banner Fidelity
February 21, 1996

China and the Internet:
Pushing the Limits of Tolerance

BEIJING, Feb. 20 (Reuters) -- For the dozens of young couples who elbowed into China's first and only cybercafe late on St. Valentine's Day, reports of a state crackdown on the Internet seemed to be clashing with reality.

"The Internet isn't just the American dream; now it's the Chinese dream," said Zhang Shuxin, whose Beijing Information Highway Technology Company runs the hot-wired downtown cafe.

Zhang's nascent on-line empire also includes Beijing's hottest dial-up network, 1+Net, which she and her computer engineer husband started last May from their own savings.

"The new rules have legalised what we're doing," the 33-year-old entrepreneur said. "The future for us is unlimited."

New regulations promulgated by Premier Li Peng on Feb. 1 ban transmission of state secrets, information harmful to state security and pornography over international computer links.

Though widely seen overseas as a bid to unplug the Internet, many Chinese see the policy in a positive light -- reflecting their Government's tenuous embrace of a new technology that it knows no modern economy can do without.

"This is somewhere between a green light and a yellow light for the Internet," said Zhang Liping, sales manager of another Beijing service provider, International United On-Line. "It's more of an opportunity than an obstacle."

Detailed rules announced on Feb. 14 require users to register with the police, but even this gave Internet providers here cause for comfort and optimism, if not celebration.

"Not bad. It could have been worse," said Zhou Suyue, whose Guoxin Information Corporation won state approval the following day to offer a new Internet service nationwide.

The Police registration requires users to sign an agreement promising not to harm the nation or do anything illegal, said 1+Net's founder, Zhang Shuxin. "That's it. It's a promise."

That's a far cry from the days after the Tiananmen Square democracy protests were crushed on June 4, 1989, when the state ordered monitors deployed at every fax machine in China to intercept foreign reports about the bloody crackdown.

Internet advocates say the Communist Party may not relish the idea of opening China to the free-thinking Internet culture but knows it has no other choice as it nurtures high-tech industries in a land known chiefly for low-tech manufacturing.

So rather than simply banning the Internet, China is betting on limited tolerance, welcoming the technology as useful for the economy and science but with strict monitoring just in case.

International links must route through the Ministry of Posts and Telecommunications, where software is being installed to filter out data from overseas sources known to offer pornography and "counter-revolutionary" or other subversive ideas, engineers said.

Vice Premier Zhu Rongji, a senior party leader, has been quoted as speaking bluntly about the need for such filters.

"Better to kill 1,000 in error than let even one slip through," Zhu reportedly told Internet organisers at Jitong Communication, a major state networking company.

Such bombast does not trouble the 100 young people at 1+Net, who are busily creating a Chinese realm on the largely English-language Internet and winning customers with good service and content that is fun and interesting -- and all in Chinese.

Zhang Shuxin's Internet cafe, still called Concert Hall Coffee Bar for its location in a music venue, is unlike any other in China. Scattered amid cozy chairs and low tables are several kiosks with desktop computers linked to 1+Net.

Other providers, including the telecom ministry's ChinaNet, offer little or nothing beyond basic Internet access.

"What we're building isn't a technology market; it's a people market," said Zhang, a former reporter who financed her five million yuan (about $600,000) start-up costs with profits from several small paging stations she launched in 1992.

Now she's negotiating $20 million in new capital to push 1+Net to 20 cities, giving it a national presence, and she dreams of starting an on-line university.

Modelled on America Online, eight-month-old 1+Net offers dazzling content including financial news, databases about jobs, overseas study, computers, music, sports and other topics and even an "on-line courtroom" where disputes can be arbitrated.

Most popular are "chat" groups where users make friends, court spouses, study together and debate ideas. One such group spends its time debating China's best strategy for invading Taiwan.

Self-censorship usually keeps the debate safely apolitical, but Zhang said 1+Net would not hesitate to shut down chat groups where politically sensitive ideas were exchanged.

"If you see anything reactionary, get rid of it right away!" she jokes to a roomful of fresh-faced editors during a tour of 1+Net's headquarters.

Zhang said the interaction her Chinese network fosters is meeting an acute need in China, creating an electronic "space" where people of similar interests can meet.

Half of 1+Net's members don't even take the full Internet service, which costs 40 yuan ($2.90) an hour to use and is seen by many as confusing and foreign. They opt for just the domestic service at three yuan ($0.36) an hour.

The domestic service, called Information Highway Space, is identical to the Internet architecturally but is not linked to 1+Net's international connection, which is leased from the Chinese Academy of Sciences.

With 1,500 members now, 1+Net needs the family and individuals," says Zhang, whose firm has taken over the top floor of a noisy machine plant in Beijing's computer district.

Zhang says 1+Net welcomes competition from Jitong, the State Information Centre, Xinhua news agency and other major firms planning value-added Internet systems as well as ChinaNet.

"Whoever has the best service will emerge the winner, no matter how big the investment, how big the company," she said.

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