In August 2011, AP reported: “China eclipsed the United States as the world’s largest personal-computer market in the second quarter of 2011, and is set to capture the full-year title in 2012. PC shipments in China rose to about 18.5 million units in the quarter, compared to 17.7 million units in the United States, research firm IDC said. The shipments were worth $11.9 billion and $11.7 billion, respectively. [Source: AP]

During the April-June period, China’s market share of global PC shipments increased to 22 percent, surpassing the 21 percent share held by the United States. The data includes desktops, portables and mini-notebooks, but not handhelds, such as tablets, the research firm said in a global quarterly report.

IDC forecast that 85.2 million units will be shipped in China in 2012, compared to 76.6 million in the U.S. “There are of course still risks ahead for China, including not just inflation but also the impact of economic conditions in the US and Europe,” Kitty Fok, vice president for Greater China Research at IDC, said in the statement. “But in the meantime, the Chinese government’s 12th Five-Year Plan should help large enterprises” to continue to move along, not to mention of course the ongoing efforts to increase consumer penetration in lower-tier cities.”

In 2004, China passed Japan to become the world’s second largest personal computer market after the United States. There were an estimated 42 million computers in China in 2005, up from 10 million in 2000. Ten million people bought personal computers in China in 2001 up from 3 million in 1997. China spent $16 billion on information technology products and services in 2005. Computers are known as electronic brains in China. A map of Chengdu in Sichuan shows "Electronic Brain Street."

Oracle, Motorola, Intel, Siemens, IBM, General Electric and Nokia all have research facilities in China. On of the biggest fear that foreign companies have working in China is that their patents ideas and copyrights will be stolen

Programmers in Beijing and Guangzhou produce code for computer games designed in Taiwan and Japan. Fearing too much dependance on Microsoft software, Beijing has backed the Linux system.

According to a survey in 2005, China was the third leading producer of spam after the United States and South Korea. It produced 15.7 percent of the world’s spam, up from 6 percent in 2004. The United States produces 26.4 percent. Many of the spam e-mails luring people to online dating services and adult-oriented sites that reach Japan originate in Chinese servers. China has also been the source of a number of viruses. In 1989 the "Li Ping" virus asked computer user if they liked "Li Peng" if the answer was yes the computer’s hard disk was wiped out.

See Technology Industry, Economics

Pirated Software in China

According to one report 98 percent of the software used in China is pirated, accounting for billion of dollars in losses to Chinese and foreign software developers every year. The latest video games and Microsoft software are widely available in pirated form.

U.S. software companies, Microsoft, WordPerfect and Autodesk won a landmark victory in Chinese courts against a Chinese company---Juren Computer Company in Beijing---that was pirating the company's software. Juren was ordered to pay the equivalent of $53,600 damages and stop pirating software. The ruling should, many hoped would set a precedent allowing foreigner companies to punish other pirates and counterfeiters.

Sony released Playstation II much later in China than it did in other places partly over concerns about pirating. A report from an investigation by Sony released in 2004, revealed that at least 10 pirating operations in China were producing 50,000 Playsation consoles a year. In one case the consoles were assembled at prison. In some cases the factories were raided and their owners were fined but the factories quickly resumed operation.

Countries with the highest rates of software piracy (pirate software as a percentage of software sold): 1) Vietnam (92 percent); 2) Ukraine (91 percent); 3) China (90 percent); 4) and 5) Indonesia and Russia (87 percent); 6) Kazakhstan (85 percent); 7) Serbia-Montenegro (81 percent). The piracy rate in North America by contrast in 22 percent. [Source: Business Software Alliance and International Data Corp. study of 70 countries, 2005]

Internet Television in China

“Every month, about 300 million people in China are using a computer to watch Chinese TV dramas, Japanese and Korean sitcoms, and even American films and television series like Twilight and Gossip Girl . Live streaming of the recent World Cup also drew a huge online audience.” David Barboza wrote in the New York Times. “Analysts say young people in China are even starting to favor free laptop-viewing over TV sets, in part as a way to make an end run around regulators, who often bar state-run TV networks from broadcasting shows that do not meet the approval of the Communist Party.” [Source: David Barboza, New York Times, July 18, 2010]

“While Internet TV in the United States is in a nascent state, in China, it is already drawing a huge share of the world biggest Internet market, where an estimated 400 million people are on the Web. A market research firm based in Shanghai, iResearch, says advertising on Internet TV and Web video sites is expected to reach $346 million this year, up from $83 million in 2008. Big video sites like Youku, Tudou, KU6 and PPTV are spending aggressively to license content, produce original programming and buy the bandwidth necessary to store and broadcast content.

“In China, though, Internet TV occupies a unique position largely because it serves as an alternative to what many consider bland state-run programming. Global media companies like Disney are often restricted from winning television programming slots and are allowed to show only a limited number of films in China. Piracy is rampant in China, and TV viewership among young people is in decline.

“That may explain why Internet TV is booming in China. While most early video sites here focused on user-generated content or amateur videos posted by users many of those sites have recently evolved by offering licensed content, in-house productions, and loads of pirated films and television series that are uploaded to the sites by users... For instance, some of America most popular shows, including CSI, appear on and just hours after being broadcast in the United States, usually with Chinese subtitles. Analysts say they do not know how much of the Internet TV content is pirated, but the fact that many of the sites continue to broadcast pirated television shows and films is a complicating factor. Most executives for the video sites say they are licensing a growing share of content and trying to stop users from uploading pirated content to their sites.

Chinese Companies and Internet Television in Internet

China’s big Web portals and search engines including Baidu are scrambling to form competing video sites, many of which plan to license content from the United States and elsewhere. “Everyone wants to get in on this market now,” says Li Yifei, chairwoman of VivaKi Greater China, part of the advertising and communications giant the Publicis Groupe, told the New York Times. “Suddenly there a change of attitude because people are watching a lot of online video.” [Source: David Barboza, New York Times, July 18, 2010]

“Through various agents, we have purchased and are going to purchase more copyrighted content from foreign countries,” Victor Koo, the founder and chief executive at Youku, said told the New York Times. “On the issue of pirated foreign movies uploaded by users, he added that the site had been working with the Mot ion Picture Association of America to improve its monitoring. But some analysts say illegal content is a major factor driving traffic to Internet TV and video sites and a taboo topic for the industry. Still, the analysts concede that Internet TV and video sites are gradually moving toward more original and licensed content, with some companies competing fiercely to buy popular Chinese and Korean television series.

Anita Huang, a spokeswoman for Tudou, based in Shanghai, says the company is positioning itself as a Chinese version of HBO . Vincent Tao, chief executive of PPTV, which provides licensed content, said his company was streaming N.B.A. games and producing original TV dramas. We are going to spend more to acquire foreign content, he said. We now have a deal with Warner Brothers .

Strong challenges from newcomers to Internet TV could create a messy battle over the next few years. For instance, recently formed Qiyi, and if Baidu begins directing most video searches to its own site, that could harm other sites, since Baidu is China dominant search engine. Advertising agencies really want to transfer their advertising budgets to online video sites, there no question about it, Alan Yan, founder and chief executive at AdChina, said. But first, the video sites need to solve some of the copyright issues on the content.

Chinese Government Television Versus the Internet

It shift in viewing habits from television to the Internet is also attracting the attention of authorities in Beijing. They are tightening oversight of online video sites and also pushing state-run television networks to form their own Internet TV sites in an effort to retain control over what viewers can watch online.

State-run networks in China are worried that entertainment is migrating to the Web and that young people are souring on television. So they are trying to jazz up their offerings with reality shows or programs modeled on American Idol.

Sometimes, though, network news divisions get even by investigating the follies of their Web competitors. In 2008, for instance, China Central Television---the biggest state-run network---ran an exposé on how Baidu accepted money to bolster the search results of unlicensed medical companies.

The State Administration shut down a lot of the popular Japanese and Korean series a long time ago. Many young Chinese who like these shows watch them with subtitles provided by fans.

Trends in Internet Video in China

Blog China Hush reported: “The idea of “webisode” started in the western world, a new trend which provides opportunities for individuals or small groups to create media content that can potentially become popular. As we observe, user generated content / webisodes is the latest growing trend on the China’s Internet media market. Let’s see some examples. [Source: China Hush, June 21, 2010]

Some examples: “A personal video diary of a college girl named Liu Xiaoxi, who on the video rambles about her plans and dreams, about nothing and about everything in her life. Looks very much like a typical user-generated video, but in my opinion has the potential to become a popular web reality show. The idea of “anyone can be a director / actor” encourages people to bring out their talents, with the exposure of hundreds of millions of Chinese Internet users, webispodes as simple and low budget as “Liu Xiaoxi” could just be the next hit.

“”Office Hip-Hop Quartet “ is currently one of the most successful online web dramas. With only eight episodes in the first season, the show has reached over 40 million total plays, with 5 million per episode, higher than some of the traditional television ratings.

Chinese “Red Pad” Reserved for Top Officials

In January 2012, AFP reported: “For the communist cadre who has everything, a shadowy Chinese company is offering a $1,590 tablet computer called the “Red Pad” reserved for the nation’s top officials. The pricey device, whose existence was publicised by state media this week, has drawn mocking comparisons with Apple’s iPad from Chinese netizens. [Source: Agence France-Presse, January 20, 2012]

“The iPad is a symbol of fashion, is this pad a symbol of bigwigs?” read a posting by Vicin Zheng Jun through the popular Sina microblog service. Red is the colour of China’s Communist Party and in the political context refers to someone who is patriotic. Red Pad Technology, reported to have links to China’s powerful Ministry of Information Industry, will not sell the product to the public but only bureaucrats, state media said.

The Red Pad, called the “mobile business platform” for officials, has features such as access to internal documents, the musings of top leaders and a database of government contact information.But the company selling the Red Pad appears to have grown publicity-shy, with its official website no longer accessible.

Chinese bloggers said only government officials could afford the tablet since they have access to state funds and illegal sources of income gained through their powerful positions. “Your products should be aimed at those customers who do not spend their own money,” said another microblog posting by Su Hailei. In what appeared to be a joke, a seller on China’s largest online shopping platform Taobao was offering a “Black Pad” at a cheaper $160 price, saying it beat the Red Pad “used by corrupt officials”.

Foreign Internet and Computer Companies in China

Yahoo, and Microsoft and other Internet and computer companies all wanted and still want a piece of the growing Internet and technology market in China. They have all agreed to the Chinese government’s terms on censorship in return for being allowed to operate in China. Most foreign news sites and keywords like “Tiananmen massacre,” Taiwanese independence,” “corruption” and “democracy” accessed through them are blocked.

China banned Wikipedia then eased the ban on it in 2005 and 2006 and then reimposed the restrictions. The Chinese government seems to be concerned about reference to Tibet, Taiwan and other sensitive topics in the site.

Tight regulations and control of the Internet favor domestic Chinese companies rather than foreign ones Chinese companies have also been better at creating sites that cater to Chinese tastes, which is why U.S. Internet companies have decided to make deals with Chinese companies rather than striking out on their own.

Many Chinese like to use American-based search engines such as Google if they can gain access because they provide much more information.

Yahoo in China

Yahoo move aggressively into China offering broadband service, e-mail and instant messages service. It enter the search engine business in a big way in November 2003 when it bought 3721 Network Software, a Chinese search engine, for $120 million. In August 2005, Yahoo paid $1 billion for a 40 percent stake in, making Yahoo China’s largest Internet company. The deal was seen as good for Yahoo, providing a jump start for the company in China.

As of January 2007 Yahoo had 7.6 percent of the Chinese search engine market, compared to 63 percent for Baidu,com and 19 percent for Google. As of 2005, Yahoo employed 699 people in China.

Yahoo has avoided a lot of hassles in China by letting its Chinese partner, handle the Chinese market. The tie up with allowed Yahoo to pass. E-Bay to become the No.1 auction house in China. Yahoo has also worked with

Yahoo users are warned that they are not allowed to post content that “divulges state secrets, subverts the government or undermines national unity.” The human rights group the World Organization of Human Rights USA has sued Yahoo for assisting the Chinese government with torture by revealing information on dissidents.

Yahoo entered a mire of controversy when it provided Chinese authorities with information that allowed them to arrest Chinese journalists Shi Tao and Wang Xiaoning, who were given 10 year prison sentences. Wang, an engineer, was arrested in September 2002 after writing pro-democracy articles on a a Yahoo Groups website and was convicted of “intent to subvert state power.” He was snagged with information from e-mail accessed with Yahoo’s help.

Shi was arrested in November 2004 and sentenced in June 2005 for “leaking state secrets” for sending propaganda instructions to a pro-democracy website in New York. Shi sent the instructions---a government order barring Chinese media for covering the 15th anniversary of Tiananmen Square---using a Yahoo e-mail account. After the information was leaked The Chinese government wanted to know who was it. Yahoo identified Shi’s computer as the source of the e-mails. A Yahoo executive said that when the government made the request for information on the leaks Yahoo had “no information about the nature of the investigation.”

In October 2007, Yahoo settled with Shi’s and Wang’s families. The CEO of Yahoo, Jerry Yang, personally apologized to Shi’s mother and Wang’s wife in Washington with dissient Harry Wu acting s translator. The terms of the settlement were bnot disclosed and Yahoo did not admit to being at fault. The announcement came a week after Yahoo was criticized by the U.S. Congress for not helping Shi’s and Wang’s families.

Microsoft in China

China is regarded as one of Microsoft greatest potential markets. In the mid 2000s, it formed a joint venture with a Shanghai company controlled by the son of former Chinese President Jiang Zemin. It is very active fighting piracy in. China as has been snubbed by Beijing, which is pursing the use of Linux software to undermine Microsoft’s dominance in the software market. Beijing has also complained that Microsoft may be working with U.S. intelligence agencies to spy on China.

In an effort to penetrate the market in China, Microsoft developed the Venus project: a box with software and hardware that allows a VCD player and similar device to display Chinese-language Internet on an ordinary television. Bill Gates himself unveiled the project in Shenzhen in April, 1999.

Microsoft has also complied with demands by Beijing to restrict access to controversial sites to users of its search engine. In January 2006, Microsoft shut down a popular blog that addressed human rights issues in China and then became a target of attacks.

Microsoft has an important research and development center in the Haidian district of Beijing. It was opened in 1998 to take advantage of the huge pool of gifted scientists and researchers. The company has been were able to attract large number scientists from government researcher facilities which do not pay so well. .

Chinese software engineers have been at the center of developing software for Microsoft that can take handwritten documents and covert them to text on a computer. The technology is particularly useful for writing Chinese which has no alphabet and has been difficult to adapt to keyboards.

Ethan Gutmann wrote in World Affairs, “The Chinese government set up an obscure entity known as the State Encryption Management Commission. Its directive was that all Western encryption products in China---i.e., software, DVDs, laptops---must be registered, inspected, scrutinized, possibly downloaded, and, if necessary, confiscated. The target was Microsoft’s source code, suspected to contain a Trojan horse for U.S. intelligence. Microsoft didn’t comply and the State Encryption Management Commission disappeared. Microsoft ultimately revealed its source code to Chinese officials, under what the company claims were controlled conditions.” [Source: Ethan Gutmann, World Affairs, May-June 2010]

Analysts say Microsoft’s search engine, Bing, has little chance of succeeding. Although Microsoft has spent years building a presence in China and working with the Chinese government, the company’s online offerings have fared poorly.

In 2008, Microsoft was being investigated to see if it violated China’s Antimonopoly Law. Tang Jun, the millionaire former head of Microsoft China and something of a national hero, falsely claimed to have received a doctorate from the California Institute of Technology. [Source: Andrew Jacobs, New York Times, October 6, 2010]

E-Bay in China

E-Bay has avoided hassles in China by letting its Chinese partner, Tom Online---a popular Beijing-based Internet company controlled by Hong Kong billionaire Li Ka-shing that provides games and other value-on Internet services---handle China.

In December 2006, E-Bay announced that it would shut down its main web site in China and shift its entire Chinese operations to a joint venture with Tom Online, with E-Bay taking a 40 percent share in Tome Online for a $40 million investment and Tom Online taking a 51 percent share in E-Bay China with a $20 million investment

E-Bay at that point had already spent hundreds of millions of dollars trying to establish itself in China. In 2003, BAY paid $180 million to purchase an auction company called Acned. In 2005 it spent an additional $100 million on marketing the company in China only to later shut it down in defeat.

The auction market is expected to expand to $2.6 billion in 2007. About 35 million Chinese are expected to use online auctions by 2007, up from 12 million in 2004.

In 2010, eBay announced a partnership with China Post and the U.S. Postal Service in a bid to re-establish itself in China.

Wal-mart Takes Controlling Stake of Chinese Retail Website

In February 2012, AP reported: Wal-Mart Stores plans to buy a controlling stake in the fast-growing Chinese online retailer Yihaodian. The retail chain has agreed to increase its stake in Yihaodian's holding company to approximately 51 percent, Wal-Mart (WMT) said. Yihaodian sells more than 180,000 products, including groceries, electronics and apparel. It has expanded rapidly since it was founded in July 2008. It has 5,400 employees and a next-day delivery network across Shanghai, Beijing, Guangzhou, Wuhan and Chengdu. [Source: Seth Perlman, AP, February 20, 2012]

Wal-Mart eCommerce executive Neil Ashe said the deal improves Wal-Mart's access to Chinese consumers who use smartphones and social media to shop. Yihaodian co-founder and chairman Gang Yu said Wal-Mart's carefully managed supply chain will make the Chinese firm more efficient.

Wal-Mart operates more than 10,000 retail stores under 69 different names.

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Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, The Guardian, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated October 2011

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