House Vote Triggers Investment in China Telecommunications, Web

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BEIJING - The U.S. House of Representatives' approval of permanent trade status for China and the country's imminent entry into the World Trade Organization are energizing telecommunications and Internet investments in the middle kingdom.

Last year, China had 40 million cell phone users, and they are growing at an annual 50 percent clip, according to CEO Ralph Miller, and he said e-commerce is streaking at 500 percent a year. It earned $50 million in 1999.

Shanghai, the country's commercial center, plans to focus on e-commerce "as a way to innovate and improve the traditional trade circle," deputy mayor Feng Guoqing said at an e-commerce symposium last month.

The city already has more than 100 businesses on the Internet and is building more commercial Web sites. Feng said the administration would give all the help it could to companies going in that direction.

Chinadotcom, an Internet company cash rich from two Nasdaq offerings and $172 million raised in Hong Kong for a war chest of $500 million plus, moved days after the House vote to announce a major investment in China.

CEO Peter Yip told Reuters that over the next year or so, "you can safely say that we will earmark $250 million for China." The House vote and China's entry into the WTO triggered his decision, Yip said.

He does not plan to spread his cash around, explaining "we're not a venture capital firm." Instead the money will go into "improving and enhancing" his core portal business.

Yip told Reuters that he had looked at 100 Chinese startups before buying a minority stake in just one: He also has a stake in 24/7 Media China; WayX, a Web hosting firm; and, a virtual gaming site.

Although Chinadotcom makes most of its money from other Asian sites, Yip was clear about the importance of the China market for the success of all Asian portals.

On June 1, Oracle announced formation of a venture with Shenyang-based Neu-Alpine Software Company, an independent software developer in China, and e-commerce company eON.

"The virtual company's goal is to help domestic users employ advanced and practical e-commerce systems," the business magazine China Securities reported. Employees will be drawn from both companies and continue to work for the new venture and their original employers.

Nokia -- which has had a venture in China since 1995 and sales of $2 billion last year, making China the Finnish company's second largest market after the United States -- plans to build an industrial park in a suburb of the capital.

Scheduled to be finished in 2004, the site will cover more than 100 acres and is designed to attract foreign and Chinese telecommunications companies. It is a venture between Nokia and Capitel Corp., a state-owned Chinese company.

Nokia is taking the lead by building a factory on the site, which will make dealing with far-flung subcontractors unnecessary. Eventually, the park is expected to attract investments totaling $1.2 billion.

Folke Ahlback, chairman of Nokia China, declined to reveal how much his company was investing but said he had received expressions of interest from a dozen companies and that he was looking for 20 when the park is completed.

Nokia is a pioneer in mobile phones and WAP technology, both of which are becoming increasingly important here. Estimates of mobile phones in China by the end of the year range from 60 million to 70 million, more than anywhere else in the world.

China's first nationwide WAP system was launched last month with, a leading Chinese content provider, signing an agreement to provide content to China's two leading telecommunications operators.

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