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TECHNOLOGY

Kristie Lu Stout's Web log

Blogging from China

By CNN's Kristie Lu Stout

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Latest gadgets, including phones, MP3 players and digital cameras, are cheap in China

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BEIJING, China (CNN) -- The Spark team is in China, and Kristie Lu Stout is blogging on the road. Bookmark this page to read her daily journal.

Day 1: Back to Beijing
Day 2: The OCPC
Day 3: Money Metropolis
Day 4: Kingdom of geeks

Day 4: Kingdom of geeks

After four days of reporting on the state of the tech industry in China, I can safely make this assertion...

China is a kingdom of geeks.

There are more than 350 million mobile phone users here -- that's more than any other country.

As for the Net, more than 100 million are plugged in, making China the second largest Internet market in the world.

Access to technology is cheap. A full desktop system from China's Lenovo can be had for less than $500.

And for those who can't afford a PC, there's more than two million cybercafés -- or "wang ba" -- across the country.

As a quick gauge of local "geekdom," I randomly pulled aside a few locals walking in Beijing's Wangfujing district to see what kind of gadgetry they had on them.

One young woman showed me not one but two mobile phones in her handbag -- a GSM phone that provides nationwide access, and a Xiao Ling Tong or Little Smart service that offers city-wide access at cheaper rates.

A man unzipped all the pockets in his black nylon fisherman's vest to reveal a cell phone, two digital cameras and a flash MP3 player.

This is Geek Nation, and the Geek Gold Rush is on.

Remember Baidu.com?

"China's Google" soared to dizzying heights after its Nasdaq debut -- at one point making its CEO Robin Li worth 900 million dollars.

Li, a former software engineer at Infoseek, sits at a corner office in Haidian district high rise with a picture of himself ringing the Nasdaq bell perched on his desk. He obviously doesn't want to forget that moment.

Soon after the Baidu IPO, Yahoo paid $1 billion for a 40 percent stake in Chinese e-commerce site Alibaba.com.

Google announced it was beefing up its China operations.

And Morgan Stanley kicked off coverage of China's Internet -- forecasting booming growth in online gaming and advertising.

Yet this is also an industry heavily regulated by the government. China has a highly sophisticated filtering system that restricts scores of Web sites.

In a cybercafé in Beijing's Chaoyang district, I tried bringing up the homepage of Amnesty International.

All I got was a blank page.

Clear rules spell out what can and can not be said in cyberspace, and what companies can and cannot do to make money.

A few years ago, homegrown portals Sina, Sohu and Netease were enjoying rich returns from mobile content and ring tones. That stopped when Beijing introduced a billing platform that gave a bigger chunk of the profits to state-owned carriers.

Online gaming became the new moneymaker. But again, Beijing intervened. In a bid to fight online game addiction, the government ruled that gamers could only play three hours a day -- putting pressure on companies like the Shanghai-based Shanda interactive.

It's in this kind of environment where U.S. tech giants are also learning the art of compromise.

Yahoo turned over private email information that helped lead to the jailing of Chinese journalist Shi Tao.

Microsoft blocks bloggers from posting political sensitive words in Chinese.

And Cisco has been accused of selling networking gear to China used to build its surveillance infrastructure.

According to Guo Liang, an Internet expert at the Chinese Academy of Social Sciences, many Chinese academics are angry with the lack of freedom of speech, and freedom of accessing the information they need.

But ask the average geek what he or she think of the controls, and you get a shrug of the shoulders.

In fact, Guo says most Chinese Net users think the Internet *should* be controlled or managed.

China may be a kingdom of geeks, but these geeks are not likely to use technology to subvert the system.

Day 3: Money Metropolis

As soon as you touch down in Shanghai, you know this is China's boomtown.

You see it reflected off thousands of shiny skyscrapers and the flash window displays at Marc Jacobs and Armani.

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Shanghai -- China's boomtown -- is full of movers and shakers

You see it in Xintiandi -- a maze of old lane houses and birthplace of China's Communist Party, now converted into a buzzy entertainment district of nightclubs and lifestyle boutiques.

You also see it in the faces of the thousands of migrant workers shuffling through the streets, looking for a fatter paycheck.

Make way for big dreams, fast fashion and in-your-face wealth. This is Shanghai, China's pulsating money metropolis.

Shanghai is a city of superlatives. It's China's wealthiest city. It's China's leading industrial center. It's even home to the fastest train in the world -- an experimental maglev line that can reach speeds of up to 270 miles an hour.

It's also the world's third largest container shipping port after Hong Kong and Shenzhen.

Shanghai also attracts a multitude of overseas executives eager to exploit the opening of China's markets.

Fortunately, I was able to nab a room here -- virtually all the major hotels are booked for China's ultimate corporate playfest, the Formula One Grand Prix this weekend.

I'm here to see how Shanghai's reputation as the commercial capital of China is translating in cyberspace.

Though Internet use is taking off and consumer spending is on the rise, e-commerce has been slow to take hold in China, due in part to the scarcity of credit cards.

The Web site 99bill.com is one of many start-ups promising an online payment solution for Chinese consumers itching for a fast and secure way to buy stuff on the Net.

It has 70 employees tucked away in Shanghai's Pudong district, the city's sparkling financial center that was mainly marshland just 15 years ago.

"It was logical for us to be based in Pudong," says Oliver Kwan, CEO of 99bill. "There are a lot of major banks here."

China has a notoriously fragmented banking system. And Oliver's little army is out to connect all the dots.

"In China, banks issue their own debit cards," says Oliver. "If you go to a supermarket, you have four to five separate pass machines to make a payment."

To solve this problem, 99bill has set up a payment system that can process debit cards from a variety of banks, as well as bank wires, postal wires, credit cards, and prepaid cards.

The all-in-one formula seems to be working. Just after a year it was launched, 99bill has signed on about 1.8 million users.

Oliver Kwan and his band of e-commerce whiz kids are but the latest in a long line of money men in this bustling city.

Before the communists came to power in 1949, Shanghai was considered the finance capital of the East and one of the richest cities in the region.

"And even before China opened up in the 1980s," says Oliver, "Shanghai contributed one-sixth of total tax revenue to the central government."

Shanghai is the financial engine of the world's fastest growing economy. And the government wants to keep it humming.

The State Council this year presented a plan to accelerate the pace of e-commerce in China.

And Oliver received a grant from the government to kick start his business.

"A couple hundred thousand renminbi (meaning "people's currency," about $25,000). Not that much, but it shows you something."

It shows you that this city means business, even if it's virtual.

Day 2: The OCPC

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The OCPC are confident, tech-savvy consumers, based mainly in urban centers.

China relentlessly churns out cheap electronics for the rest of the world. But what does it produce for its home market?

Gadgets that deliver an enhanced experience of the Net, but at cut rate prices -- just what the OCPC ordered.

OCPC stands for the One Child Policy Crowd. It's the nifty new acronym I picked up from Frank Yu, a high-tech commentator and program manager at Microsoft Research in Beijing.

"The OCPC is the generation born after the 1970s when the single child policy kicked in," says Frank.

"They always have mobile phones. ICQ is a standard form of communication. They have never known a poor China."

Coddled by their parents and grandparents as infants, the OCPC is now a tribe of confident, tech-savvy consumers, based mainly in China's urban centers.

Think: one massive me-generation.

Compared to their moms and dads, the OCPC may have more spending power. But its appetite is restricted by an average salary of $400 a month.

So the tribe cuts corners when it can.

"The OCPC likes to download," says Frank. "They don't buy pirate discs. They rip music and movies and software off the Internet."

And where does it all go? Into the external hard drive.

The external hard drive is a PDA-sized casing that turns a generic laptop hard drive into a virtual iPod.

For around $10 a case, OCPCs can trick out their own media players to store pictures, music and movies.

To push music out of the hard drive, China's wired tribe turn to the plug-and-play portable speaker.

Frank showed me a stylish, brushed-steel version developed by a Shanghai-based company that retails in Beijing's Zhongguancun tech markets for around $30 a pop.

The speaker is not only relatively affordable, it packs a punch. Though it's just slightly larger than a can of Coke, the speaker has a subwoofer and excellent sound quality for its size.

The OCPC also relies on technology to make much-needed social connections.

"They are alone," Frank says. "No brothers, no sisters. They really have to rely on the Internet for social interaction."

"They may learn socialization through school, but they also do it online which is why Internet dating and Internet gaming are so popular in China."

Enter the Webcam, a simple bit of technology that takes on must-have gadget status in China.

Here, it's squeezed into funky shapes like fur balls, retro robots or lucky Chinese characters. And they're pushed out to the China's tech markets for under $7 a piece, including the software to install the driver.

It also frames the user for the rest of China's wired world to see.

"When a Webcam costs just under $10, most OCPCs in China have a Webcam picture of themselves posted on their blogs and Web sites, and not a digital photo," Frank points out.

I imagine a blurry low-res image of a Chinese surfer staring at the screen -- a fitting portrait of the OCPC.

Day 1: Back to Beijing

It's been five years since I moved from Beijing to Hong Kong, and each time I return I scan for my old haunts...

Liangma Flower Market, still standing. Asia Star restaurant, it's there. And the Liangzi foot massage center? Yup, still open late in the evening.

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Beijing is a city in fast forward, where old neighborhoods are knocked down to make way for high rises.

I hunt for these pockets of familiarity only because this is a city in fast forward. Too many cafes, old lanes and neighborhoods have been knocked down to make way for sky-high buildings with steely exteriors.

Thankfully, the locals don't seem to be mirroring their new surroundings. They're still chatty and unpretentious, with a gentle sense of humor.

I'm back in Beijing for a series of interviews for Spark, including a reunion with Alibaba.com CEO and founder Jack Ma.

I first met Jack when I was working in the China Internet industry in the late 90s. He was the English-teacher-turned-entrepreneur who roared on to the scene with a perpetual grin and a killer business model: use the Internet to link Chinese suppliers with global buyers.

Alibaba was his baby. He came up with the name, he designed the logo and spoke breathlessly about how his site would help China's mom and pop entrepreneurs sell their wares to the world.

And everyone knew Jack was on to something.

I caught up with him again about two years ago in Hangzhou for a story about the city's emergence as a center of innovation. With a few of his "team members," we munched on raw lotus seeds and sipped Longjing tea while overlooking the West Lake.

"A place like this you can sit here and have a brainstorm session," Jack mused. "You never argue, you never fight. You can get all sorts of great ideas!"

These days, Jack is spending less time in Hangzhou after a deal with Yahoo that grabbed international headlines.

Earlier this year, Yahoo paid $1 billion and handed over its China unit to Jack for a 40 percent stake in his company -- turning Alibaba.com into the biggest Internet operation in China.

He's been deemed China's new Internet King. But Jack is staying clear of the crown.

"I don't consider myself a king, but a teacher," said Jack. "I am China's Chief Education Officer for the Internet."

Since the Yahoo deal, Jack concedes that his life has indeed changed. He jokes that he's getting busier, getting thinner. And that a lot of strangers on the street give him a pat on the back for his dot-com coup.

"But to me, I still think 24 hours a day -- sleeping, working, on the toilet -- about how to make the Internet change China..."

-- The Spark show on China airs on CNN International on Sunday, Oct. 23 in Europe at 2030 CET, and in Asia at 2030 HKT

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