China Bans Skype

Contributed by James (Yuqi) Liu

In the last month of 2010, the Chinese government unexpectedly announced Skype illegal in China. Skype Limited is the Luxemburg-based company that develops and operates the VoIP software Skype, allowing users to make computer-to-computer phone and video calls, and most importantly, computer-to-land line calls.

Since entering the Chinese market in 2007, Skype has maintained a fairly good relationship with the government. For example, it offered to filter out the sensitive words within its chat function as the government intended. It was partly because of this fact that when the Chinese government drove out Facebook, Twitter, Youtube, and in the first half of 2010, Google. Skype survived.

However, things changed. Starting from 2000, IP phones started to get in the market, which significantly harmed the potential profitability of the monopolistic telecom firm in China then: China Telecom. Chinese government soon announced IP phones illegal, even after the split of China Telecom into four oligarchic firms. Despite the government’s regulation, many family simply ignored the laws and installed IP phones, with per minute cost only 5%-10% that of normal phones.

Skype, on the other hand, didn’t begin their business in China as IP phone provider. Most users simply used the online video call function to make phone calls with relatives abroad. But it’s convenient IP call function soon attracted the attentions of IP phone providers. They assigned their users a Skype phone number and install an IP phone for them. Then, users could enjoy the cheap Skype phone calls.

Observing the increasingly stronger IP phone market, the only thing left for the government to do it to ban computer-to-land phone calls offered by Skype. Computer-to-computer calls will still be available, but computer-to-land calls will be completely illegal, with the only previously legal Skype phone illegalized.

Of course, there is still a long way to go if the government wants to drive out IP phones, considering the strength of the underground market and difficulty in detecting the use of Skype or other IP phones. After all, the increasingly lower telephone fee has made the Chinese government move against the tide.

Qihan Li: Tech Watch

Starting from this week’s column, I will introduce up and coming or already popular but somewhat unknown websites and companies from China and America with similar backgrounds or business models to you, the readers, so that you will have a better grasp of the latest trends.  For this week, I will introduce the flash-deal websites that sell products at discounted prices for a short period of time. Companies with such business models like Livingsocial and Vipshop have exploded in both China and America over the past few years and both companies represent a larger trend in their respective nations.

Livingsocial.com

There have been serious rumors around the web that Amazon will invest 100 million dollars in LivingSocial to expand their share of the special-deals and coupons market.  LivingSocial primarily focuses on discounted experiences for bars, salons, and various forms of entertainment in the local area, and the discounts range from 50-80%.  You have probably seen its applications like Visual Bookshelf on Facebook. Due to the economies of scale, it has rapidly expanded to nearly 90 markets and it directly works with local businesses.  They get a share of the businesses’ revenues, and the discounts indirectly advertise the business. Despite fierce competition from large websites like Groupon as well as another 180 smaller websites, LivingSocial has been projected to rapidly expand in America.

Vipshop.com

In China, one-deal-a-day websites are generally not as popular as websites that combine the traditional e-commerce model with limited time and huge discounts.  One example is Vipshop, which recently raised 20 million dollars from venture capital firms DCM and Sequoia.  Vipshop sells middle-tier brand-name clothes and accessories to cities in China and directly works with both international and domestic retailers to increase the discounts.  What separates it apart from competitors may be its wide variety of products and its secured and trustworthy retail chain. Chinese customers always have to worry about fake products, but Vipshop generally eliminates such concerns with its 7-day return policy and the guarantee of China United Insurance. Vipshop has set its eyes on the growing middle-class to increase its sales and offers valuable opportunities to foreign brands to enter the Chinese market. However, with the flash-sale market rapidly expanding, Vipshop has to continue to innovate to stay at the forefront.

Sources: Sina, Venturebeat, Wall Street Journal, Wikipedia. 

From Sustainability to Innovation: Thomas Friedman to Qi Lu

Contributed by Cathy Zhu

Stanford, CA (Oct 04, 2010)– Just this past week, two international conferences were hosted here in the Bay Area.  Wednesday saw the conclusion of Stanford’s Global Climate and Energy Project 2010 Research Symposium (“Creating a Sustainable Energy System for the 21st Century and Beyond”), as well as the launching of HYSTA (Hua Yuan Science and Technology Association)’s “Drivers for Growth and Innovation”, their annual conference focusing on IT and entrepreneurship across both sides of the pacific.

Despite their difference on technical focuses, the two conferences shared a common theme: the idea that ensuring sustainability is the challenge of our time and that innovation is the key solution. As noted by the two keynote speakers Thomas Friedman and Yinyi Qian, it is an idea accompanied by a sense of immediacy and urgency; it is an idea that simultaneously brings empowerment and responsibility; it is an idea that defines and shapes international relations today, especially those of US and China. It is one that perhaps will continue to do so throughout the coming years.

The GCEP conference focused on the need for sustainable development. Keynote speaker and New York Times columnist Thomas Friedman aptly captured the way we are currently treating our markets and our mother nature in three phrases: we are “under-pricing risk, privatizing gains, and socializing losses.”  This is not only a concise summary of the financial crisis, but also an accurate picture of our environmental situation. Climate change is becoming a globally recognized threat to our survival, but our governments have yet to put a price tag on carbon emissions.  Friedman describes “the American model” of living as one continuous cycle of buying and selling ever-increasing numbers of consumer products, produced by ever-increasing numbers of factories in China, powered by ever-increasing numbers of coal-fired power plants, that result in an ever-increasing trade imbalance, which encourages ever-increasing American consumption on credit, bringing us back to the beginning of the cycle. Each link in the chain is driven by short-term pursuit of privatized profit, which comes at a societal cost of long-term environmental degradation. In an increasingly “hot, flat, and crowded world”, Americans must change the “way of living” example they are setting for the rest of the world, because the world was not created to sustain an entire world population living on such extravagancy and waste.

So how do we act and how do we act now? HYSTA gave an excellent illustration by showcasing how businessmen and entrepreneurs are now changing China’s economic model. The answer given by Qi Lu, Microsoft President of Online Services, is in one word: innovation. There are three drivers of economic growth, says Lu, labor, capital, and productivity, and only one of them is sustainable: increasing labor and capital productivity.  Thus, the daylong conference saw high-level executives of Baidu and Tencent come and talk about unleashing young Chinese minds from the rigid thinking of China’s test-based education system, teaching them to take risks, break rules, and think outside the box. Entrepreneurs shared case studies of business success before a panel on the challenges and benefits of “Return to China”. The business model for cross-pacific ventures is rapidly evolving from one that merely combines America’s talents and technology with China’s vast capital reserves and untapped markets. Increasingly, Chinese R&D is yielding ideas and technology that are beginning to enter the US. The rapidity of innovation, growth of new successful ventures, the progress towards cleaner technology, all tell us one thing: we are addressing our sustainability issue and we are doing it right here, right now.

So where does this leave us, at the beginning of the school year and nearing the beginning of a new decade? Here at FACES, we firmly believe in the importance and relevance of our mission: building the US-China bridge by developing and connecting the leaders of tomorrow. Whether it is facing common challenges or finding common solutions, mutual understanding, exchange, and collaboration between USA and China is more important than ever today.