What good does it do a developing economy to try to leap into the information age? And how does that attempt transform the economy itself? By now a large body of literature--much of it largely hortatory--has explored the global information future's implications for economic and political institutions in the world of the early 21^st century (Ohmae, 2000; Dertouzos, 1997). With a very few notable exceptions (Castells, 2000; Estabrooks, 1995), most commentators on the rise of what Castells terms "informational capitalism" address themselves to an audience largely situated in the most advanced countries. Most, whether whether praising or damning the advent of the information age, concur on one point: proliferating communication and coordination through networks based on "information and communications technology" (ICT) accelerate globalization, erode boundaries, and pass initiative and power into the hands of the global corporation, undermining the capacity of national states to control the flow of information or capital. Odd, then, that China's Communist Party-led state, which attempts to maintain control over political information flows, and still plays a leading role in strategic economic sectors, should so warmly embrace the information age.

Or is it? Scholarly work on the political implications of China's information infrastructure development remains largely in the arena of speculation (e.g., Lynch, 2000), with some notable exceptions (Zhao, 2000). On the economic side, while the country's telecommunications industry has enjoyed significant scholarly attention, we lack detailed studies of the applications of networked communications and their implications for economic institutions and for the political economy as a whole. The dearth is understandable: networked communications are of very recent introduction, and the results, whether economic or institutional, are as yet embryonic. And yet, sufficient evidence is materializing to allow inquiries into the utility of the new communications medium for economic development, and into the ways that it may be reshaping the institutions linked to the economy. This chapter represents an exploratory foray into such an inquiry, with a close study of one locality.

Chinese development strategy since the mid-1980s has placed increasing emphasis on ICT, crystallizing since the early 1990s around the comprehensive concept of "informationization" (xinxihua) and its major vehicle, the Internet (Hu, 1994). The preoccupation with informationization began with a series of "Golden Projects" launched in 1993 (Fries, 2000; CNNIC, 1999?). These projects kicked off the first phase in the informationization thrust: construction of infrastructure and basic large-scale networked applications for major economic institutions. The scale of these ventures was massive (Zhang, 1994).

Since China had little telecom or information technology (IT) infrastructure or "soft" environment as foundations to build on, the scope and depth of infrastructure projects soon grew beyond the "Golden" ones. As the infrastructure and its applications grew, organizational change followed. In order to coordinate the converging technologies and investments for electronics and telecommunications, the Ministries of Posts and Telecommunications (MPT) and of Electronics Industry (MEI) were merged into a new, overarching Ministry of Information Industry (MII) in 1998. Other reorganizations affected the cable television industry and the management of media propaganda functions. Rapid technological change and enhanced communications capacities coupled with organizational upheavals and bureaucratic maneuverings for advantages have been hallmarks of China's informationization process (Zhao, 2000; Lynch, 2000; Wang, 1998).

The challenge remaining is enormous. Behind the enthusiastic reports of China's burgeoning Internet growth, the boom in computer markets, the prevalence of the latest in telecom gizmos, lie some sobering facts. The rate of use of these technologies is low for the country as a whole, and highly skewed. Internet use and Internet resources, for example, are heavily concentrated in the high-tech heavens of Beijing, Shanghai, and Guangdong (CNNIC, 2001). Each of these three possessed strong advantages for hitching its wagon to a particular type of informationization star. Guangdong’s proximity to Hong Kong and its early special treatment in foreign trade and investment policies positioned it for success in becoming a major manufacturing base for high-tech products first for foreign and eventually also domestic foreign producers (Naughton, 1997). Beijing enjoyed the country’s best high tech R&D base and a large early market: the central government. These ideally suited it to benefit from the high-tech development zone policies of the late 1980s-early 1990s (Li Xu'e, 1992; Baark, 1994; interviews BJHDQ95G). Shanghai’s global linkages, investment resources and connections within the central government from the early 1990s put it in an ideal position to make the most of China's accelerated opening to the world economy by launching a local state-coordinated infrastructure drive (interviews SHXXG98G). And, it should be noted, each of these started on its strategic route relatively early. Shanghai was the latecomer, with its Infoport project only getting underway in the mid-1990s.

But what of China's many smaller, less well-endowed, late-comer cities and regions? If the overall strategy is ultimately to work, it must work for them as well. They face some daunting challenges. First, in developing high-tech sectors, they must contend with competition (or domination) centered in the early-contender regions, and must also cope with foreign competition finding its way into the China market. Second, their traditional industries are often under stress, and may face even more stress with China’s entry into WTO, thus raising the stakes for developing successful new industries or "informationizing" the old ones into better competitive shape. Third, as Joseph Man Chan's chapter in this volume suggests, the technological and economic-institutional changes associated with informationization and marketization increase the possibility that local institutions like telecom and media companies may be swallowed up by new conglomerates based in the leading metropolitan areas.

Can such new contenders shape local strategies for informationization so as to improve their own economic and social prospects? And, as they attempt to do so, how does informationization affect the local region’s economic and political coherence?

Hangzhou As Test Case

This chapter uses Hangzhou as a case study to help illuminate answers to these questions. Hangzhou is a mid-size city that is at once an ancient and ongoing magnet for tourists seeking scenic beauty, and the rapidly modernizing capital of Zhejiang Province. In Hangzhou, as in the more advantaged high tech centers, the local government has embraced the developmental potential of informationization, particularly of networking and Internet expansion (Zhang, 2000, 16-17).

Although it shares some of the advantages said to have given Beijing and Shanghai an edge--most notably strong foreign trade orientation and a relatively high proportion of population with good technical education--Hangzhou occupies an economic niche that puts it in competition with numerous other cities. Its most distinctive characteristics relate to the strong role of tourism in its local economy (probably matched only by Suzhou), and the presence of one of the country’s outstanding centers of science and technology education, Zhejiang University. But it shares with most other mid-sized and smaller cities in the Yangzi River Delta region the traditional reliance on light industry and the more recent strategic emphases on export orientation, rural industrialization, and foreign/joint venture investments. While it enjoys the new opportunities created by recent years’ upgrading of regional transport networks, including high-speed roadways and improved rail transport speeds, these improvements have visited similar cities and may intensify competitive threats. (Yang, 2000; interview ZJHZ01D003)

Hangzhou’s economy has depended heavily on light industry, especially textile and apparel manufacturing, a sector with diminishing potential for contributing much to local economic growth or to employment. Other traditional industries, like the machine tools and chemical industries, depend mostly upon small and medium enterprises that need comprehensive upgrading if they are to compete effectively. With China’s entry into WTO, these industries are likely to find themselves under even greater stress.

Like other cities and provinces, Hangzhou has responded to these challenges by taking advantage of suitable central state policies. And like many others, the municipality has escalated attempts to place informationization center stage in its strategy and future vision.

Policy framework

Hangzhou was the third city in China, after Beijing and Shanghai, to open connections to the Internet, in October 1995 (HZDX, 1999, 41). But the city lagged behind Shanghai and Beijing in making the most of the information highway's opportunities. Perhaps the city’s relatively weaker infrastructure partly explains the belated interest in informationization. Another part of the reason may be the dearth, until quite recently, of immediate market demand for high tech and information services.

The city's information economy has nevertheless made considerable strides. By the first half of 2000, according to a local government analyst, the "information" sector (including computer hardware, software, and services; telecommunications equipment and services, and network and information services) contributed 5.9% of Hangzhou’s total GDP; this compares quite favorably to a 6.1% share in Shanghai (Zhang, 2000, 15). In specific products, it is among the top in the nation (mobile phones, chip manufacturing, and a couple of other products). But with the exception of software and telecommunications equipment, Hangzhou's information sector is still relatively weak. It still has to play catch-up with Shanghai and Beijing to meet its own ambitious developmental goals, for which information industry growth is crucial.

Hangzhou created an Informationization Work Leading Group in 1996, but the city government's efforts at informationization first hit their stride only in 1999. In August of that year, the Leading Group held its second conference. The conference identified goals that have set the trend for subsequent development, calling for the creation of an "international infoport with the networking of information resources as its principal part" (HZNJ 2000, 201).

Another important element of a high-tech economy meanwhile had been a-borning within the Hangzhou New and High Technology Development Zone and in the wider municipal area. By 1999, the total earnings in the development zone reached the equivalent of US$12 billion (Jiu, 2000, 1). Graduates of Zhejiang University and other local universities started setting up software and other IT companies in the early 1990s. These relatively small firms were complemented by larger companies like Eastcom and UTStarcom, which develop and manufacture telecommunications equipment. By 1999, dot-coms had started moving into the scene as well, with the best publicized being the ambitious business-to-business (B2B) company, Alibaba.com, which chose Hangzhou as its China R&D center ("Gongsi jieshao," n.d.; "Chinese Internet Scene," 2000).

Coupled with local telecom and Internet infrastructure development, such progress emboldened government planners for two moves to chart Hangzhou's path to the informationized future. The first was the inception, at the beginning of 2000, of the "Number One Project," a ten-year menu of goals for Hangzhou's high tech development. The project proposed creating a "Silicon Valley in Paradise" based on the Hangzhou Infoport and a "pharmaceuticals port." Three Hangzhou development zones, including the high tech zone, were also key elements. As the government's description of the project states,

The "Infoport" notion for Hanghzou invokes a distinctive strategic approach. Shanghai's pioneering Infoport project self-consciously emphasized infrastructure building as the basis of local informationization, with the municipal government coordinating planning and investment in basic infrastructure and applications for networking and internetworking government, business and society. Hangzhou's leaders have chosen to travel a different route. After over a year of preparation, the city authorities in late December 2000 unveiled a ten-year informationization development plan (HZSW, 2000). Some of the planned projects bear considerable resemblance to those in Shanghai's Infoport Project, particularly its infrastructure-creation and "backbone [applications platforms] projects". But unlike the Shanghai Infoport approach, Hangzhou’s plan, while announcing fifteen specific projects, assigned project responsibility in only part of the basic infrastructure creation: Hangzhou Cable Network was tapped to create the broadband transmission network. No centralized coordination; no government commitment to fund anything but the projects directly related to government functions. Rather, the government expected that firms, including many minban ("people-managed") firms, would take on the projects using their own funds, including loans, in pursuit of profitable lines of business (interview ZJHZ01J003).

Similar looseness characterizes the proposals that resulted in Hangzhou's successful bid to become an "informationization city test point." The national government announced the competition for this designation in late 1999; Hangzhou submitted its proposal in July 2000. It emphasized three points intended to distinguish Hangzhou from all other contenders: 1) the "Silicon Valley in Paradise" theme; 2) the municipality's position as a tourism center and the role of informationization in tourism; and 3) an emphasis on "informationized communities" and "informationized households." By September, Hangzhou learned that it stood among the select group of five winners, along with Beijing, Shanghai, Shenzhen, and Guangzhou. Significantly, the designation did not mean--nor had planners expected--that the Center would provide extra resources. Rather, as one official explained, Hangzhou's success provided a psychological boost for pursuing the plans previously announced (interview ZJHZ01J003), although the designation would certainly not hurt in obtaining loans, perhaps even at preferential interest rates.

Elements of the Hangzhou strategy are apparent, cumulatively, from these developments. First, the government saw itself as playing a largely behind-the-scenes role, although certainly a regulatory one. Second, the government viewed competition in the creation and operation of the communications pipes as beneficial, and has taken informal steps to foster competition and accelerate creation of capacity. Third, the government expected further development of R&D and manufacturing capacity, spearheaded by companies under a variety of ownership/management forms (JVE, minban, transformed SOEs, etc.). Fourth, it put heavy emphasis on developing the content part of informationization. Fifth, the creation of e-commerce and other online financial transactions capacity was considered essential. Sixth, and informing all the others, the city aimed to meld its new informationized elements with the factors that have traditionally made Hangzhou unique, in order to increase its attractiveness for the human and investment capital it sees as essential to rebuilding a successful regional economy.

INFRASTRUCTURE DEVELOPMENT

The wiring of the Hangzhou region both precedes and goes well beyond today's Internet. The expansion of local communications capacity has been deeply affected by the national-level bureaucratic maneuverings for advantages and market opportunities, and by related national government decisions. In principle, the infrastructure for networked communications could use the telephone or cable television networks. In China, additional possibilities were offered by communications networks owned by the national railway, the electrical power industry, and the military. Nationally, however, telecom interests associated with the old MPT gained the upper hand. National policies effectively put China Telecom in a heavily favored position as infrastructure builder and keeper of the pipes as networking and the Internet took off (Tan and Mueller, 1996; Lynch, 2000; Zhao, 2000).

Local branches of the national, state-owned companies in telecom and cable have been both buffeted and benefited by major national policy shifts and the bureaucratic competition preceding them. Hangzhou, like a small number of other Chinese cities, has enjoyed the occasional key dispensation from Beijing. Although the city has, like the rest of China, seen the continuation of a virtual monopoly over fixed-line telephone services by China Telecom, it has also secured the privileges of "experimenting" with approaches proscribed by national policies. While most of the country's cable TV companies were long forbidden to move into Internet services, reserving that arena for China Telecom and its local branches, Hangzhou was allowed an early exception. More recently, Hangzhou's cable network has also been given the nod for providing other "telecom services" ("Shisan cheng," 2001; Xu J., 2001). Development of both phone and cable communications in Hangzhou has provided a good foundation that can expand, digitize, and upgrade rapidly, while consumers and businesses alike have grown increasingly accustomed to using the latest in modern communications technologies (Table 1). The interest in and use of the Internet grew rapidly from nearly zero--but it did not come out of nowhere.

Three companies have, until very recently, been the principals in building out Hangzhou’s modern telecommunications infrastructure and equipping it for the digital age. Two grew out of telephone services; the other, out of cable television. Changes in both these sectors in China as a whole since the early 1990s have been phenomenal, and the pace of change has, if anything, accelerated, with recent national-level decisions mandating the mergers of local broadcast and cable TV companies and the formation of an overarching national company; the approval of new telecom/broadband providers such as China Railcom; and the MII decision mandating a north-south bifurcation of China Telecom (Gharemani, 2001). Such changes naturally also affect the Hangzhou environment. But the future will grow out of what has already been achieved by three major builders of Hangzhou's infrastructure.

Telecom: Hangzhou Telecom and Zhejiang Mobile

Hangzhou Telecom (HT), the local branch of China Telecom, rapidly modernized and expanded its network during the 1990s. The total telephone penetration rate in 1990 was less than 10%; after massive investments and technical improvements, HT was able to report a penetration rate of over 40% (not including mobile phones) by the end of 1998. The national project that connected the entire country through a high-speed fiber optic backbone upgraded the city’s links with the rest of the country. Digital data networks (for use mainly by large customers like banks) were also built during this period (HZDX 1999, 34-47).

Widespread Internet access has been longer in coming to the paradise by West Lake. As recently as early 1998, HT's total capacity for dial-up Internet access was only 7500 users. But by that point, HT began actively recruiting new users, launching a "Get on the Net in '98" program, providing demonstrations of its "data and multimedia " offerings, along with some free surfing for "big customers" in its demonstration hall. HT also began diversifying its business in the late 1990s. It experimented with a "public computer network." It developed several e-commerce applications in its segment of the Golden Card project (HZDX, 1999, pp. 45-48). By the end of the 1990s, it developed some higher bandwidth services, including ADSL.

Despite these signs of dynamism, HT was, according to one government official, "too much a 'state agency'" and too plodding in decision and action to be entrusted with the main responsibility for building the major local broadband infrastructure (interview ZJHZ01J003).

As in most other coastal cities, business and residential customers' growing demands for telephone service far outstripped the pace of growth in China Telecom's fixed phone networks, and mobile services quickly moved in to fill the gap. This is the arena in which China Telecom faced its first competitors. In early 2000, MII decided to split China Telecom, spinning off the mobile business into a separate China Mobile Company.

Three years earlier, however, a Hangzhou local spinoff had formed: Zhejiang Mobile Communications Co., Ltd. (ZMCC). Its business has concentrated largely in the Zhejiang standard mobile phone services market, where it has captured about 80 percent of the provincial market. It has distinguished itself from its main competitor, Unicom, by offering "personalization" and more sophisticated mobile phone applications (short messaging, games, a mobile lottery, mobile banking, stock market). Large chunks of the financing for its mobile network have come from foreign companies like Nokia and Motorola. But its plans go far beyond mere mobile phones. The company has invested heavily in the development of both fiber-optic and wireless broadband networks throughout the province. Its major purpose is to connect users to a telecom network capable of providing mobile Internet access, fax, multimedia, and other higher value services (interview ZJHZ01J004). ZMCC's plans are definitely long-term. The fiber-optic network construction is well underway, and a 10-20Mbps wireless system was being tested in early 2001; but true broadband reception on wireless handheld devices probably won't be possible until 2004 or 2005 (interview ZJHZ01J004). By that point, ZMCC will be able to connect just about everyone in Zhejiang from just about everywhere and via just about every device: mobile and fixed phones, laptop computers, PDAs.

Other projects ZMCC now has in hand include a "mobile multimedia information network" project (allowing users to conduct mobile e-commerce or work from a "mobile office"), and a "mobile community" project (furnishing a "social services window" with mobile access, for example, for residency registrations) (Fang, 2001).

Hangzhou Cable Network (HCN)

Hangzhou Cable Network was tapped for the honor of building the major broadband network infrastructure for the Hangzhou prefecture (the city and seven counties), and planned a rollout of broadband Internet access and other services by the end of 2001.

HCN had one big advantage: its cable TV network already extended throughout the prefecture, and reached more households than did the phone company. HCATV merged four of the city’s district (diqu) cable TV stations into the city’s cable network in 1999. Its first major infrastructure expansion began in 1999, as part of the national parent CATV's expansion plans: Hangzhou built its own cable TV broadcast ring in the city and seven-county area. By late 2000 HCN's penetration rate was around 96%, with 1.5 million subscriber households ( HZNJ 2000, 202; HCN jianjie, 2000; interview ZJHZ01J001; Shao Z., 2000).

A second major upgrading and extension of the cable network started in 2000. This involved the further upgrading of transmission cables to a fiber/coaxial system, reputedly the fastest in China, as well as the construction of an "IP [Internet protocol] network and information applications platform" with nearly 5000 km. of fiber optic cable, 22 data exchanges, a multimedia system, and Internet connection. The new network infrastructure was intended to serve a number of functions, including higher quality TV transmission, wide-area data networks, and a platform for networked services for government, education, medicine, and the financial sector. For household subscribers, HCN promised eventually to provide bandwidth rivaling the fastest in the U.S. By the beginning of 2001, the city ring had been completed and HCN was moving out to construct the seven-county ring in the network. By April 2001 the cable TV network was being tested, while reports touted the pending benefits of a broadband multimedia and interactive network that could connect computers at speeds tens to hundreds of time faster, and far more cheaply, than the "dialup connection" (a nice euphemism for China Telecom’s services) (HCN jianjie, 2000; interview ZJHZ01J001; Youxianwang, 2000; Yang, 2001).

By mid-2001, HCN turned into a joint venture with the local branch of China Netcom, a new broadband network company sponsored by some national leaders to inject high-level competition into major metropolitan broadband markets. The local hybrid was renamed "Hangzhou Netcom Infoport Corporation" (Liu, 2001). Netcom plays a leading role in the north-south bifurcation of China Telecom, in which Netcom will merge with the northern provinces' part of the telecom giant--but with David supposedly swallowing Goliath (Zhao W., 2001). Further shifts and reorganizations will undoubtedly continue to occur.

The Internet and beyond

Ultimately, Hangzhou has laid the firm foundations for massive expansion of Internet use. For a city whose population has already demonstrated avid acceptance of the new communications medium (Zhang, 2000, 16), once broadband access is widely and inexpensively available, user numbers and intensity of use are likely to continue rising. The longer term plans for informationization in Hangzhou extend well beyond what we now know as the Internet. MII's next Five-Year Plan and local plans anticipate further technological convergence; the current slogan calls for sanwang heyi ("integrating three networks ["telecom, cable TV, and computer networks"] into one) ("MII Outlines," 2001). Hangzhou Netcom (nee Hangzhou Cable) and ZMCC are working on new applications intended to integrate communications over Internet protocol networks into all aspects of business and personal life, from ubiquitous access to stock transactions, to remote or automatic controls of home utilities and security systems.

CONTENT CREATION

The germane question, of course, is what the use of the infrastructure portends for the local economy and patterns of information interchange. From the Chinese side, great hopes are pinned on the promise the new technologies of communications offer for greater economic efficiency and competitiveness. From the West, a number of analysts have suggested that the "message-source proliferation" permitted by the new communications media will erode authoritarian controls over the information and views available to and sought by the Chinese public (Crossette, 1999; Rubin, 1999; Lynch, 2000). This chapter does not address the latter of these contentions directly; rather, the purpose here is to assess the implications of recent developments on the local content horizon that might help evaluate the utility of Internet-based communications for the patterns of marketization of the old state-based economic institutions and the state-controlled traditional media within the Hangzhou regional context.

At the national level, the informationization leadership called for phases of content and applications creation nationwide, designating 1999 as the year for "getting government online" and 2000 for "getting enterprises online." 2001 was earmarked as the year for "getting households online." "Getting online," though, could mean very different things.The informationizer's modernization dream of getting online means integrating all work with networked information technology: creating and using complex databases and interactive applications to save time, cut costs, improve old products and create new ones, find new markets, speed up decision-making, beat competitors, and make money from all of the above. From the consumer or citizen viewpoint, it could mean turning to the network medium as the preferred method to transact business with the government, find appealing entertainment, keep up with the news, and find jobs, schools, … and dates.

Getting government, business, and vast numbers of users online poses two challenges for the region using informationization as part of its economic strategy. The first, nearly a cliche by now (but no less true), is that networking information and interactions dissolves borders, or at least makes them penetrable on many more fronts. By networking itself and connecting to outside networks, the locality may be opening the floodgates to competitors for the pocketbooks or the brains of the local populace. This issue is all the more salient for Hangzhou, in that it is smaller and has far fewer resources than its near neighbor, Shanghai, and might as easily find its local economy "colonized" by such a domestic competitor region as by a host of de-localized foreign parties. The second challenge is the noise factor. Users' sense of disorientation, frustration and paralysis may also increase geometrically as the amount of information increases. Making the information manageable becomes one of the challenges of the information age; it is also one of its biggest business opportunities.

Content creation in Hangzhou has moved fast. As of the end of February 2001, Zhejiang Post and Telecommunications Bureau had approved licenses for 43 "commercial" (jingyingxing) and another 15 "non-commercial" Internet content providers (ICPs). Twenty-eight of the commercial and ten of the non-commercial sites are most likely the creations of entities based in the city of Hangzhou ("Wosheng," 2001). Additional sites created by Hangzhou companies may be registered with other, national or regional agencies. In the following, I describe a small sample of the content that may provide clues about the way this region is handling the challenges and positioning itself for the hoped-for Silicon-Valley-in-Paradise success.

Information services companies: China Chemnet

Local companies in Hangzhou have built important commercial information resources. Hangzhou Telecom, in its previous incarnation, started the tradition by buying China's first commercial information provider on the WWW, China Yellow Pages (www.chinapages.com), in early 1996 (HZDX 1999, 41). Hangzhou companies also pioneered in developing sector-specific web sites that furnish market information, technical news, and business networking opportunities for member firms. Hangzhou now hosts such sites for textiles (TexNet), for vegetables (VegNet: "click our website and you are shaking hands with the vegetable world"), and, most proudly touted of all, for chemicals (China ChemNet or CCN).

CCN, which opened its site in late 1997, was set up by a classic combination in China's high-tech sector: government agency (Zhejiang Chemical Industry Department), "people-managed" firm (Hangzhou Hi2000 InfoTech Co., Ltd.), and traditional information provider (Shanghai Chemical Industry Journal). ChemNet is a business-to-business (B2B) operation that targets both purchasers and suppliers within the industry. For suppliers, it provides web site creation services, and includes supplier companies' information in the CCN database for ease of location by potential buyers. For buyers, it highlights some "top companies" as good supply prospects, as well as listing the supplier companies' "offers to sell." For paying members, it dispatches those offers via email.(CCN, n.d.)

CCN has a strong claim to distinction. It built itself organically, consolidated its user base as it expanded--and the site, now China's largest chemical industry site, actually makes money.

For Zhejiang generally, the chemical industry was a good sector with which to begin online information services. The Jiangsu-Zhejiang region boasts about a third of China's chemical manufacturing firms. They are generally small or medium in size, and most are rural enterprises and/or under private management. CCN began with one subsector of these firms: dyestuffs. After putting a critical mass of those companies online, CCN moved on to upstream suppliers and downstream users. Getting them online then attracted firms further upstream and downstream to the network. In late November 2000, the CCN General Manager claimed 2500 "member" firms, a database including over 10 thousand firms, and 60 thousand hits per day. CCN's claims to preeminence in the industry seem credible; and its dynamism is apparent in the expansion into new sectors like chemical machinery, and the provision of year-round online "sales exhibitions."(CCN, n.d.; Huagongwang, 2000)

CCN's profitability is based on membership and service charges for member firms; the company also collects advertising fees for market promotions. At startup, the provincial Chemical Industry agency's database no doubt contributed invaluable intellectual capital. Moreover, one could surmise that its institutional sponsors proved especially persuasive in getting Zhejiang firms to sign up in the early days. But others had to be drawn by the perceived utility of the services.

The industry-specific focus ("We are not something about everything; we are everything about chemicals") makes an interesting contrast to the model of multisector B2B site that has received far more foreign media attention. Hangzhou, as it happens, hosts the China operations of one of the most highly touted of such portals, Alibaba.com (interview ZJHZ01J006). So both could be said to be "located" in Hangzhou; both reach out to international markets. But Alibaba.com is headquartered in Hong Kong and bankrolled by international venture capital (Softbank), while China ChemNet's roots are deep in the old regional and sectoral structures. Although the recent dot-com shakeout has not fundamentally discredited the Alibaba.com model, CCN may prove to be the more successful model over the long run because of its close ties with the origins of the information in which it trades.

News Media Portalization: Hangzhou.com and ZjOnline.com

Attracting everyday users to the Internet, and keeping them there, is the work of another type of commercial ICP, the portal. Portals aspire to become the regular port of entry for Internet users by providing convenient, user-friendly access to the information such users are expected to seek, through topically organized sets of links to major sites, on-site search engines or links to the most popular such search engines, free email, news feeds, weather information, and other services such as virtual communities in bulletin boards (BBSes), online fora (luntan), and chat rooms (liaotian shi). They may also offer sites for special interests, such as hobbyists.

Several entrants to the portal sweepstakes can be found in Hangzhou trying to wow the local audiences. Zhejiang Telecom created Zhejiang Info Supermarket; Sohu.com, for a while, tried a localized portal for Hangzhou. And like their gigantic national media counterparts, the Zhejiang and Hangzhou news media have also created their own portals in hopes of adapting themselves to information age functions and creating new revenue streams.

News media organizations enjoy one significant advantage in attracting users: surveys appear to indicate that well over half of current Internet users go online primarily for news (Yu, 2001). And national regulations have sternly insisted that only authorized news media organizations may furnish the news, although other sites may use feeds from the news media. For the central-level media like Xinhua, CCTV, and People's Daily, the regulations have provided a welcome major revenue stream. But news media at all levels of the administrative hierarchy have gone online in large numbers--over 700 of them, by the end of 2000, so many that one source referred to the online sites as a "fourth medium" (Xu B., 2001). Most of these must find new ways to make money from their web sites, a challenge that thus far only a few have managed to meet successfully (Zhang H., 2001).

The first commercial ICP license in Zhejiang was nabbed by the province's flagship media enterprise, Zhejiang Daily Publishing Group, which set up Zhejiang Online (Wosheng …, 2001; zjonline.com.cn). ZJOnline in spring 2001 was a cleanly professional site, loaded with news content and with a free database of news accessible via a well-functioning search engine. While the news content stood front-and-center, the home page also provided links under a "Guide to Zhejiang" and a section headed "Homestead" connecting to other sites within the province, to its "interactive communities," and to "Consumers' Heaven." It provided free email and hosted a nice specialized site for photography enthusiasts. Users could also find convenient links to other Zhejiang media and to "cooperating sites," including mostly national media and some national portals, like Sina.com. The news content was kept constantly updated, but a number of the links in the directory sections indicated future plans rather than current access.

The Hangzhou Daily Publishing Group created a portal site as well, HangzhouNet (hznews.com.cn and hangzhou.com.cn), which opened in fall 2000 (Hangzhouwang…, 2000). Like its provincial counterpart, it provided access to its several publications (Hangzhou Daily, a youth publication and a weekend edition, among others). Its site seemed aimed at attracting a somewhat less serious or possibly just a younger user. The front page frequently displayed photos of young ladies in tight or skimpy clothing, and icons on the front page linked to resources like Health Channel, "Guys and Gals" (click on the large red heart and land yourself in a pink-tinged paradise with personals ads, fiction, entertainment news), stock market news, "Travel in Hangzhou," "English Every Day," and specialized news under the rubric of "Serving You." The site offered a community BBS, but only for indirect submission via email to the boardmaster.

Even HangzhouNet's most youth-oriented and personal elements could display a serious guiding hand. The Guys and Gals personals section, for example, required that anyone wanting to run a personal ad report in person and present proof of unmarried status. Preference in listings went to the college-educated and/or registered local residents.(Ni zenyang…, 2001) The ads themselves could reflect the new economic-modernization correctness, as this example suggests:

For the sites sponsored by media lower in the hierarchy, most are unlikely to find large infusions of such venture capital. For them, absent a lucky gamble on value-added content that could bring in large amounts of revenue, market threats to their existence may arise either from the national media giants being deliberately nurtured by Beijing, or from the lateral invasion of their "territory" by media units from other localities or regions that capture the attention of the previously captive local audience, precisely the type of erosion of administrative boundaries that Chan addresses in this volume.

ANALYSIS

We return to the questions posed at the beginning of this study of the Hangzhou road to informationization: Can the regional late arrivals so shape their local strategy as to improve their economic and social prospects? And given the supposed boundary-eliminating effects of the new networks, how will Hangzhou's integration into national and international information infrastructures affect its own coherence and vitality as a distinct, and distinctive region?

At this point the answers to these questions must remain somewhat speculative. Much of Hangzhou's own physical communications infrastructure is still a-building; a substantial majority of the population have yet to make use of the more sophisticated technologies; and other regions are preparing to make their own entries as contenders. However, perspectives derived from the evolution of the information infrastructure in the U.S., and from the literature on globalization, territorialization, and cluster economies, may help us point us in the right direction.

The first perspective relates to the openness of entry and opportunity that we can expect within a more mature, informationized economy and society in China in general. Despite the popular American rhetoric of competition in the infrastructure (telecommunications) arena and of openness in the content arena, a structure of control and concentration is emerging. Consider the actual consequences of "convergence" in the aftermath of passage of the U.S. Telecommunications Reform Bill of 1996. That bill, intended to remove regulatory barriers to convergence of industries that technological change had rendered possible and, it was argued, necessary for dynamic growth, was also bruited as a prelude to greater competition in the telecommunications industry. The competition unleashed, however, has resulted in a scramble for mergers that not only built new regional and potentially national and even international giants in the telecom sector, but also put control over pipes and major sources of content (news, entertainment, etc.) within the same few giant hands. There is reason to be skeptical about the open entry of new content providers, as well. Scholars who have examined actual use patterns have found that most users resort to the online information sources that they consider most authoritative and reliable: established mainstream media and organizations that have migrated online, and that possess overwhelmingly superior resources for creating and maintaining content (e.g., Davis, 1999).

The point for Hangzhou is that we can expect the more advantaged firms in China's marketizing economy to seek to improve their own competitive positions by expanding into a combination of pipes-and-content industries to the extent permitted by effective law, and to lobby for the law to permit more of it. Regulatory environments determined at the national level will certainly shape the structure of many opportunities, and the timing as well as the wording of changes can be crucial. Major actors' awareness of the stakes is apparent from the intensity of recent battles over ministerial jurisdictions and market entry rights (SARFT vs. MII over ICPs, for example). If the central government's attempts to create designer competition through business licenses (specifying permissible technologies for specific telecom firms) relax, and if now local firms are permitted to seek their own competitive fortunes in other regional and national markets, interesting things just might happen--say, for Zhejiang Mobile. It is far more likely, however, that the national parent firms, with the advantage of friends in high places and large amounts of capital, will hold the upper hand, or that their chief competition will come from giant entrants from related sectors (computers, media) or--after China joins WTO--from abroad.

The perspectives on globalization and territorialization introduce another intriguing issue for Hangzhou. If the region becomes increasingly integrated into global information networks as its economy is increasingly informationized, will it cease to be a region in any but physical-geographic terms? Not necessarily, if it manages to capitalize upon its special qualities. As Cox (1997) observes, while globalization involves "the emergence of a world of enhanced locational substitutability," "territorializing [forces], those social relations that result in enduring commitments to particular places, … can in turn be a source of competitive advantage and so serve to reinforce those commitments" (p. 5).

In this respect, Hangzhou's attempts to transform from a silk to a silicon valley may serve to strengthen it as a region facing the global economy. "Silk" (used here as a metaphor for Hangzhou's traditional light-industrial products) can be produced by a number of other regions, and is highly substitutable in theory. But the imbedded economies of certain types of light industrial products may indeed resist geographical substitutions, if the contributing elements that some analysts have pointed to as crucial for specialized economic clusters (Porter, 2000; Saxenian, 1994) are nurtured and reinforced by the local information economy's development. ChemNet may in this respect be a harbinger of Hangzhou's future competitive revival.

Building the hoped-for "Silicon Valley in Paradise" is a longer shot. If the region can attract, train, and keep the requisite human capital, it is situated as few others are to create an environment that can sustain innovation. Obviously the role of ZheDa and other Hangzhou colleges and universities is pivotal here; but so is the potential relationship between the universities and research institutes, and companies in the area. The situation now may be at an especially crucial juncture, however. ZheDa, for example, is engaged in rapid expansion in its traditional educational milieu as well as in distance education, which is definitely appropriate for accelerating the accumulation of some of the right kind of human resources for high tech development. But if teaching demand overly claims the time of professors, and graduate students cannot be retained locally, some of the original Silicon Valley's conditions will not have been matched. Shanghai, Shenzhen and Beijing still offer vastly higher salaries for the technically qualified, and can drain off the critical mass (interview ZJHZ01D003).

Many questions remain. With the new information infrastructures in place and the habits of communicating and seeking information through the new media building steadily, however, Hangzhou has at least created for itself the sine qua non for competing effectively and maintaining its initiative in the national and global market.

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