China Tries Tighter Web and Phone Laws

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BEIJING -- China can't stop tinkering with rules and regulations for the Internet and the telecom industry despite the acknowledged need to have more foreign investment in those industries.


In early October the government issued new regulations making Internet companies responsible for content on their Web sites and chat rooms. Subversive content is banned, including support of cults or information that harms China's reputation.


Service providers must keep records of everything that appears on their sites for 60 days and must obtain licenses from the Ministry of Information to stay in business.


Ministry approval also is needed for companies who want to receive foreign capital or cooperate with businesses outside China. Foreign ownership in Internet service providers is limited to 49 percent.


If the rules are enforced, they could have a dampening effect on the burgeoning Internet and telecom industries. The one bright spot: Rules and regulations in this area are enforced sporadically and often ignored.


Legislatively the move is considered important, political analysts said, because the rules are the first to be issued by the State Council and are a "prelude for the telecommunications law, which is due to be released soon," a high-ranking Chinese official said.


But he conceded that the new rules "clarify the specific role foreign companies" will play in these industries. The official, Hunag Chengquin, said another document on the issue would be released by year-end.


Chinese media contend that domestic and foreign telecoms welcome the new rules because they assure "a fair marketplace in which players can compete equally." And on Oct. 22 China Daily's Business Weekly ran a story headlined, "E-commerce hungers for legislative protection."


A law was needed "to define e-commerce's basic factors and to guarantee the security of online transactions," the publication quoted an information ministry lawyer, Alamusi, as saying.


"Basic factors include digital signatures and documentation, electronic credence, electronic certification and digital currency transfer." Online transactors' rights and obligations are not clearly defined, Alamusi said.


"E-commerce transactors are also at a higher risk of being cheated or having their contracts breached as identification and credentials are all digital. As a result, many consumers are reluctant to place orders over the Internet," the Weekly reported.


Safety and reliability are major concerns but security is the most important. Citing a recent survey by China Internet Network Information Center, the Weekly said 36 percent of those surveyed identified security as a major problem of online shopping.


Nevertheless, the government clearly has its work cut out for it in its efforts to control the Web. Even the Ministry of Information conceded that e-commerce had great potential as the number of Chinese surfers passes 17 million.


The Ministry expects e-commerce sales in China to hit $1.2 billion by 2002, up from a forecast $96 million this year.
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