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State Prudent on Reviving Cyber Cafes
Internet cafes, which were once a burgeoning business around China, are now facing a development dilemma as they are caught between the conservative attitude of the government and strong demand from the netizens.

Most of Beijing's Internet cafes were closed after a fire that killed 25 people and hurt 13 in an illegal Internet cafe in the city in June.

After strict safety checks by the local authorities, only 30 out of 2,400 reopened.

More than 100 other licensed Internet cafes are expected to resume business in the capital in the near future, said sources with the Beijing Culture Bureau.

But, since the fatal fire, the municipal government has become much more conservative toward Internet cafes and asked operators follow strict stipulations and ensure self-discipline.

The 30 Beijing Internet cafes that have reopened pledged in a joint public statement that they will refuse entry to people under 18, ban smoking and close between midnight and 8 am to follow regulations on Internet services issued by the Ministry of the Information Industry.

Gambling, violent video games, pornographic websites and noisy behaviour are also banned, according to the statement.

Many people, especially young males, have complained that the closure of most Internet cafes has greatly inconvenienced them.

Zhang Xuguang, a 24-year-old Beijinger, said he had to wait for more than one hour to use an Internet cafe downstairs from his home.

"There are too many people and too few computers. As demand is high, the Internet cafe near my home even raised charges from 4 yuan (48 US cents) per hour to 7 yuan (84 US cents)," he said.

Zhang said he used to spend three or four hours in the cafe every week, playing online games with his friends.

"But now playing online games seems difficult due to cost considerations and the shortage of computer terminals in the cafe," he said.

According to statistics from the China Internet Network Information Centre (CNNIC), the mainland had 45.8 million Internet users in July, with more than half of these people being under the age of 25. About 17 per cent of them said they always use Internet cafes to go online.

Zhang said: "I grew up with Internet cafes when I was in college and had no personal computer."

University students who prefer cyber cafes to computer labs on the campus still form a substantial number of Internet cafe customers.

The demand is there and still growing but some companies have started to leave the business.

Sparkice Inc, Beijing's very first Internet cafe operator in 1997, announced last week that it would close all its 14 cafes around the country and concentrate on providing online business-to-business (B2B) services.

Edward Zeng, the company president, said: "The contribution of Internet bars to Sparkice's revenue kept shrinking while that from our B2B marketplace has risen rapidly."

He said that over 70 international purchasers are now buying Chinese products via Sparkice's virtual trade platform. Orders for the coming 12 months are worth US$100 million. The company can expect to get a lot in commission, Zeng said.

After making a comparison between Internet cafes and B2B trade, the company decided to turn to the more profitable B2B business.

"If you compare the government attitude to the two businesses, you can clearly figure out which one the government supports and which one it remains cautious about," Zeng said.

But where there is demand, there should still be a profitable market. Feiyu, Beijing's biggest Internet cafe provider, has 1,600 computers connected to the Internet. It still regards the market as having great potential but also worries about the government's thumbs-down attitude.

Wang Yuesheng, president of Feiyu, said Internet cafes have made a significant contribution to the development of China's Internet business. The hurt that the Internet cafes are suffering now is the growing pain, he said.

He said the cafe operators should face the fact that many adolescent crimes were connected to uncontrolled access to "unhealthy" websites. Some computer gambling games have also led to thieving or robbery, he said.

But, once new management rules and self-discipline are implemented effectively, the Internet cafes should still be a good source of knowledge and a platform for communications.

(Business Weekly August 14, 2002)

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