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Nine in Ten Chinese Dotcoms May Go Bankrupt This Year
Nine out of ten Chinese Internet start-ups may go bust this year as funding is becoming scarcer because of a worldwide cooling in the dotcom frenzy, state media reported on Sunday.
After the drop in the technology-heavy Nasdaq stock market, many venture capitalists are reluctant to invest in Internet companies, the China Daily Business Weekly reported.
This will deprive the vast majority of Chinese dotcoms that have not yet gone public from their single most important source of financing, according to the paper.
"It's not exaggerating to say 90 percent of Chinese dotcoms will go bankrupt by the end of this year," said Zhi Tan, chief executive of 8848.net, a company that helps small enterprises get online.
The sombre outlook may appears at odds with some of the statistics for Internet use made public in China.
According to official data, China's online population almost doubled in the first six months of the year to 16.9 million.
At the same time, the Ministry of Information Industry, the powerful regulator of China's Internet, expects e-commerce volume to reach 10 billion yuan (US$1.2 billion) in 2002, up from a forecast 800 million yuan (US$96 million) this year.
The problem is that enteprises trying to make money on online transactions face a range of obstacles specific to China, the paper said.
The lack of a standard credit system or an effective express network is a problem for companies, whether they want to perform business with other enterprises or with consumers.
"Whatever e-commerce mode is adopted by Chinese dotcoms... they will experience a hard time cultivating the market," said Liu Zheng, an economist with the Chinese Academy of Social Sciences, a government think tank.
One way for Chinese Internet companies to survive in this harsh climate is to make sure that they are credible players not only online, but also offline, the paper commented.
One case in point is Guaweb.com, a joint venture invested by China Guardian Auction Corp., Hong Kong Telecom and Softbank of Japan.
The company has gained from China Guardian Auction's experience as an offline auction house, while adding to its online credentials by acquiring Clubciti.com, a Internet auctioneer, the paper said.
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