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China’s Secret Hi Tech Market

Photography: kurzonis

When Lenovo bought IBM’s PC unit for $1.75 billion in 2005, it felt as though the world really had changed. Here was a Chinese company that few people in America had heard of buying up an American icon of the twentieth century, a company that for many of the previous decades had epitomized the United States’ technological advantage. Now it would become part of a business whose biggest shareholder was the Chinese government. IBM would be working for the Chinese. Today, Lenovo is the largest seller of PCs in China with more than 28 percent of the market. Its sales for fiscal year 2008/2009 were almost $15 billion, and it’s the fourth largest seller of personal computers in the world. The sight of IBM notepads carrying the Lenovo brand name no longer seems unusual. And yet, when it comes to high tech, other Chinese manufacturers are largely invisible outside Asia. They’re also different, big and coming this way.

The high tech gap between China and the West may best be seen in gaming. European and American gamers have long been used to firing up their Japanese-made game consoles but the most popular games have tended to come from Western manufacturers. Activision, with its $1 billion Call of Duty franchise, started building games for Atari but it’s an American company majority-owned by French company Vivendi. Electronic Arts, founded by Trip Hawkins and based in Redwood City, is as American as John Madden’s favorite sport. Overall, the gaming industry in the US posted sales of over $19.7 billion in 2009.

American Gamers Don’t Like Cheats

China though is surprisingly close behind. According to a report by accountancy firm KPMG, already in 2006, its online gaming industry was worth $970 million, a sizable amount for a country whose GDP per capita is about one-ninth of America’s. But the kind of games that Chinese players like to play tend to be different to those bought in the West. Few gamers in Shanghai, Beijing and Urumqi are signing up to battle bad guys across Call of Duty’s online servers. Instead, they’re more likely to be playing Westward Journey, a game based on the classic Chinese novel Journey to the West.

And the form of playing is different too. As ChinaGeeks, a China-related blog, points out, few Chinese gamers own dedicated game consoles and even PCs are still relatively rare — at least outside the larger cities. Playing then takes place in long sessions at Internet cafes (which don’t serve coffee), with progress saved on the game’s servers. And while American gamers are reasonably happy to pay monthly subscriptions, they balk at playing free games alongside other players who have paid for magic items, the revenue model popular in China.

Just as gaming forms in China and the West are worlds apart, commercial operating systems are different as well. Chinese computer users do use Windows, Leopard and Linux but outside China, you’ll be hard pressed to spot a user of Kylin, an operating system developed at China’s National University of Defense Technology and based on Mach and FreeBSD. A report for the US-China Economic and Security Review Commission suggested that the program’s main purpose might be related to cyberwarfare.

Chinese users even search the Web differently. Google’s decision to stop abiding by the Chinese government’s censorship rules following cyber attacks on the email accounts of human rights activists might have looked like a supreme act of moral self-sacrifice but with a market share of around 35 percent in comparison to local search engine Baidu’s 58 percent, the company wasn’t giving up a leading position.

Chinese Online Shoppers Go for the Tea

And even as online retailing has grown in China so the way of buying and selling on the Web has evolved in a  unique direction. One of the most common items bought online is tea, located on sites like Alibaba’s TaoBao, paid for through AliPay and delivered by scooter. Ebay and Paypal barely get a look in.

It may seem then that the Chinese hi tech world is a unique ecosystem as distinct from the West’s way of using the Internet as the Galapagos Islands is different to Iceland. But there are similarities and there are overlaps. World of Warcraft is as loved by Chinese gamers as it is by Western hack-and-slashers. Farmville, Facebook’s social media game, is a copy of the Chinese game Happy Farm. Kingsoft, creators of a suite of productivity software, as well as some of China’s most popular games, has recently announced that next year, it will launch its Lost Temple and JX3 Online games into the European and North American markets. Despite the Chinese cultural associations of those games, the company seems to feel that if the story is good and the gameplay enjoyable, then people anywhere will want to play. They may well be right.

Perhaps the most intriguing development though is in mobile technology. The phone in your pocket may be running the iPhone’s OS, Android or Symbian but few mobiles have the capacity to boot up more than one operating system. (Nokia’s N95 managed to do it with a little developer trickery). The Chinese Sunno S880, however, packs a 3.6 inch WVGA display, WiFi, GPS, an 8 megapixel camera with lens cover, 256MB of memory and an 806 MHz CPU. And it can run both Android and Windows Mobile. If they can get Kylian on it too, they might just have something.

It’s no surprise that technology in China has developed in a different direction to the way it’s grown in the West. Regulations have made it difficult for some companies, such as Paypal, to operate. Cheap transport costs that allow cross-city deliveries to be made within the hour for as little as 73 cents mean that it’s worth ordering some forgotten grocery on the Web in a manner that doesn’t pay in the West. The question though is what will happen in those areas where those two worlds converge. IBM won’t be the last company to find it’s working for China.

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