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Internet development in China and its impact on business practice

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Since its first appearance in 1995, the Internet development in China has been among the fastest in the world. Despite the fact that the price of a PC is still a big expenditure for most Chinese households, the number of Internet users in China reached 17 million in July 2000. The continuous expansion of bandwidth of Internet connection and the flourishing of numerous Internet ventures support this development. Most of these Internet ventures are set up and owned by private individuals. While most major industries in China, especially media and telecommunication industries are still dominated by state-owned enterprises, and the private sector is still facing difficulty in obtaining financing from banks and other sources, this fact is particularly interesting. How those successful Internet ventures got started and financed, how the capital evolved in these ventures, and how their business models differ to those of their US counterparts are the major issues addressed in this paper. The authors have carried out two case studies of the most successful Internet ventures in China, one a portal, and the other a stock exchange platform, Established in 1998 by a 31-year old electric engineer Wang Zhi Dong in Beijing, was built on its strength in Chinese character platform, and provided comprehensive news and community services. Its growth was supported by venture capital, and thus was transformed continuously by the shareholders into something more market-driven and more global. The strong technological expertise in Chinese platform and the solid understanding of the Chinese community made an incomparable number one portal in China. Even after Yahoo! and AOL launched their Chinese version website, is still a dominant portal. The success of another Internet venture,, provides a rich example of doing business in the Chinese context. Gao Li Min, an ordinary clerk at Shanghai Subway Company with neither capital nor important 'connections' in China, established and grew the online stock exchange platform by leveraging the strength of a state-owned telecom company and foreign capital. It now has 8 million daily page views and more than 1 million registered users. These two cases represent the entrepreneurship in the Internet area in China and the active involvement of foreign capital in fuelling their growth. Their successes have a profound impact on the business practice in China and the public's view towards private enterprises.

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