DATE=4/27/2000 TYPE=BACKGROUND REPORT TITLE=CHINA INTERNET - REGULATIONS NUMBER=5-46209 BYLINE=STEPHANIE MANN DATELINE=WASHINGTON CONTENT= VOICED AT: /// EDS: THIS IS THE FOURTH OF FOUR REPORTS ON THE INTERNET IN CHINA. THE FIRST TWO REPORTS WERE ISSUED WEDNESDAY AS 5-46200 & 5-46201. THE THIRD WAS ISSUED TODAY AS 5-46208. /// INTRO: Should governments regulate commercial transactions on the Internet or the content of Internet web sites? That is a question facing officials, business executives and consumers in many countries. V-O-A correspondent Stephanie Mann reports on how the regulation issue is being perceived and handled in China, where Internet usage is growing at dramatic speed. TEXT: Maintaining social order is a priority for China's leaders. Last year, when the Falun Gong spiritual and exercise movement used the Internet to organize large demonstrations in Beijing, Chinese leaders and security agencies were taken by surprise. The government launched a massive crackdown on Falun Gong adherents and began looking for ways to have some control over the Internet in China. Anne Stevenson-Yang is the president of Twin Poplars, a publishing and consulting company in Beijing. She points to the rapidly increasing number of Chinese using the Internet, and the great quantity of money flowing to online businesses, and says that is prompting the government to set up a regulatory structure for the Internet. Ms. Stevenson-Yang says the Chinese government seems to have two purposes -- controlling information and controlling commerce. /// STEVENSON-YANG ACT ONE /// On the commercial side, their concern is controlling fraud, which is a very great concern. ... On the information side, on one hand they're very concerned about helping their own state-owned media compete -- by funding, by to some extent maintaining monopolies, by giving them regulatory advantage. On the other hand, they're interested in setting up a sort of orderly gateway, so that they still have some control over the flow of information going to the Net. /// END ACT /// In March, at the annual session of the National People's Congress, China's legislature, several delegates proposed that China enact a law on Internet trade, or e-commerce, as soon as possible. They proposed regulations in the areas of security, taxation, payment systems, consumer protection and intellectual property rights. Different Chinese agencies are establishing rules for different aspects of the Internet. For example, the China Securities Regulatory Commission has issued interim regulations for online brokerage firms. A new office, called the Internet Propaganda Administrative Bureau, has been created to supervise the news content of Chinese web sites. Other agencies with key roles in Internet regulation are the Ministry of State Security, the Ministry of Information Industries, and the State Encryption Management Commission. Late last year, the encryption commission ordered all businesses and individuals to register with the government any products containing encryption technology, which scrambles information to prevent it from being read by others. Many companies, especially foreign makers of Internet-related software, were alarmed by the rule. After receiving complaints from industries in many countries, China issued a clarification in March, now restricting only specialized hardware and software for which encryption is a core function. The chairman of the American Chamber of Commerce in China, Tim Stratford, says the revised ruling shows China is responsive to corporate concerns. /// STRATFORD ACT /// We were disappointed that there wasn't opportunity to comment on the proposed rules before they came out. But we've been very encouraged that, as we have pointed out problems with the rules or areas that were not clear, that the government has been very active in gathering views and in trying to respond to them. /// END ACT /// The city of Beijing recently issued its own rules for businesses to register their e-commerce operations. The city says it aims to standardize Internet business activities, protect the rights of enterprises and consumers, crack down on illegal activities and maintain social and economic stability. Anne Stevenson-Yang says until now, China's regulatory structure has not recognized the Internet as an entity. She says that has presented some difficulties when companies register their required business scope, or plan, with the government. /// OPT STEVENSON-YANG ACT TWO /// There's no such thing as "Internet content provider" in a business scope, for example. So, companies try to persuade the regulatory authorities to let them register as "Internet service providers" or "software developers," because you have to develop databases if you're going to create an Internet site, so that's sort of a software-development function. /// END ACT /// /// END OPT /// Ms. Stevenson-Yang also says the Internet exacerbates problems that already exist in China's regulatory system, such as cracking down on fraud in conventional commerce. She says accelerating trade through the Internet leads to more channels for greater fraud. But she does not believe the Internet itself needs special regulations. Tom Lasater agrees. Mr. Lasater is the chief executive officer of Vertical Asia, a Hong Kong-based company that provides specialized "portals" -- entry points for Web surfers -- on the Internet. /// LASATER ACT /// I think, in general, there should just be a complete de-regulation of the Internet industry, because that's how the Internet grows quickly. And I think China wants a strong Internet industry, and they understand that you can't control it, so they should just de-regulate it. /// END ACT /// The head of a Chinese Internet business, Peggy Yu, does not agree. Ms. Yu is co-president of Science and Culture Book Infotech Company, which is the largest online seller of Chinese books. She says commerce in China is developing very fast and the lack of adequate regulations can hurt consumers and businesses. /// YU ACT /// There should be in place many, many regulations to protect consumers and to protect commerce interests alike. And in the U-S, there are certain rules related to interstate commerce and mail order and other things, and China is working to develop those. I think we need that. /// END ACT /// Ms. Yu's online bookstore, called Dangdang.com [dangdang-dot-com], currently sells only books published in China. She points out that Chinese publishing companies have the responsibility to make sure what they publish complies with government regulations about content. In the future, Dangdang.com hopes to offer its customers books published in other countries as well, and it remains to be seen how that may be supervised or regulated. /// REST OPT /// Like many countries, China is concerned about the availability of Internet sites with pornography or violent content. In March, the city of Beijing adopted a regulation to tighten control of Internet cafes -- small restaurants or shops where patrons can surf [browse] the Internet. The Xinhua news agency says many cafe owners allow school-age patrons to engage in online gambling and play pornographic or violent computer games. Under the new regulation, Internet cafe owners in the Chinese capital must register their businesses with the appropriate commercial administrative office as well as with the police. As online business activities expand in China, government agencies at the municipal and national level continue to devise new regulations to try to keep the Internet manageable. (Signed) NEB/SMN/KL/WTW 27-Apr-2000 11:41 AM EDT (27-Apr-2000 1541 UTC) NNNN Source: Voice of America .