Also, China Telecom began to build the China Public Network, which was completed and was providing service in 1996 (CNNIC, 2003).

China has also aggregated international bandwidth. The rapid growth rate of the international bandwidth doubled to 7,466 Mbps between October 2001 and March

2002 (CNNIC, 2002). The percentage of Chinese owned link capacity to the U.S. rose

from 50 to 79 percent (CNNIC, 2002). A major Internet exchange point (IX) began

operating in Beijing, Shanghai and Guangzhou. There are also several local IXs. The

IX and domestic bilateral exchange points have the capacity to handle 84 percent of

Chinese traffic, indicating that China has weaned itself from the U.S. and other

backbones.

By 2003, China had broadband access line to two million cable and DSL users

as well as three million ISDN users. Another sixteen million users connected via a

LAN with a leased line [CNNIC, 2003]. China Telecom has also made "large

investments in fiber MAN (metropolitan area networks) and high-speed access networks" for fiber-to-residence, fiber-to-building, and fiber-to-curb [Cisco, 2001].

Unicom and China Netcom have also deployed fiber to buildings in some urban areas.

China has recognized that Voice over Internet Protocol (VoIP) is a critical Internet

technology for developing countries. Where there is sufficient teledensity, large

populations and income (OECD, 2003), the benefits of low cost VoIP telephony will

offset revenue losses. Therefore, the Chinese government has encouraged the

development of the latest of VoIP technology, VoIP 6. At least four major networks

(China Telecom, China Netcom, China Unicom, and China Mobile) offer VOIP. VoIP

revenue has been instrumental in funding competitors in China (OECD, 2003;

CNNIC, 2004).

Since China has encouraged VoIP, Internet telephony has had a greater impact

in China both in providing service to the public and in investment in China’s

16 telecommunication industry. To migrate from VoIP 4 to VoIP 6, CERNet has promoted an active IPV6 research program, and China has deployed VoIP 6 to expand the address space needed for a large population of users and portable devices, and to improve the quality of service for audio and video (China and India, 2001; CNNIC,

2003). According to a recent report, China has developed one of the most advanced

VoIP 6 technologies in the world—other countries pursuing VoIP6 are the United

States and Japan (China Daily, 2003; CNNIC, 2003).

Internet diffusion will continue to grow fast over the next several years in

China. According to the official survey of the China Internet Network Information

Center (CNNIC, 2004), the number of users reached 79.5 million by January 2004, a jump of 35.2 million from January 2002, 11.2 million people from 2001. China has become the Asian country with the most Internet users, with the second largest number of users in the World (China weekly, 2003). Surveys also indicate that Internet usage is increasing beyond the wealthy, into education, e-commence, and e-governance

[CNNIC, 2003]. Figure 8 demonstrates the pattern of Internet development in China.

Figure 8: The growth of Internet users in China

Internet users in China (1993-2003)

M illions 90 79.5 80

70 59.1 60 50

40 33.7 30 22.5 20 8.9 10 0.0 0.0 0.1 0.2 0.4 2.1 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

(Source: CNNIC)

CHAPTER TWO

THE CONTINUING PROBLEMS FACED BY CHINA

2.1 Telecommunications and Social Control: China’s Social Change Dilemma

Perspectives on Information Technology and Development

In China, telecommunication and information technologies have developed at an unprecedented rate since the late 1990’s. The new technologies are providing the vast Chinese population easier access to the outside world, which will greatly help

Chinese economic growth. Currently, however, there is a battle between two forces: one is the un-harnessed force of information flowing into China from outside China through the Internet, and the other is the countervailing force of the government that is trying to bring the rampant telecommunication and Internet technologies under its control. In this section, the discussion is intended to focus on one relevant question:

Can information technology become the liberating force of democracy and freedom in

China or will it become an instrument of governmental control to maintain the status- quo?

Modernization and communication development theories see communication technologies contributing to pluralism and enhancing democratic processes. Many scholars believe that the new technologies give the advantage to the individual rather than to central authorities because many of the emerging technologies such as cell phones and the Internet are under user control (Neuman, 1991). Rogers (1983), in his writing on information diffusion, illustrated how the emergence of new technologies

changes the society, politics, and the economy in many countries. Both Marxists and

Political Structuralisists have pointed to the interaction between social forces and

technological forces that contribute to social change.

Much relevant empirical research finds that there are connections between the

growth of telecommunications industries and changes within the political and

economic environment (Abbott, 2001; Qiu, 2000; Yang, 2003; Weber, 2002).

Democracies and free market economies tend to place greater emphasis on making

information widely available, whereas authoritarian political systems and command

economics tend to limit and control the flow of information (Lee, 1997; Compaine,

2001; OECD, 2001). In any case, it is clearly seen that the emergence of the Internet has greatly changed society, and has become a powerful tool for individual communication in the world (D.H. Perrit, 1998; OECD, 2001).

While the adoption of the Internet is a way to expand political control, it is also a way of strengthening the democratic process. The Internet contributes to political participation by allowing people to access and view information easily and quickly. It decreases many of the risks of direct democracy in the non-democracy countries. As

Stover (1984) pointed out, in many developing countries the information technology can raise the level of conflict between users and the government who wants to control its citizens while it uses the new technology for its own benefits.

There are different kinds of government censorship—censorship of citizens

within a country and censorship of citizens trying to access information outside

country. Also, the types of censorship can be one-to-many, or one-to-one

communication. For mass censorship, to censor what information comes from outside,

the government put surveillance points at the routing level, domain level and application level to check what the Internet user is looking for (Rubin, 2002).

At the routing filter level of sensorship, the censor can monitor the Internet

Protocol (IP) address of the destination. If it is undesired information from outside, the

censor can simply block it or deal with data treatment differently. It is easy to do

without new hardware and software. It is also difficult for the Internet users to

circumvent, because if the routers do not allow data in or out of the network, there is

no way to get around it. It will get very expensive to dial into the external ISP directly

when the censor is by the national government (Rubin, 2002, Qiu, 2000).

By exercising control at the domain filter level, a powerful government can

control the domain name services (DNS). The DNS system translates the website

addresses, such as www. Yahoo.com, into an IP address so that the website can be

accessed by others. If users know the IP address, this type of censor could be

circumvented by using the IP address instead of using the name to connect to the

website directly. However, due to IP addresses changing very often, it is not always a

useful solution for avoiding the monitor (Rubin, 2002, Qiu, 2000).

By controlling the application at the filter level, the censor is using software to

check the information content. Even if the users can access the website, viewed

content can be inaccurate when the information is filtered. The easiest way for the

Internet users to circumvent the censor is to use encrypted content (Rubin, 2002).

In conclusion, most people who work in the Internet industry and are familiar

with the IP technologies believe that the relationships between the censor and those

circumventing the censors are like an arms race. Technologically, if a government

develops a way to block information, then others can develop ways of circumventing

the filters. Therefore, political and economic powers still play important roles in

Internet use.

Measures of Control taken by the Chinese Government

It is clear that information technology has changed Chinese society. Websites

have appeared as channels for fast swapping of commercial products. Advocacy groups now have Websites with which to communicate with their constituents. Even though small and informal, the gay community has come into the open countering government positions. Women’s groups have also entered into the information age.

One of the most popular websites for women is named Gaogenxie, which means

“high-heeled shoes” in Chinese. Gaogenxie is a symbol of freedom from the traditional view of Chinese women, the opposite of bound feet. This website discusses issues that the Chinese government tries to avoid in public, for example, why Chinese men refuse to use condoms, and attitudes about sex, single women, and single mothers. Internet has already become a symbol of freedom for the Chinese

(Economist, 2000).

The Chinese government is very aware of the conflict. On the one hand, the

government wants to encourage advanced technologies that will stimulate economic

growth to help catch up with developed countries. On the other hand, the government

is deeply concerned that such technologies might weaken its legitimacy. Thus, the government seeks to limit any political harm that might occur with the exposure growth in Internet use.

China’s Internet and Intranet are completely state-owned. It is clear that the

Chinese government wants to control what information flows into China and where.

Chinese Internet access services are divided into network service providers (NSPs) and Internet service providers (ISPs). NSPs operate the interconnection networks that give direct ISPs access to the Internet. They provide vast bandwidth with which to connect outside China via its leased international connections. ISPs operate the access networks (AN), connecting users to the Internet. This is where the government chooses to exercise greatest influences. All NSPs are managed by five stated-owned enterprises under the Ministry of Information Industry (MII). Almost all large ISPs are managed by state-owned enterprises in each city or province. (OECD, 2002; Harwit,

& Clark, 2001).

Someone who wishes to set up or to use the Internet, according to Chinese

Internet policy needs prior approval from the government. Chinese users have to sign an agreement not to access any information that threatens government security. In addition, according to the Computer Information Network and Internet Security

Protection and Management Regulations passed by State Council in December 1997, the policies require that all Internet service providers (ISPs) will pass along Internet users’ personal detailed information to the state-owned China Internet Network

Information Centre. By this means, the government can control all Chinese Internet

users (Jussawalla, 1999; Abbott, 2001, Qiu, 1999).

The Chinese government has been involved in censoring the Internet since its

use was expanded nation wide. Early censorship was by blocking web pages based on

their IP addresses. The Chinese authorities have actively blocked so called political

sensitive websites, such as those advocating Taiwanese independence. The Chinese

ISPs have continued to block the Chinese democracy websites and some labor sites,

and have also blocked many U.S. news websites, such as the US-based Democracy

Network, Human Rights in China, and China News Digest. In August 2002, Chinese

Internet users found that an international search engine “Google search” was blocked.

In the same year, Beijing sentenced a man to 11 years in prison for downloading political content unfavorable to the government (Gutmann, 2002).

Today censor will search for key words that may point to undesirable content

coming from foreign websites (The search goes on, 2002). Chinese censors are able to trace users’ activities and to discover what thy have looked at, and downloaded. When

Chinese users are connected via a local server, their administrators can easily monitor

their activities, while anyone with technical skills can easily read their email (Huang,

1999). For example, when the censor finds 15 key words in an email, the filter can

block the email (Lin, 2002).

In addition to blocking websites and email, and censoring user activities, the

authorities have shut down many Internet cafes in Beijing and Shanghai. The cafes

have the largest numbers of Internet users in China. Thus, the government has sought

to limit unfavorable information flowing into China via cafes. From April 1999 to

February 2000, Shanghai city authorities closed 127 unlicensed cafes and took computers and other equipment (The flies swarm in, 2000; Huang, 1999). By 2002,

Beijing had shut down most of its Internet cafes. What worries the government is that the Internet cafes may contain unauthorized links, and provide the local users uncensored access to reactionary news and information websites (Gutmann, 2002).

Officially approved Internet cafes are required to report any customers who accesses banned sites (Beech, 2002)

In January 2000, the State Bureau of Secrecy announced new regulations that required websites to pass a security check concerning state secret might appear on the web (Huang, 1999). However, the definition of state secrets is unclear, and is defined to include anything has not obtained official approval for publication. Furthermore, the

regulations require ISPs monitor and respond to any security breach that may appear

on the Internet bulletin boards, chat rooms and newsgroups (Abbott, 2001; Hachigian,

2001).

Because of such practices, the Chinese government has been criticized by

Western countries for limiting freedom of speech and denying access to the Internet.

However, it is officially denied. The government explains that all Chinese believe that

wrong information should not be spread on the Internet (Einhorn, & Keenan, 2002).

The irony is that while the officials have embraced the Internet as a driving force for

24 economic growth, they still assert that freedom of information access threatens the central government power.

Fragmented and Inefficient Government Control

Although the Chinese government has tried to build a digital wall to prevent the citizens of China free access to information, their ability to carry this out is limited.

Resistance to governmental control hardly stops. Where people have knowledge of the

Internet, they find ways around the censors to access the restricted websites. The most common way is by using one of the thousands of proxy servers that exist outside

China, such as www.proxymate.com, or the growing number of routing services, such as www.anonymizer.com (Huang, 1999).

The state constraints are powerful, but they are not effective. In June 2000,

Huang Qi was arrested in Chengdu, the capital of Sichuan province, because his website carried content about a politically sensitive event that happened in Tiananmen

Square on June 4, 1989. Huang Qi’s website became a forum for discussion of human- rights abuses. The Chinese authorities eventually charged Huang under the new state- secrecy laws (The flies swarm in, 2000).

However, it is interesting to note that the government did not close down

Huang’s website. Huang Qi was able to send a message to his web viewers to announce his arrest. He wrote: “The Public Security Bureau has summoned me for interrogation. The road is still long. Thanks to everybody devoted to democracy in

China. The policemen are here now. So long” (The flies swarm in, 2000). A yellow

ribbon was put up on his site, and many people posted messages in sympathy and

support on his website.

Other provocative sites remain unblocked too. The government is strongly

against a London-based organization that is supporting Tibetan independence. But, its website is still freely accessible from China. Also, when Google was blocked in 2002, many Chinese Internet users were angry, and posted messages on bulletin boards protesting the authorities’ action. Their protest lasted until some Chinese ISPs started

rerouting to reach the blocked Google site (The search goes on, 2002). Hundreds of

‘unofficial’ and ‘unregistered’ Internet cafes still exist in Beijing and Shanghai. No

matter how many cafes are closed, new ones always appear (Beech, Hannah, 2002).

This evidence suggests governmental control is selective, often fragmented, inefficient

and ill coordinated.

The ineffectiveness of governmental control is also shown by another major

incident. In April 1999, 10,000 or more followers of the Falun Gong suddenly

surrounded the compound in Beijing where the top government leaders live. The Falun

Gong demonstrations have shown the Chinese government the power of on-line

organization. Using an Internet-based pyramid of online contacts, the coordinators

helped stage a protest of Falun Gong followers. Even if the government were to close

down mainland China-based websites of the Falun Gong, the Falun Gong waved still

exist in China by virtue of the Internet (Platt, 2000; the flies swarm in, 2000; Forney,

2001).

It should be noted, however, that before the Internet became a political threat,

the Internet had become a powerful tool in strengthening the Chinese government’s

position. Higher economic growth that went along with the development of

telecommunications and the Internet provided the government more security than

without them. The government’s strategy to maintain its authority was to harness the

Internet for its own purposes, give some personal freedoms and manage the potential

risks of Internet use. Thus, the Chinese government gives the Chinese people some

free space but Internet communication may be helping to cultivate Chinese civil

society (Hachigian, 2001).

It is also a fact that today the Internet will not greatly threaten government

power because only 6% of the total national population is using the Internet (CNNIC,

2004). Since many Chinese have benefited from the good economic times, few worry

about exposure to new ideas and new perspectives on the government. However, as

economic independence increases, and Chinese users can access sites outside China,

pressure s for political change will grow. This will likely, occur in the future wired

China.

2.2 Digital Divide

Understanding the Digital Divide

Definitions of the digital divide generally refer to unequal access to digital and network resources, including the Internet, and opportunities to learn using information and communication technologies. The gaps are usually concerned with economic,

social and cultural constrains based on income, age, education, gender, ethnic

background, and physical handicaps.

Researchers began examining the problem of information inequality in the

media in the 1970s but it was never a big social issue. When the Internet began to be

widely used, leaders of international organizations such as the World Bank, the

European Union, the United Nations, and the G-8, as well as international scholars,

began to look at the factors affecting the information gap (Mun-cho and Jong-kil,

2001). The term “digital divide” became popular when U.S. President Bill Clinton

raised his concern about this issue and submitted a new national plan to bridge the

“digital divide.” Basically, economic factors, such as income, and related social

factors, such as race, gender, and class were thought to have created the digital divide.

It was acknowledged that the digital divide existed in most countries of the world

(OECD, 1999; Norris, 2001; Mun-cho and Jong-kil, 2001).

Norris (2001) is one of the researchers who has focused on the economic and political aspects of the digital divide, he has distinguished three hierarchical levels: the macro-level (the technological and economic resources available and their distribution); the meso-level (the role played by political institutions), and the micro- level (individual resources and individual motivation).

Norris suggests that the digital divide is a mixture of circumstances that need to be considered from global, national, and democratic perspectives. Having examined the digital divide within developed countries, his study argues that “the heart of the

problem lies in broader patterns of social stratification that shape not just access to the

virtual world, but also full participation in other common forms of information and communication technologies” (pp. 91-92). Compaine (1998; 2001) concludes that the gaps that exist among many societies are associated with the state of the economy.

Compaine thinks that the digital divide has been ill-defined from the beginning. The author is skeptical of the whole concept, and believes that the digital divide is not a real issue; as a result, the digital divide will fade away as costs go down and ease of use increases. Hence, Compaine’s work pays most attention to the economic, technological, and political factors influencing the digital divide.

Some studies claim that the definition of the digital divide has been confused.

In From Digital Divide to Digital Opportunity (2003), Kuttan and Peters state, “the term has become a favorite phrase for academics and pundits, educators and politicians. Unfortunately, it has been misused and overused so often that it has become just another amorphous catchphrase that has clouded the real and pressing

problem that it represents.” These authors conclude that the digital divide is at least a

technological problem having to do with IT training, personal computers, and access

to broadband Internet. They choose to divide society into suburban and rural

communities, minorities and the majority, and rich and poor which are separated into

the technology “haves” and “have nots.”

While most scholars focus on economic and social factors within countries, a few have pointed to essential differences in the definition of the digital divide between

"digital have countries" and "digital have not countries." For example, in "digital have not countries," 90% of the population is said to lack even the choice to access digital resources, and would find it difficult or impossible to get access to digital resources even if they wanted to (Foulger, 2001; Nua survey, 2003). The total Internet bandwidth in Africa is the same as in the Brazilian city of Sao Paolo, and the total bandwidth in all of Latin America is the same as in Seoul, South Korea (UNDP

Human Development Report, 2001). Thus, individual choice cannot be an issue in these countries because people have few real prospects of using digital resources.

By contrast, people who live in "digital have countries" have greater access to a variety of communication media and information. While Internet access may or may not be ubiquitous, it is certainly set up in most schools, companies, and communities so that people who want Internet access can get it. Therefore, the digital divide is really a continuum of choice. The choice is a fundamental issue informed by psychological and social concerns, not just economic concerns. Some people choose to make extensive use of digital resources. Others do not. Most people fall somewhere in between (Foulger, 2001).

For “digital have countries,” Foulger (2001) says that “The digital divide is the continuum of use of Internet and other digital media that separates those that choose, for whatever reason, to use such media from those who choose not to use such resources.” On the other hand, for “digital have not countries,” he writes, “the digital divide is the cliff that separates the five billion people who cannot, for whatever

reason, choose to use Internet and other digital media from the half billion or so

people who can choose to use such resources.” In this sense, the key difference is

divided by choice and the lack of choice.

A study by Min-cho and Jong-kil (2001) defines three stages of the digital

divide: information accessibility, information utilization, and information

receptiveness. At the first stage, information accessibility is closely associated with the

economic factors under which the user can have access or not in terms of digital

opportunity. The next stage, information utilization, is related to obtaining and

creating added value in using the information. Both are linked to the expansion of life

expectancy. Information receptiveness refers to whether the user can use the

information to enrich the quality of his/her life. In this stage, cultural capital plays an

essential role, such as in the cognitive and emotional dimensions that influence

people’s decision making. As the information society develops, the focus of the digital

divide will shift from economic factors to social factors, and then to cultural factors.

Digital Divide in China

Although China has achieved rapid Internet growth, China faces multiple

digital gaps. On the international level, the gaps have come from its failure to develop

an information society. While China has become one of the largest IT exporters in the world, the entire industries still depend on developed country technologies and foreign investment. According to an IDC research report in May 2002, for the network equipment manufacturing market in China, the share of switchboards in the market

including those produced in China and outside China, is 3Com 25%, Cisco 20% and

Nortel. The Cisco brand accounts for more than a 78% share in the router market, and a 44% share in the IP market (OECD, 2003, & ICD, 2002).

A chronic lack of scientific and technical leadership has become one of the biggest obstacles to closing the industrial gap with developed countries (Giese, 2003).

China has also failed to develop an information society. The gap still widely exists.

Almost all who accesses the Internet are monitored by the Chinese government, so the

Chinese people do not yet have complete information freedom.

Although the number of Internet users in China has increased rapidly (they were at 79.5 million in December, 2003), this number of users only accounts for 6.2 percent of the total population (CNNIC, 2004). The percentage looks much less impressive than the total number. The digital divide is mainly categorized by regional differences and urban concentration within China, in terms of a few highly developed regions with vast undeveloped regions. According to the OECD report (2002), more than 50% of the rural areas, especially in Western China still do not have access to basic telecommunication services due to the high cost of infrastructure. While Eastern

China has maintained the strongest Internet and other telecommunication networks,

West China, especially its rural areas, has the weakest infrastructure and lacks essential Internet connectivity (Press; Foster; Wolcott, & McHenry, 2002). The following figures show the gaps between urban and rural, East and West. Western

China includes Yunnan, Sichuan, Ningxia, Qinghai, Tibet, and Xinjiang.

To examine how the current information gap is defined in China, surveys were conducted by the CNNIC and several other research institutes. The CNNIC report in

January 2004 showed that a higher penetration rate among Internet users is concentrated in major cities; the top is Beijing at a 28 percent, followed by Shanghai at 26.6 percent, Guangzhou at 14.4 percent, and Tianjin at 12.1 percent. In contrast,

Western China represented a lower Internet penetration rate among the regional population, and Yunnan, Qinghai, and Tibet have lower than 4 percent penetration rate.

Figure 9: Telephone mainlines in China and in its large cities

Per 1000 people telephone mainlines in China and in its large city Telephone mainlines/ 1000people 700 In large cities 583.7 600 477.6 500 385.0 400 294.5 300 254.5 In the whole country 189.7 200 138.9 137.4 111.8 98.7 85.8 100 57.2 56.2 56.2 69.6 33.0 44.0 9.6 14.4 22.5 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

(Data source: the World Bank Report 2003)

Figure 10: Internet Users in Western China

The Internet User in Western China Compare to the National Population (%) 6Figure 11: Intern5.3et Penetration by Regional Population

5 4 3 2.1 2 1.5 1 0.4 0.3 0.1 0 Yunnan Sichuan Ningxia Qinghai Tibet Xinjiang

(Data source: China Internet Network Information Center 2004 survey: http://www.cnnic.net.cn/)

Figure 11: Internet Penetration by Regional Population

The Internet Penetration Rate for the Regional Population (%) 30 28 26.6 25

20 14.4 15 12.1 Western Region 9.7 9.2 10 8.3 6.2 4.9 5.8 3.8 5 3.7 3.2

0 g g n u n a i t ai g n a ng jin h jin on n jia gs na u xi ha be i g n ia u n n h jia an a gd ej F ia c ing ing Ti Be Ti n J Yu Si N Q Sh a Zh Xin Gu

(Data source: China Internet Network Information Center 2004 survey: http://www.cnnic.net.cn/)

The CNNIC survey also shows that the percentage of male Internet users

(60.4%) is higher than female users (39.6%), the percentage of unmarried users (56.8

%) is higher than married (43.2%). However, significant gaps do exist between different age groups. While the highest percent of Internet users (70.1%) are below thirty, users over sixty have the lowest percentage, only 0.8 %. In other words, elderly people rarely use personal computer communications and the Internet.

Figure 12: The Internet users by gender and marital status

Divided by Gender and Marital Status (%) 70 60.4 56.8 60

50 43.2 39.6 40 30

20 10

0 Male Female Married Unmarried

(Data souce: China Internet Network Information Center 2004 survey: http://www.cnnic.net.cn/)

Figure 13: The Internet users by age groups

Divided by Age

Above 60 0.8 51-60 3.0 41-50 6.4 36-40 7.6 31-35 12.1 25-30 17.2 18-24 34.1 under 18 18.8 (%) 0 10203040

(Data resouce: China Internet Network Information Center 2004 survey)

The survey also says that most Internet users have at least a high school education. The Internet users without high school degree only share 14 percentage of the total Internet population. Moreover, many users have monthly incomes above

500RMB. Therefore, the majority of Internet users are likely to be male, younger, unmarried, high school graduates, with income of 500 RMB, living in urban areas, and in East China. The following figures demonstrate the detail.

Figure 14: The Internet Users by Income

Divided by Monthly Income per Capital

(RMB) > 10000 0.9 6001-10000 1.1 5001-6000 1.2 4001-5000 2.4 3001-4000 4.9 2501-3000 5.7 2001-2500 6.2 1501-2000 11.3 1001-1500 16.5 501-1000 15.6 < 500 23.8 No income 10.4 (%) 0 5 10 15 20 25

(Data souce: China Internet Network Information Center 2004)

35 Figure 15: The Internet Users by Education Level

Master Doctor Degree Degree Under High 2% Bachelor 1% School Degree 14% 27% High School 29% Junior College 27%

(Data souce: China Internet Network Information Center 2004: http://www.cnnic.net.cn/)

In exploring the reasons for the digital divide, the survey shows that lack of computer and Internet skills, as well as a lack of sufficient equipment, still are significant (CNNIC, 2004). As for reasons why people did not use the Internet, 37 percent people of the surveyed answered that they did not understand how to use computers and the Internet, 21percent responded that they did not have sufficient access to either computers or telephone lines in order to view the Internet. Thus, to close the digital gap in China, it is necessary to create more useable forms of information technology and provide computer skill training, improve the infrastructure in Western regions, and cultivate a greater understanding about the importance of the

Internet–digital opportunity. It is a fundamental issue that the Chinese government should make an effort to bridge the gap between regional differences and urban concentration.

Figure 16: The Reasons for not using the Internet

Reasons for not Using the Internet

Don't know how to use computer and the internet 37 No computer and /or no connection 21.3 Unnecessary / not usefull 14.8 No time to use 14.3 Age too old or too young 6.8 Costly 5.6 Not interested 4.5 Worry children getting damage or bad influence 1.7 Other reasons 5.1 Don't know why or no reason 11.5 (%) 0 5 10 15 20 25 30 35 40

(Data souce: China Internet Network Information Center 2004: http://www.cnnic.net.cn/)

CONCLUSION

Research on what has happened in China’s Internet development, finds that

positive changes indeed have taken place in China. Adoption of the Internet in China

has been driven by two forces, economic development, and government policy.

Globalization and, the importance of information in economic growth have led the

Chinese government to rethink how technology and information factor into economic,

political, and social development. Although the Chinese still lack a free information

market, the loosened communication system has changed the political economy.

China's future prosperity will depend on how fast it can make the transition to a

political regime based on the rule of law and limited government, so that openness and

public account ability, rather than a system that spawns corruption, will prevail. A

free society requires constitutional constraints to limit the power of government so that

the rule of law will safeguard individuals and their property against the arbitrary force

of the state. Like it or not, limited government is crucial to the growth of the

economic market and democracy in China.

It should now be clear to the political leaders in China that, in the age of the

Internet, governments are unable to control flow of information. Although the Internet

does not paralyze the Chinese government in its efforts to minimize the liberalizing

impact of the new medium, it has led to a system of more decentralized media

ownership system, a less hierarchical approach to regulation, and a set of punishment mechanisms with less confining potency. As in many other countries, the Internet in

China has proved to be a very effective public medium of communication to those who can access it. Since the Internet has present to be a powerful revolutionary and liberating tool to open up closed societies, and instrument of choice in the people’s fight for democracy, China can expect to see those changes as well.

Governmental control over society is increasingly challenged by the Internet and Information technology. Why? Because the unprecedented technological forces in China empower its march toward a more open and deregulated dialogue with the world. China's entry into the WTO requires that China will be incorporated into the global capitalist system, which is characterized by open societies, a free markets, and liberal democracies. At the same time, it should be admitted that it will take time and patience for this type of political logic and its consequences to gradually unfold in

China.

The unique ways that the Internet has been developed and put to work in China

is the result of its complicated history and culture. Chinese linguistic characters

always value the role of balance in which the top, the bottom, the left and the right

sides of the sign should be balanced within a square. The Tenth Five-Year Plan

(1995-2005) specifies clear targets for information technology industry growth to

accelerate the Chinese economic growth and popularize IT throughout the country.

Therefore, it is said that the Chinese government, like the characters of its language,

must balance the country’s economic growth, political power and international

relations, and therefore will put a great effort into bridging the “digital divide” in

China. It is hoped that by using, adapting, and improving upon advanced Western technologies, China will eventually overcome past humiliations, fully open its Internet

society, close its large digital gap in terms of unequal regional development, and

achieve an online landscape with "Chinese characteristics."

APPENDIX

A: The relationships between the power of government and the impact of Internet

development in China

Positiv e Impact Negative Impact The Goal of Chinese Government Catch up Western Countries

Positive Strength Government Actions Power Threaten Government Power

Political Economic Foreign Deregulation Liberalization Investment

Digital Divide Democracy

Economic Growth

Positive Impact Telecommunication Negative Impact Internet Development Industry Growth Positive Impact

B: The Structure of the Chinese MII (Ministry of Information Industry)

Department Main Functions Regulate relations between offices, announce and 1 publicize regulation and laws; release publications, General Office administration management Examines and formulates general policies and major reform plans. Drafts laws, administrative rules, and 2 regulation and development policies; policies on Department of Policy Hong Kong and Chinese Taipei telecommunications and Regulations industries. Develop mid-to long-term policies; allocate spectrum resource, prevent overlapping investments; joint 3 Department of ventures with foreign capital; promote standardization Planning in telecommunication; release statistical data. Analyze international telecommunications technology; set technology regulations; establish 4 Department of Science public telecommunications technology system and Technology standardization; oversee quality of service. Direct and provide advice on restructuring policies of Department of telecommunications operators; provide business 5 Enterprise policies and strategies; analyze and release economic Restructuring and statistics; provide annual development plans; manage Operation imports of technologies and contents. Promote fair competition; implement policies on universal service, service tariffs, interconnect; allocate 6 Telecommunications and manage numbering resource; provide measure for Administration Bureau telecommunication security. Department of Establish and develop postal policies; supervise 7 Financial Regulations financial affairs of state-owned operators; set budget and Clearing regulations between operators. Provide mid-to long-term policies, regulations, and Department of the studies on the development of the telecommunications 8 Electronic and IT industry; promote domestic telecommunications Products products. Department of the Oversee administrative management of special / 9 Electronic Installations military electronic technology. The State Carry out research on regulations and strategies to Informatization Office development national economy and information 10 (Department of system; supervise local government authorities; Information develop information security technology; promote Promotion) information education. Bureau of Radio Conduct research on efficient use and management of 11 Regulation (The spectrum resources; allocate spectrum; oversee and

State Radio Regulatory manage wireless stations; prevent spectrum Office) disruption; participate in international conferences related to radio spectrum. Attend international conferences; negotiate and exchange telecommunications co-operation with 12 Department of foreign governments; analyze international regulation International Affairs models. Department of Manage staff, labor issues and wages; co-ordinate 13 Personnel organizations under the Ministry. Ministry-Party Co- Ensure co-ordination between government parties and 14 ordination Office ministries.

(Source: OECD, 2003)

C: China telecommunication development timeline

Ministry of Post and Telecommunications (MPT) estiblished First half Data Transmission Office; Mobile Telecommunications Office; and restructured the Telecommunication Office Establishment of China Unicon: introduction of competition 1994 July in the basic telecommunications sector Ministry of Post and Telecommunications (MPT) announces September development plan for GSM mobile telecommunications; GSM service tested in designated cities China Telecom, with 10 million mobile telephony 1997 July subscribers, ranks third in the world China Telecom (Hong Kong) listed on the New York stock October markets. Creation of MII through the merger of MPT and the Ministry March of Electronics Industries (MEI) April Decision to separate the postal sector from MII China exceeds 100 million fixed telephony subscribers and 1998 August million mobile telephony subscribers. 1989 September A paging company: creation of Guoxin

December Firbre-optic cable spans all regions of China. Independent business operation of post and January telecommunications.

China Telecom announces its break up into four separate entities:China Telecom,China Mobile, China Statellite 1999 February Company, and China Paging C. China Unicom absorbs a paging company (Guoxin) and rail telecommunication company and expanded services area. Formation of China Wangtong to construct and operate the August fiber-optic network

Internet and IP Telephony license granted to China Telecom, October China Unicom, Jitong, China Netcom and China Mobile. Reassessment of China Telecom. The company is split into April two groups: China Telecom and China Mobile China Telecom and China Mobile start individual business May operations China Unicom exceeds 10 million subscribers, while China 2000 June Mobile exceeds 43 million subscribers China Unicom listed on the New York and Hong Kong stock June markets State Council grants license to establish the China Satellite Telecommunications (ChinaSat) Group; MII establishes July "Telecommunication Service Standards" to improve quality of service The State Council adopts and announces the September Telecommunications Decree China Unicom acquires the China Great Wall Network January (CGWN) Company, along with CDMA service 2001 February China Unicom surpasses 20 million subscribers China admitted to the WTO: submits the concession schedule November in telecom sector Official member of the WTO; Announced the Regulation of December Foreign-Invested Telecommunications Enterprises ("FITE Provision") China Telecom split in two: China Telecom and China 2002 May Netcom (Source: OECD, 2003)

D: Internet development timeline in China

Chinese Academic Network (CANET) started to operate 1986 with its partner, the University of Karlsruhe, Germany CANET sent the country's first email to the University of 1987 September Karlsruhe. The title was "Across the Great Wall we can reach every corner in the world". The first X.25 switch network set up successfully. Covering 1988 January Beijing, Shanghai, Guangzhou, Shenyan, Xian, Wuhan, Chengdu, Nanjing, and Shenzhen in that time. Chinese Academy of Science signed agreement using X.25 to

connect network with Europe and North America. The first national Internet development project, National 1989 October Computing and Network Facility of China (NCFC), was started. The World Bank mainly founded the project. China registered its domain name ".CN" in the SRI-NIC 1990 January (Stanford Research Institute's Network Information Center). China applied to join to the International Internet Network. 1992 June Due to political reasons, it was not accepted. Started to use TCP/IP system and FDDI technology; these December improved Internet network capacity, and application technology. University members of NCFC project connected these

campuses to the Internet. The first international private Internet line was connected to SLAC of USA through AT&T international satellite channel. 1993 March This private line allowed hundreds of Chinese scientists to use email across the country. The vice Chinese premier Zhurongji suggested and planned

the “Golden Projects.” The Chinese premier decided to fund 30 million USA dollars August from the Premier Foundation to support the “Golden Projects.” NCFC backbone networks, which use high- speed optical December fiber and routers, were completed successfully. The USA National Science Foundation approved China joining the International Internet Network connection. China 1994 April became one of the countries that have full functions of the Internet. Created the first Chinese website, including news, economy, May culture, business and trade, and high technology.

Started to build the National Internet Project, "Golden June Projects." The first IP/X.25 network was set up successfully, connected 1994 July with five cities, Beijing, Shanghai, Guangzhou, Nanjin, and Xian. Asian-Pacific Network Group Meeting was for the first time September held in Beijing. The Internet started to expand nation wide, supported by the 1995 March Chinese Academy of Science. The Chinese Academy of Science connected the Internet to 24 cities, and also connected all academic institutions within April the country. The China Science and Technology Network was established (CSTNet). China Telecom stared to build a Internet network backbone May (CHINANET) throughout country. The first 128Kbps international Internet network began to July operate. The "Golden Projects" initial project was completed. August Connecting with 24 cities through satellite network and also connecting outside China. China Education and Research Network (CERNET) was December completed. 1996 January CHINANET started its service throughout China. The China National Affairs announced "The Republic of February China's Computer Information Network and International Internet Management Regulations." Established China International Electronic Commercial

Center. September Started to provide the first 256 Kbps private line service. November Started the first Internet coffee shop in Beijing. Started to provide the first 2Mbps high speed Internet. The Info-Highway Network began its operation. In three months, it achieved the connection of eight cities, including 1997 February Beijing, Shanghai, Guangzhou, Fuzhou, Shenzhen, Xi’an, Shenyang, and Haerbin. It became the earliest and largest private ISP/ ICP.

The State Council held a National Normalization Workshop in Shenzhen and finalized the definition, elements, guidelines, working principles, objectives and chief missions of the national informatization mechanism. The workshop also approved “the 9th five-year planning” and “2000 long- April range objective.” The Chinese Internet project was listed on the construction agenda of the State Information Infrastructure. The workshop also proposed to set up a national network information center and Internet exchange center. The State Council promulgated “the State Council's Decision on Revising the Provisional Regulations of the People's Republic of China on Managing Computer Internet May Information Networks.” It amended “the Provisional Regulations of the People's Republic of China on Managing Computer Internet Information Networks.” The Informatization Leading Group Office of the State Council issued “Interim Policies on the Administration of Internet Domain Names in China”. It then accredited CAS as 1997 May the institute for founding and administering China Internet Network Information Center (CNNIC), which gave the authorization to the center of CERNET for managing “.edu.cn” through a contract with CNNIC. Entrusted by the Office of Informatization Promotion Leading Group of State Council, CAS set up the China Internet Network Information Center (CNNIC) in its Computer Network Information Center. CNNIC operates as June the national Internet information center. On the same day, the Office of Informatization Promotion Leading Group of State Council announced the formation of a CNNIC Steering Committee. CNNIC published the first “Statistical Report on Internet Development in China”. By October 31, 1997, there were 299,000 computer hosts and 620,000 Internet users in China; November 4,066 domain names were registered under .CN. China had about 1,500 WWW web sites and 25.408M of the international bandwidth. The Ministry of Public Security issued the State Council December approval of “The Management of the Security of International Computer Network Information Networking”.

The Informatization Steering Group of the State Council issued “Implementing Rules for Interim Regulations of the 1998 March People’s Republic of China on the Management of International Computer Information Networking”. The rules went into effect as of the date of promulgation The project of constructing the China Great Wall Network May was approved by central government. CERNET formally participated in the trial network of the June next generation IP (IPv6) - 6BONE. CHINANET launched the second-phase project of its backbone network construction. This would expand the July backbone bandwidth in its major 8 regions into 155M; all the node routers in these regions will be upgraded to kilobit to megabit routers. The Ministry of Public Security officially formed the Public Information Network Security Supervision Bureau. It takes August the responsibility of maintaining computer network security, striking against crime in cyberspace, and supervising the security protection of computer information systems. Led by China Telecom and the Economic Information Center of the State Economic and Trade Commission, over 40 relevant government departments (offices and bureaus) 1999 January hosted the Conference for Launching the E-Government Project of P.R. China in Beijing. www.gov.cn, the primary website of the project, initiated its trial operation. CNNIC published “The Third Statistical Report on the Development of Internet in China”. By December 31, 1998, there were 747,000 computer hosts and 2.1 million Internet 1999 January users in China; 18,396 domain names were registered under .CN. China had about 5,300 WWW web sites and 143.256Mbit/s of international bandwidth. In January 1999, CERNET opened all of its satellite backbone networks, which enormously increased the transmission speed. In the same month, the China Science January and Technology Network (CSTNET) launched two sets of satellite systems, which replaced IP/X.25 and connected with more than 40 cities all over the country.

“The Certification System of Electronic Business Information Security”-one of the Key Technological R&D Programs of China’s 9th five-year planning (powered by the China International E-Commerce Center)-passed the technical achievement appraisal by the Ministry of Science and Technology and the National Pass-code Administrative February Commission. It also obtained the license for selling information security products from relevant departments, and became the first purely self-developed and copyright self- owned CA security certification system for E-commerce. This system was successful in administrating the quota licenses of domestic textiles. China National Information Security Testing Evaluation & Certification Center (CNISTEC) was established. CCERT (CERNET Computer Emergency Response Team) was formed in the Network Engineering Research Center of May Tsinghua University. It is the first organization for dealing with network emergencies in China. The first Chinese conceptual stock of the network company July ChinaNet went public on Nasdaq. Over 200 colleges in 6 provinces used “All-China College August Students Recruiting System” on CERNET, and achieved the first success. China International Electronic Commerce Exhibition (E- COMMERCE Expo’99) was held in Beijing. The exhibition was hosted by the Ministry of Foreign Trade and Economic Cooperation and the Ministry of Information Industry (MII). September For the first time, the Chinese government hosted an E- commerce exhibition, and for the first time, China held a fruitful conference that demonstrated many E-business technologies and applicable resolutions. China Merchants Bank took the lead in providing the online banking service called “All in One Net”, establishing the online service system that was composed mainly by enterprise-individual-oriented bank, online payment, online 1999 September negotiable securities and online shopping. Approved by the People’s Bank of China on conducting personal banking business, China Merchants Bank became the first online commercial bank in China. Mr. Wu Jianping, a professor of Tsinghua University was nominated a member of Address Supporting Organization October (ASO) of the Internet Corporation of Assigned Names and Numbers (ICANN).

The State Informatization Steering Group came into existence; Wu Bangguo, the Vice Premier of the State December Council chaired the group. The former State Office of Informatization was renamed the State Office of Informatization Promotion. “Regulations for the Protection of National Computer Networks” was promulgated by the National Administration 2000 January for the Protection of State Secrets, and was put into force on the same day. The Ministry of Information Industry (MII) approved “China International Economy and Trade Net” (CIETNet) project, January which would be conducted by the China International E- Commerce Center. China Internet Network Information Center (CNNIC) published the fifth “Statistical Report on Internet Development in China”. By the end of December 31, 1999, January there were 3.5 million computer hosts and 8.9 million Internet users in China. 48695 names were registered under .CN, and China had about 15153 WWW websites and 351Mbit/s of the international bandwidth. A national Internet exchange center started operating in Beijing, which increased the inter-connection bandwidth of March domestic backbone networks from less than 10Mbit/s to 100Mbit/s. China Securities Regulatory Commission (CSRC) issued March “the Interim Measures for the Administration of Online Stock Commission”. China Mobile Network (CMNET) was put into operation. On May the same day, China Mobile Co. formally initiated the “Global link WAP” Service. Authorized by the State Council, the State Development Planning Commission designated July http://www.chinabidding.gov.cn the sole network media that was entitled to publish government bidding announcement. Directed by the State Economic and Trade Commission and MII, China Telecom Group and the State Economic July Information Center of the Trade Commission jointly launched “the project of enterprise accessing the Internet.” World Computer Congress 2000 was held at the Beijing International Conference Center. President Jiang Zemin gave an important lecture in the conference, stressing the necessity 2000 August of setting up the Internet pact, and also calling on people to strengthen the administration of information security and to make full use of the Internet.

Beijing Qinghua University built the first next generation Internet network switching center DRAGONTAP, with a 10Mbps connecting with Chicago, USA, next generation September switching center ATARTAP and connection with High Speed Asian-Pacific Network Switching Center in Tokyo, Japan. CERNET started to provide VoIP 6 address distribution September service. MII announced “The management rules of publishment news in the Internet”, “The rules of management Internet November advertisement service”, and “the announcement of management of registration and administration of Chinese domain name for the Internet. December Main Chinese newspaper started to publish online newspaper 2001 January "Connecting Every Campus" project started its operation. CNNIC seventh survey, by December 31, 2000; there were January 89.2 million host computers, 22.5 million Internet users, 265405 websites, and 2799M international bandwidth. China Telecom connected Internet international roaming February service. Internet Society of China was established under MII's

leadership. China's first next generation high-speed internet network July NSFCNET"(1999-2000) was completed. It is mainly to be used for the academic research. The People Bank of China established "The rules for Internet July bank service management". China's high-speed Internet network backbone (CERNET) for education and research was completed. It has 40Gbps high speed transmission network, the speed of backbone December achieved 2.5 Gbps. The network connects into 35 cities, provinces, and nearly one hundred colleges. Also, 67 universities start e-learning education. CNNIC published ninth survey; By the end of December 31, 2001, there were 12.5 million computer hosts and 33.7 2002 January million Internet users in China. China had about 277,100 WWW websites and 7597.5 Mbit/s of the international bandwidth. CNNIC published tenth survey; By the end of June 30, 2002, there were 16.1 million computer hosts and 45.8 million July Internet users in China. China had about 293,213 WWW websites and 10,576.5 Mbit/s of the international bandwidth.

CNNIC published its eleventh survey; By the end of December 31, 2002, there were 20.8 million computer hosts 2003 January and 59.1 million Internet users in China. China had about 371,000 WWW websites and 9,380 Mbit/s of the international bandwidth. CNNIC published its twelfth survey; By the end of June 30, 2003, there were 25.7 million computer hosts and 68.0 July million Internet users in China. China had about 473,900 WWW websites and 18,599 Mbit/s of the international bandwidth. CNNIC published its thirteen survey; By the end of December 31, 2003, there were 30.8 million computer hosts 2004 January and 79.5 million Internet users in China. China had about 595,550 WWW websites and 27,216 Mbit/s of the international bandwidth.

(Source: CNNIC)

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