Tech Market WatchBy Perry Wu
Santa Claus came prepared to China's technology sector this year with a bag full of mergers, lawsuits, and rumors. In the last week, CDC Corp announced a separation of its games division, eBay decided it couldn't cope solo in China, and PayPal is supposed to be marking a new deal with UMPay.

One of the biggest gripes netizens have in China is the sometimes slow access to websites around the world and the occasional blocked website. In order to increase speeds, China Netcom just reached a cooperation agreement with VeriSign to launch root domain name mirror servers to provide more convenience to Chinese users. Though this won't unblock websites, it will add a local cache of worldwide domains so that the server lookups go faster and users can get onto their chosen online destinations a bit quicker.

How many mobile phones do you have? I have two, but in the last ten years I have gone through at least twelve phones. I have a small box full of the old phone chargers and batteries in my closet, but a new rule in China will hopefully standardize all these things in the future. China's Ministry of Information Industry has published a new industry standard called "Mobile Communications Handset Charger and Interface Technology Requirements and Testing Methods" in order to help tackle the situation caused by a lack of unified standard in the market. Based on the principle of promoting practicality and being favorable to mobile phones' individualized designs, the new standard sets the interface in one side of the charger by referring to the specifications for Universal Serial Bus (USB).

Who says China doesn't have capitalism in its genes? Chinese instant communications service provider Tencent has filed a lawsuit against auction website, accusing Taobao of infringing its copyrights by allowing sellers to sell QQ numbers and Q coins on the Taobao website at unreasonable market prices. Where there is a demand, suppliers and products will materialize!

In survey after survey, Alibaba's continues to be ranked as the top Internet auction platform in China. In order to fight its way to the top of the heap, carpetbagging American auction website and Chinese Internet company Tom Online have announced a joint venture agreement in China. The two companies will combine expertise to build a new China marketplace in 2007. eBay will have a 49% stake in the joint venture, and Tom Online will have a 51% stake. Both companies will make financial contributions to the venture, including a US$40 million cash contribution from eBay and US$20 million in financing from Tom Online. I think eBay's China deal is too little, too late–it should concentrate its energies on markets where it won't have to lose face and embarrass itself so much.

One more thing about the eBay empire: its subsidiary is rumored to soon make a US$105 million investment in Chinese payment services provider UMPay. PayPal is rumored to take a 33% stake in the company so it can refine its presence in China and the future of nation's payments market. In addition to its global offering, PayPal will continue to offer its domestic service to consumers and businesses through UMPay. Other circulating rumors point to odd financial machinations between PayPal and one of UMPay's investors, but all my calls to eBay in the United States and China have not elicted a response to this potential Enron debacle arising in the Middle Kingdom.

I'm a bit bearish on Internet games in China. Yes, I love to play computer games and I think there is a huge potential market, but games are like movies–most fail and it takes a bit of luck, timing, and creativity to make lots of money off games in China or anywhere else in the world. To this end, CDC Corporation says that independent shareholders of its subsidiary have approved the internal restructuring of CDC Games which will make the online games publisher a direct business unit of CDC Corporation. Play on!

Some positive news for telecommunications watchers: data released by China Mobile, China Unicom and China Telecom shows that all these three major telecom operators saw an increase of new users in November 2006. Of the three, China Mobile received 4.67 million new users in November which made its total user reach 296.4 million by the end of the month. China Unicom saw an increase of 1.3 million new users, of which 930,000 were GSM users and 373,000 were CDMA users, and its total user number reached 141.1 million by the end of November. China Telecom increased 690000 new users in the month, which added its total telephone users to 222.4 million.

Finally, a new study from ABI Research forecasts total Chinese mobile video users at more than 32 million in 2008. The report says about 27% of these consumers will use broadcasting technology, and 73% will use unicast streaming technology, while a number of viewers are likely to use both. Google recently bought American video website, so I expect this to all lead to a little bubble around this sector. I expect more crazy investors to lose their shirts and their minds as they plunge more money into this hole of no returns.

About the author:
Perry Wu is a writer and correspondent for and can be reached here at the site. Perry Wu does not hold any positions, long or short, on any of the Chinese or American company securities mentioned in this article.


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