Tuesday, May 02, 2006

Eye on China: Few guests but many a reservation

The United States' leading tech and entrepreneur magazine, Red Herring, has just held an interesting conference in Beijing. It was interesting in the same way a motorway pile-up is interesting.

Perhaps that's overstating the case - the lunch buffet was excellent - and the venue, the brand-new Intercontinental in the west of Beijing, was good as well. But problems became apparent from the first day.

The Intercontinental has a rock-bottom occupancy rate and there's a good reason for that - it's in a bad location. With typical obduracy, the Chinese Government has looked at the thriving downtown district in the east of the city and decided that setting up something completely artificial and inconvenient on the other side of town makes far more sense. They can't leave well alone.

Partly as a result, few people actually turned up. Cost was also a major factor: At US$1500 ($2300) a pop, the tickets were about 10 times what local people usually pay for such conferences, if they pay at all.

Ironically, many of the speakers were Japanese. Smart, polished and with well-established ventures behind them, these men reflect a resurgent Japan. They were much older than the Chinese present and they had accomplished far more.

Sacchio Semmoto spoke about his intense rivalry with Softbank founder Masayoshi Son, a rivalry which helped drive Japan's broadband access cost to among the lowest in the world - from being the highest - a situation which had put Japan's ability to compete in a new high-tech world seriously in peril.

Semmoto did so by creating the first rival to the incumbent Japanese telecoms provider since World War II. He's now hoping to do the same thing for mobile phone services in Japan.

Contrary to popular belief, airtime for Japan's mobile phones is expensive, and penetration and usage rates are relatively low. Semmoto exemplifies the tremendous impact the right kind of entrepreneur can have and his comments about the foolish decision of Japan to adopt mobile phone standards completely different to the rest of the world were revealing.

Japanese telecom monopolies at the time hoped thereby to keep competition from foreign companies away from Japan. They succeeded, but only at the extraordinarily high price of depriving themselves of export markets for their main products.

Yet despite the value of these speakers, it was something of a social gaffe. Relations between Japan and China are at their lowest point for several years and, in any case, Japan's economy is so large and isolated that it functions at a rhythm quite separate to the rest of the Asia.

While the organisers did their best to make the conference go with a bang, other problems rapidly became embarrassingly apparent. The second day was meant to start at 7.40am, but was delayed by more than an hour since not a single delegate was out of bed at that time. The dynamic West Coast American organisers' amazement at the much slower pace of life in Beijing was quite comical.

Another Chinese aspect of the conference was that the local delegates were basically uninterested in what was occurring on stage. They were networking like fury over the lunches - which thus also dragged on for much longer than scheduled - rather than listening to the speakers.

Even more striking was a somewhat gladiatorial event known as "meet the money" whereby a few brave souls have three minutes to pitch their company to a board of venture capitalists. After a round of questions, the VCs give the thumbs up or down.

Here a huge cultural gulf appeared. Getting information in China, including the most basic, is still astonishingly difficult. Even with listed companies, potentially sensitive information is hidden away under random headings, while technical issues such as badly maintained websites compound the problem.

A culture of intellectual property theft makes people even more reserved (one doltish and obviously monolingual Chinese entrepreneur at the conference had dubbed his company Softbrain, in an attempt to piggyback off Son's Softbank). But, as a result, information is hoarded.

The Americans weren't used to this and the US-trained VCs were clearly outraged at the soft presentations and mushy videos provided by most of the candidates, about 90 per cent of whom they failed. It was easy to applaud the Americans' demands for more access to key information, however much it made the locals squirm.

The conference did highlight one of the paradoxes of China, namely that a developing country should have such a high-profile tech sector and attract the attention of magazines such as Red Herring. When I put this to some of the delegates, they put an interesting gloss on the phenomenon.

One told me that Chinese tech companies were not really intent on becoming "real" tech companies. Companies such as Hong Kong-listed Focus Media merely put LCD screens in office lobbies and sell advertising on them. Tom Online, also listed in Hong Kong, has a hugely successful mobile phone services operation, but mainly revolving around simple texting and downloads. But what the technology does is enable these companies to achieve the vast scale necessary to exploit China's gigantic and far-flung markets.

Overall, I thought the conference was a brave stab at a new market. One can only hope that the Chinese will ponder the advice for increased financial transparency, while the Americans might consider lowering their prices.

* Eye on China is a journalist based in Beijing.

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