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Last Updated: Tuesday, 13 September 2005, 00:54 GMT 01:54 UK
How the web is taking off in China
By Charlotte Windle
BBC's Shanghai business reporter

Bill Clinton
Ex-US president Bill Clinton made the keynote speech
China's fifth internet summit attracted the country's most successful entrepreneurs, and a record number of international visitors.

Among the foreigners were many of the largest US internet companies and venture capital firms.

However, for them the keynote speech by former US President Bill Clinton was not the attention grabber.

They came to hear how China's dotcom leaders plan to turn the country's fast-growing internet population into corporate profits.

Among the line-up of entrepreneurs at the summit in the city of Hangzhou was Charles Zhang, founder of the popular web portal Sohu.com.

Other big names included Wang Yan, boss of Sina.com, William Ding, chief executive of Netease.com, and Ma Huateng of Tencent.com.

Mr Zhang has made himself and his company famous with publicity stunts including climbing Mount Everest to prove his text and picture messaging service, Sohu Message, works from the summit.

You've got to have patience to make money here
Jack Ma, Alibaba.com

Mr Zhang told the BBC that while the number of internet users in China is huge, "revenue and profit compared to the user base is still tiny.

"Part of our strategy is to offer our services for free but in the meantime online advertising will take time to grow because companies still prefer to advertise through the traditional media," he explained.

Fee or free?

One of the problems that goes with a developing market is that most internet users are not yet willing to pay for the services they use.

While China already has more than 100 million internet users - a figure that is growing by 100,000 new users daily - only four million of them currently make purchases online.

One of the largest obstacles is the lack of an online payments system.

While debit cards have been around for a decade in China, it is still uncommon to have a credit card. There are just 30 million in circulation today - about 2% of China's total population.

While that figure is growing at 20% a year, growth is being held back by the absence of a national credit bureau - which would enable banks to check an applicant's credit history.

The first national credit bureau is due to launch this year.

Riding the boom

Whatever the obstacles, however, there are plenty of people convinced of a bright future.

Jack Ma, founder of China's largest business-to-business website Alibaba.com and organiser of the Hangzhou event, told BBC News that more users would eventually buy online - but that it would take time.

"Internet users in China, comparatively speaking, are very young," said Mr Ma. "They are university students or recent graduates, so after 3-5 years they will become white collar workers and they will spend.

"But you've got to have patience to make money here."

The choice is be patient or miss out, because no other country has China's growth potential.

Analysts estimate that the number of internet users in China could equal the entire population of the US by 2010.

With that in mind, Yahoo agreed in August to pay $1bn for a 40% stake in Alibaba.com.

The deal followed the spectacular debut on the Nasdaq stock exchange a few weeks earlier of China's largest search engine, Baidu.com.

Its shares soared on their first day of trading by 350% in one of the most successful initial public stock offerings since the end of the Internet bubble in 2000 and 2001.

Some say China is now experiencing its own bubble. Others say the rapid growth is simply the inevitable result of the expanding audience.

The speed with which China's internet companies can turn traffic into custom will determine which diagnosis proves the correct one.




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