China An IT Perspective

ByIndubala MorriNitin WaliaShravan Panuganti

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Agenda

• Geography• Population• People• Culture• Politics• Education• Economy• Transportation• IT statistics• IT strengths and weaknesses• E-Government• Foreign Investment• E-commerce• Shanghai• China Vs Vietnam• Recommendations

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History

• The Ancient Dynastiesshang dynasty 1700- 1270 B.CZhou Dynasty 1027-221 B.C

The Great wall was built

Han (206 B.C.-A.D. 220).China was reunified in A.D. 589 by the short-

lived Sui dynasty (A.D. 581-617)Ming Dynasty

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History contd…

• Emergence of Modern China– The Treaty of Nanjing (1842)– On March 10,1911 in Beijing, Yuan Shikai was sworn in

as provisional president of the Republic of China

• Republican China– In late 1931 Mao was able to proclaim the establishment

of the Chinese Soviet Republic under his chairmanship in Ruijin Jiangxi Province.

– “Transition to socialism” corresponded to China's First Five-Year Plan (1953-57)

• People’s Republic of China– In 1958 the CCP launched the Great Leap Forward In

1958 the CCP launched the Great Leap Forward

5

Geography

• Eastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam

• China has a land border of 22,143.34 kilometers long and is bordered by twelve countries.

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US - China

3.68 million square miles

3.69 million square miles

75% of the Americans live in suburban areas.

74% of China lives in rural areas

40% of the U.S. land can be cultivated

11% of China's land is arable

(http://afe.easia.columbia.edu/china/geog/maps.htm#1a

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US – China cont…

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Population• In the early days of the People's Republic, Chairman Mao urged

Chinese to bear as many children as possible to "make China stronger."

• The population nearly doubled from 1949-1979.

• In 1979, China implemented a "one-child policy" in an effort to control population growth.

• 94% living in the southeastern part of the country.

• China's total population of 1,252,800,000 nearly exceeds the COMBINED populations of Europe (579,700,000) and South America (311,500,000) and the United States (272,573,000) and Japan (125,200,000).

• Life Expectancy is 71.86

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Age Distribution

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People

• Population below poverty line: 10% (2001)

• Labor force: 778.1 million (2003)• Labor force - by occupation:

agriculture 50%, industry 22%, services 28% (2001)

• Exchange rates: yuan per US dollar - 8.277 (2003)

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Key Model

China

Level of EconomicGrowth

Political System

Culture

Key MIS Management

Issues

MultinationalBusiness andIT Strategy

Key MIS Management

Issues

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Culture and Social Relationships

• The continuous primary theme in social structure among Chinese throughout history is the centrality of the family (Chin, 1996; Kim, Yang, Atkinson, Wolfe, & Hong, 2001; Tong & Spicer, 1994). From the centrality of the family (Kim et al, 2001) arise:

• Filial piety (or duty)

• Conformance to norms

• Family recognition through achievement

• Emotional self-control

• Collectivism

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Hofstede’s Cultural Dimensions

China United States

Distribution of family income

Gini index 40 (2001)

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Social structure

• 56 ethnic groups Han Chinese 91.9%, Zhuang, Uygur, Hui, Yi, Tibetan, Miao, Manchu, Mongol, Buyi, Korean, and other nationalities

• Multi-religious country. – Buddhism, Taoism and Islam are the three major

religions.

• There are seven major Chinese language groups.

• Communication is complex and is based on context, social status, intuition, and other matters not readily discernible to Westerners. (Chang, 1999; Chin, 1996; Kagawa-Singer & Blackhall, 2001).

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Chinese Linguistic Groups

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Meaning in China Body Language Meaning in U.S.

Anger, irritation, frustration, remorse

Stamping one’s foot Impatience

Thank you; mutual positive feelings

Speaker or performer clapping at the same time audience applauds

Applauding oneself; improper, immodest

Curiosity, sometimes surprise

Staring, gaping Considered impolite; makes people embarrassed, self- conscious

Disapproval, hissing “Shoo” Calling for silence

Seldom used; occasionally adults may pat head of children to show affection; patting the head of a teenager or adult would cause displeasure and can be insulting

Pat on head Giving comfort, consolation or encouragement; also shows affection

Same Body Language in Chinese and American Cultures, but with

Different Meaning

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Different Body Language, Same Meaning

MeaningBody Language in China Body Language in U.S.

“Come here” (beckoning some to come)

Hand extended toward person, open palm, palm down, with all fingers crooked in a beckoning motion

Hand extended toward person, closed hand, palm up, with forefinger only moving back and forth (in China, this same gesture would be considered offensive by many)

“Shame on you!” (semi-joking gesture)

Forefinger of one hand extended, tip touches one’s own face several times quickly; similar to scratching, but with the forefinger straight (usually with the remark “Shame on you!”)

Forefinger of each hand extended, palms down in front of one’s body; one forefinger makes several brushing movements over the back of the other forefinger

“I’m very full” (after a meal) One or both hands open, lightly patting one’s own stomach

Hand raised to throat, fingers extended, palm down (often with the remark “I’m full up to here”)

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Political picture• The Communist Party is the sole party in power. • Founded in 1921, the Communist Party of China

(CPC) established the People’s Republic of China in 1949 through years of armed struggle.

• 34 major political divisions.• 23 provinces.• 4 municipalities (Beijing, Shanghai, Tianjin, and Chongqing)

• 5 autonomous regions.

• 1 Special Administrative Region (SAR)• (http://www.china-inc.com/education/geography/)

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Education: Facts, Figures

• Literacy: 90.9% • Number of graduates from colleges and universities in

2004: 2.8 million • Number of foreign students in China is over 350,000, and

this number is approximately the same as the number of Chinese students studying abroad.

• China carries out the nine-year compulsory education program.

• Figures: The rate of children completing primary schooling and attending middle schools jumped from 74.6 percent in 1990 to 95.5 percent in 2001.

• The enrolled number of people into colleges and universities rose from 609,000 to 2.683 million over the same period.

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Literacy Rate

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EconomyChronology of events

• 1958-”The Great Leap Forward”• 1959-Sino-Soviet relationship

deteriorated • 1960- Soviets withdrew from China• 1960-61- famine• 1978- market-oriented system • 2003- second-largest economy in the

world

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Economy - GDP• $6.449 trillion (2003)

• GDP growth highest in last 20 years China382% , India105%, United States56% real growth rate : 9.1% (official data) (2003)

• Per capita: PPP - $5,000 (2003)

• Composition of economy by sector (2003) : agriculture: 14.8%industry and construction: 52.9% services: 32.3%

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GDP – Growth by year and industry

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THE BIG MAC INDEX What a Dollar would buy you in different countries?

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Growing Economy

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Economic zones

• For developing the foreign-oriented economy, generating foreign exchanges through exporting products and importing advanced technologies and of “radiators” in accelerating inland economic development.

• China has established special five economic zones are foreign-oriented areas which integrate science and industry with trade, and benefit from preferential policies and special managerial systems.

• 15 free trade zones, 32 state-level economic and technological development zones, and 53 new- and high-tech industrial development zones have been established in large and medium-sized cities.

• Shanghai Pudong was considered as a new zone, In 1999, Pudong GDP is 80 billion Yuan and output value is 145 billion yuan.

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Foreign - Trade

• Canton Fair , China Sourcing Fair : Electronics and components

• 2004: EU becomes China's largest trading partner in first five months of 2004 valued at 65.7 billion dollars in the first five months of 2004, up 35.9 percent on the same period last year,

• Exports - partners: US 21.1%, Hong Kong 17.4%, Japan 13.6%, South Korea 4.6%, Germany 4% (2003 est.)

• Imports - partners: Japan 18%, Taiwan 11.9%, South Korea 10.4%, US 8.2%, Germany 5.9% (2003 est.)

• Chinese exports rose 33.4 percent to 207.6 billion dollars in the first five months of the year, while imports jumped 41 percent to 216.3 billion dollars

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Transportation

• The total length of highways 1.4 million km 37,000 km of newly built highways, 1,487 km of which are expressways.

• 507 airports opened to civil airplanes more than 80 could accommodate large airplanes such as Boeing 777s, 767s, 757s, 747s and 737s and A340s

• The total length of civil air routes is 1.506 million km, 10.1 times that in 1978 and 1,122 air routes had been opened, 131 of which were international air routes.

• Asia and Europe are linked by railways from Linayungang in China to Rotterdam in Holland

• 1989 to 2001, the Chinese government poured 6.3 trillion yuan (US$761 billion) into 1,553 infrastructure projects, covering sectors: transportation, postal and telecom services and other public services.

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2008 Beijing Olympics

2008 Olympics projects demands total investment of about 20.5 billion yuan (2.48 billion USD)

Beijing Olympic Preparations are Big Business with anticipation at the prospect of the largest marketing event ever taking place in the world's most populous nation, as preparations for the 2008 Olympic Games in Beijing are in full swing.

2008 Olympics is a better opportunity for china in terms of human rights.

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Tourism in China

• China is huge and has many wild places for people to explore. It has 56 minorities which all have their own culture, music  and traditional customs.

• Traveling in China from north to south, from east to west, you can enjoy exploring in beautiful nature, seeing different people living different lifestyles, and hearing the different dialects.

• Beijing , Nanjing , Xian has great architecture, etc. There are many historical sites in those cities.

• China has many E-tourism web sites offering great packages to see china.

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IT Strengths and Weaknesses

• Strengths Government policies High Market Demand Highly skilled low Labor Cost Access to export markets Favorable cost structure Infrastructure Macroeconomic climate

• Weaknesses Financial Systems (Banking) Piracy and Intellectual Property Deregulation E-Commerce Language

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E-Government

• By 1998, China has set up 145 gov.cn domain names in China.

• 720 governmental departments has their own www websites. According to the CNNIC annual report, the number of gov.cn domain names has grown up to 5864.

• The “government online project” includes:1. Online electronic information exchange2. Online government procurement bidding3. Online welfare payment4. Electronic delivery5. Information centre6. Electronic document manage and publish7. Electronic tax8. Digital ID

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2003: Bring in “LaoWai”

• Government – 1 millions copies of Java Desktop System

for Chinese governments in 2004 • Waving Linux as a stick in the face of

Microsoft • Leverage the eGov purchasing power • RedFlag Linux/RedOffice 2000 for

Beijing Municiple Government

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Outsourcing to China

• China as the world’s leading manufacturer and fastest-growing consumer market.

• China will become a major supplier of offshore outsourcing services.

• Changes in the country are creating a perfect economic storm for outsourcing. They include the liberalization of laws and policies, a burgeoning middle class and a new emphasis on education.

• The offshore manufacturing already in China has created the support services infrastructure necessary for outsourcing.

• China's proximity to Japan and South Korea, as well as its common culture and similar language, make it a natural for offshore outsourcing to those two large economies.

• Piracy of Intellectual property and Language barriers• Lack of management skills among Chinese employees

http://www.outsourcing-asia.com/china.html

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Policies for FDI

China had set up complete legal system. In 1979 the National People's Congress issued The Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures.

Ninth Five-Year Plan (1996-2000), the objective is to attract foreign investment, which featured high speed, large scale, and improved industrial structure and utilization of the investment.

Tenth Five-Year Plan (2001-2005) focuses on developing the infrastructure and industrialization projects of software industry.

About 180,000 foreign-invested enterprises are in operation, employing around 20 million people, equivalent to 10% of China's non-agriculture labor force. Foreign-invested enterprises have become a key component, an increase point and a driving force of China's national economy.

FDI In China• Exports have grown rapidly over past twenty years. China was ranked 4th in Exports in the World Merchandise Trade. • Foreign investment pumped into Shanghai surged 51.4 per cent in the first two months of 2004. 10% increase from the previous year.• 2004 - the number of foreign-funded enterprises in China reached 482,636, and the amount of contractual and actually-used foreign investment stood at 100.037 billion and 527.38 billion US dollars respectively. • In the five months, China approved the setting up of 17,359 foreign-funded enterprises which involved 57.24 billion US dollars of contractual foreign investment, up 14.39 percent and 49.76 percent respectively.

http://english.people.com.cn/200406/16/eng20040616_146553.html

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China. FDI and Exports

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Current Foreign Investors in China

Intel plans to have a second chip plant in china

General Motors is moving its Asia-Pacific headquarters to Shanghai, reflecting the importance of China's fast-growing car market.

Microsoft, Dell, Kiyocera, TCS, Wipro,Infosys

41 multinational setup their HQ’s in Shanghai

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E-Commerce Only 10% of China’s 90 million web surfers buy things

on the Internet compared with 38% in the US The Payment network-Online consumers in China often

browse through a sales website only to find they must pay by mail or walk down the block to provide payment in person. This makes e-commerce more time-consuming, more costly, and less predictable than a traditional purchase. And it is a sure way to kill the prospects for internet business.

Telecom hurdles-Telecom costs remain an impediment to the development of e-commerce in China.

Outmoded shopping concepts and methods-Chinese customers shop by looking at, touching, listening to and tasting products.

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Tele-density

China 1995 : 44.3 million telephone subscribers (40.7 million fixed, 3.6 million mobile) ,(US –1950)

China 2003 : 532 million subscribers (263 million fixed and 269 million cellular )

US 2003 : 341 million subscribers (182 million fixed and 159 million cellular )

In 2003 111 million new telephone lines were installed in China. first 4months of 2004 50 million lines brought into service

- an average of over 200 lines a minute, day and night, seven days a week.

China Telecom, China Mobile, China Netcom and China Unicom Ranked by subscribers.

China Mobile is the biggest mobile operator in the world, providing service to well over 150 million users .

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Tele-Density . Cont..

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IT Growth-Internet Users

http://english.people.com.cn/200408/11/eng20040811_152529.html

620 1,175 2,1004,000

8,900

16,90022,500

85,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

1997.11 1998.12 1999.12 2000.12 2004.6

Total user 87 million - 2004

Total user 87 million - 2004

By June 30, 2004,Internet users in China had reached 87.0 million, which increased by 27.9% over a 12 month period , 45 million via dial up

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IT Growth-WWW Sites

382,000

94,900

180,500

265,405

627,000

39,5009,9065,3003,700

1,50015,153 27,289

64,00034,50020,7008,600

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1997.11 1998.6 1998.12 1999.6 1999.12 2000.6 2000.12 2001.12 2004.6

under . cn general

预计 2001 年上网机器总数 1,700 万预计 2001 年上网机器总数 1,700 万

A total number of 382,000 wwwsites under .cn and 627,000 sites

in general 2004

Beijing, south China's Guangdong Province, east China's Zhejiang Province and the economic hub of Shanghai were the top four areas for numbers of websites, accounting for 56.8 percent of the total

People’s Daily Online

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IT Growth-Total Bandwidthto the Outside World

18 84 143 241 3511,234

2,799

18,599

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1997.11 1998.12 1999.12 2000.12 2004.6

A total bandwidth of 18,599mbps to the outside world

2004

A total bandwidth of 18,599mbps to the outside world

2004

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Shanghai - Geography

• Shanghai, called "Hu" for short, is a bustling metropolis located at the mouth of the Yangtze River. Connected with Jiangsu and Zhejiang provinces in the west, the city is exposed to the East China Sea in the east

• It consists of two basic districts, Puxi (western town) and Pudong (eastern town) which face each other across the Huangpu River. As a general rule, Puxi is the embodiment of 'Old Shanghai' and Pudong is the embodiment of a 'New Shanghai'

• It is one of China’s biggest cities. • Main financial center of china

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Things you need to know about Shanghai

• Municipalities are directly under the administration of central government. A municipality has the same political, economical and jurisdictional rights as a province.

• Total area of 6,341 square kilometers (about 2,448 square miles) .

• Population of 13 million .• Very safe city; very little if any serious crime, streets

are safe.• Many festivals take place on the streets.• Visitors are appreciated and respected.

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The Bund or Waitan, Shanghai’s mostFamous and scenic downtown sight.

This is a picture of the Pearl Tower, the tallest tower in Asia and Shanghai’s Pride and joy.

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Shanghai’s 2003 statistics

• Shanghai has only 1 percent of China's population

• The city accounts for more than 11 % of China's exports, 15 % of China's imports, and more than 11 % of contracted FDI through the third quarter of 2003

• Shanghai's exports during 2003 grew more than 20 percent faster than the national average.

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Economy Shanghai Vs China

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Shanghai Zhangjiang Hi-Tech Park

• Vision : To be the top Hi-tech park in China and be well-known worldwide by 2010

• Mission : To create a series of complete Hi-tech industry chains

• Shanghai Zhangjiang Hi-Tech Parki- was established in July of 1992 as a national-level park designated for the development of new and advance technology.

• The Park’s two leading industries are information technology and modern biotechnology and pharmaceuticals, and its principal focus is to develop innovation and entrepreneurship.

• By 2005 Zhangjiang will be one of the nation’s top hi-tech parks, with an innovative and educational atmosphere and state-of-the-art technology.

Shanghai Zhangjiang Hi-Tech Park

In the first eight years, the Park has already become the home to various national-level bases, including the State Bio-Tech and Pharmaceutical Base (Shanghai), the National Information Technology Industry Base, and the National Science and Technology Innovation Base.

From July, 1992 to December, 2003 •Registered Companies : 3009•Attracted Investment • USD 10.8 Billion•Contracted Foreign Capital •USD 6.33 Billion•Fixed Asset Investment • • USD 41.2 Billion •Developed Area •17 km2 (25km2)•Supported by 15 Universities in Shanghai's region

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Shanghai Zhangjiang Hi-Tech Park

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Shanghai Pudong Software Park

http://pudong.shanghaichina.org/infrastructure.html

• Shanghai Pudong Software Park intends to build up a favorable environment for R & D, production, marketing, service and investment that helps information industry to grow.

• In April 1990, the Chinese government began the development of Pudong (Pudong New Area), an area adjacent to the urban districts of Shanghai.

• The state has extended special preferential policies to the Pudong New Zone that are not yet enjoyed by the special economic zones. preferential policies of reducing or eliminating Customs duties and income tax, common to the economic and technological development zones and certain special economic zones, the state also permits the zone to allow foreign business people to open financial institutions, and run tertiary industries

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Shanghai Pudong Software Park

•Over 982 software enterprises have registered and with 220 companies having moved in, including: Citibank, Sony(Software), Kyocera, Microsoft.net , Bearing Point, TCS, Satyam, Infosys UnionPay

•To become the software export base, IC design center and the platform for value-added software industry

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Profitable Investments in Shanghai

Technology-intensive manufacturing industries in the suburbs and industrial parks

Bio-pharmacy Electronics and telecom equipment Automobiles Shipbuilding Petrochemicals Fine steel China Movie Industry

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China vs Vietnam

China Vietnam

Currency Renminbi (RMB) yuan new dong (D)

Exchange rate 8.3 yuan=US$1 14,020 new dong (D)= US$1

GDP 10,239.8 billion yuan (at the end of 2002)

$143.1 billion

Population 1295.33 million 80,226,000

Population growth rate 10.55% 1.49%

Ethnic groups China has 56 ethnic groups. 2 major ethnic groups

Government type Communist state Communist state

34 provinces 58 provinces

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China Vietnam

GDP growth rate 7.5% GDP growth of 8.5% in 1997 fell to 4% in 1998 and rose slightly to an estimated 4.8% in 1999

FDI$62.66 billion

Foreign direct investment has fallen dramatically, from $8.3 billion in 1996 to about $1.6 billion in 1999.

GDP per capita $1,850

Population below poverty line

10% 37%

Inflation rate 1.2% 4%

Unemployment rate 9% 25%

Labor force $778.1 million 38.2 million

Exports: $325.6 billion $11.5 billion

Imports: $295.2 billion $11.6 billion

External debt $184 billion $7.3 billion

Railways 57,600 km 2,652 km

Highways 1.278 million km

93,300

Waterways 238,000 km 17,702 km

Airports 140 48

Telephones - main lines in use:

263 million 842373

Problems 1.War image2.Illicit drug trafficking3. Border conflicts with lot of countries

RecommendationsInvest In IT-

IndustryMerits Demerits

Software Dev. • Potential of a vast local market.• Favorable govt. polices• Skilled workforce

•Deregulation•Software Piracy

Hardware Dev. & Manufacturing

• Good Infrastructure• Availability of Capital• Growing Domestic and world demand

• High Competition•Need govt. approval

Bio-Pharmacy • Skilled Work Force• High tech parks

•Recent Wage Increases

E-Commerce • Large future market •Limited Infrastructure •low Penetration

Automobiles • Highly Skilled Work Force•Potential demand for economy cars

•Government Policies•Language

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Sources

• http://english.people.com.cn• http://www.people.com.cn/• http://www.cia.gov/cia/publications/factbook• http://www.american.edu/carmel/jw6194a/Korea_files/software.htm• http://www.american.edu/initeb/cc9979a/hongkong.htm• http://geography.about.com/library/cia/blcsouthkorea.htm• http://www.state.gov/www/background_notes/

southkorea_0006_bgn.htm• http://www.amcham-china.org.cn/• http://www.cbw.com/business/exhib/cantonfair/• http://english.epochtimes.com/news/4-10-8/23643.html• http://www.chinesetradepartners.com/Chinese-Transportation.html• http://cn.yahoo.com• http://www1.bejieng.olympic.org.cn• http://www.globalsources.com/TRADESHW/CSF/INDEX.HTM• http://www1.beijing-olympic.org.cn• video clip