March 12, 2007

Internet ferment in China

[Note: Staffer Deborah Fallows is now living with her husband in Shanghai and is sending reports every so often about the internet in China.]

Three familiar internet issues in China have begun to spill over onto each other in an interesting way: the rural/urban digital divide; the growing popularity and success of online games; and the role of internet cafes as both a provider of access and a monitor of online behavior.

Digital Divide:

While the internet user population in China is surging – up 23% in 2006, to 137 million users – its social demographics remain, like most things in China, terribly askew. Although estimate vary widely, China’s biggest cities are home to about a quarter of the population but 83% of the internet user population. Rural China, home to the other roughly one billion people, includes only the remaining 17% of the internet users. Seen another way, the internet penetration rate in China’s cities has reached about 20%, compared to about 3% in rural areas. Bringing the internet and computer literacy to the countryside remains on the Party’s heaving plate of rural development issues.

Internet cafes:

While home computer use is also surging – 76% of internet users say they go online from home — some 32% of Chinese internet users go online from internet cafes. The number is much higher, up to about 80%, in rural china, where owning a home computer remains wildly out of reach. The role of internet cafes has been critical not only as the point of access for so many people but also as an essential player in the Party’s oversight of internet content and internet use.

Some elements internet cafes have been accountable for include: keeping track of patrons’ identities and surfing history (read: porn and politically sensitive content); having monitoring cameras in house; preventing entry by children under the age of 18; watchdogging duration online (read: gaming addiction). Cafes — which have a general reputation as dens of iniquity, and to the casual observer are smoky, dusky, venues — are variously shut down, fined, opened, and reopened, either legally or illegally. At the beginning March, the Party announced that the opening of any new internet cafes in 2007 will be forbidden.

Online games:

Some 27% of China’s heavily young, male internet users are online game players, compared to 21% in US. Online games are a black hat – white hat topic in China. On the one hand, the newspapers are filled with studies and statistics about the threats and costs of online game addiction among China’s youth. Latest figures widely report that two million of 18 million of China’s young internet users are addicted to online games. There are a handful of expensive internet addiction treatment centers operating around the country, and are described as no-nonsense, quasi-military institutions. Between the lines of much extreme reporting and commentary seems to lie a general dismay among parents that their tech-savvy kids are distracted by games, and among the Party that its youth is straying into unhealthy pursuits.

On the other hand, the online game industry in China is hailed for its mind-boggling nearly 75% fiscal growth in 2006, and is celebrated as one of the “most vibrant and profitable sectors” in China’s economy. The excitement is palpable, as people discuss the value of game quality v. business models, try to solve money trading issues, and look over their shoulders to worry about government regulation.

Imagining ahead to an integrated resolution of these internet issues is, as with most things in China, impossible. Business, government oversight, political pressures, market demand, social and economic development issues are all ingredients in the messy stew of this stage of China’s internet evolution.