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November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

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Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek technology

OCTOBER 29, 1999 VOL. 25 NO. 43

A New China Gateway
Shanghai tries to solve an e-payments puzzle
By RIC SHREVES

also:
Technology in Brief



Illustration by Emilio Rivera III
Many a corporation has broken its sword trying to hack off a piece of the China market. The latest blade-buster is shaping up to be the country's Internet. Electronic commerce on the mainland is projected to grow from a negligible $42 million this year to $3.8 billion in 2003, according to market research firm International Data Corp. But the obstacles to online purchasing loom as large as the potential market itself, and meeting lofty sales targets may prove difficult.

One barrier is the creation of a reliable electronic payment mechanism that will be accepted by mainland merchants and consumers. A Shanghai information technology company believes it has an answer - a payment system that adapts Western technology to fit circumstances in China. The just-launched TOPGate system, developed by Shanghai Huateng Software Systems Co., is e-commerce with Chinese characteristics.

    ALSO IN ASIAWEEK
A New China Gateway
The PRC gets an e-commerce boost

From the Web
Meet the Internet's bad egg

TOPGate addresses a conundrum that bedevils online merchants who would sell to the mainland's masses. The internationally recognized online payment standard is the credit card; most web retailers are set up to handle purchases made with VISA and MasterCard. But few people in China hold major cards, consumer credit being a relatively new phenomenon in the evolving socialist economy.

TOPGate - a payment "gateway" or networking system that routes information to the proper financial institutions for settlement - is geared for a more appropriate financial vehicle: debit cards. Using debit cards, payments are deducted immediately from the accounts of users. The volume of debit card transactions is less than 10% that of credit cards in the U.S., but in China debit cards are fairly common. In Shanghai, for example, there are 1.2 million credit card holders. When debit-card holders are included, the number of potential online buyers jumps to more than 12 million.

The new gateway, a government initiative owned by the Shanghai Bankcard Network Services Corp., is capable of handling credit cards as well. It is linked to Shanghai's SNET, a network connecting Shanghai banks, MasterCard, VISA, Citibank, and Hong Kong & Shanghai Banking Corp. To encourage merchants to join TOPGate, transaction charges have been set at a remarkably low 1% (in the U.S., settlement costs are as high as 14%) of the purchase price. The system is expected to be operating later this month.

If it gains national acceptance, TOPGate could help solve part, but hardly all, of the China puzzle. Currency controls make it impossible to pay merchants other than in renminbi, seriously curtailing international purchases over the Internet. The highest hurdle of all remains China's still-small base of computer users - just 4.5 million people, less than 1% of the population, are online, says Gurinder Kalra, head of Technology Research at Morgan Stanley Dean Witter. "Lack of access will continue to be a problem for mainland e-commerce," he says. If more consumers had credit cards, perhaps they could buy more computers.

X-Game
Microsoft's Flight Simulator computer game has long been a best-seller for PCs, but the world's largest software company has steered clear of the rowdy console video game market. Now Microsoft may be changing course. In a story bound to send chills through Sony, Nintendo and Sega headquarters, the Wall Street Journal reports Microsoft is working on a video game machine of its own. Ominously code-named the X-Box, the console could go on sale late next year - about the time Sony plans a U.S. release of its new Playstation 2. Microsoft may be considering the move in part because the Playstation 2, meant for TVs, will do many of the things computers do, including connect to the Net. No official confirmation has come from Microsoft. The company could decide there are already too many game machines and kill the project, the newspaper reported, quoting unnamed sources.

Fare Game
Leading Internet portal Yahoo! has teamed up with a San Francisco taxi company so riders can log on during commutes. Portable computers with wireless links to the Internet were installed in a dozen cabs to enable back-seat surfing. One cabbie said that a passenger made several stock trades enroute to the airport. "I don't know if he made or lost money, but he gave a good tip," the driver said. But does it eliminate back-seat driving?

Privatizing People?
An international effort to map the human genome is in sight of its goal. The U.S.-based National Human Genome Research Institute says that by spring of next year, about 90% of the roughly three billion gene "base pairs" will be decoded, providing a working draft of the blueprint for the construction of people. The research is expected to be valuable in finding disease cures, but it is not without controversy. A private U.S. firm, Celera, is also decoding genes and is trying to patent its discoveries so it can later sell them to healthcare companies. Critics say the blueprint should remain in the public domain to speed new therapies.

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