American Internet pioneer Jerry Yang approached the podium in a tony Beijing hotel this morning to make an important announcement. He then uttered seven words in Chinese and thereby made a shrewd business move.
Translated into English, he said: "I am Chinese."
The story of how Yang built Yahoo Inc. into a $36 billion company from scratch is a typical success story according to American rules. But by citing his Chinese roots before he announced an agreement with local partners to operate a new World Wide Web site in China, Yang was attempting to play by Chinese rules.
Last week, China's top telecommunications official announced that China would ban foreign investment in this country's fast-growing Internet market. Yang is hoping, in stressing that he's Chinese, that exceptions will be made.
"I think it's a good strategy for Yahoo," said a top executive at another foreign-funded Internet venture. "Jerry is famous here."
Indeed, something appeared to be going right. Also on the podium with Yang was Qu Weizhi, vice minister of the Ministry of Information Industry. She and Yang each stuck three-pronged plugs into dummy wall outlets in a high-tech ribbon-cutting for today's launch of YahooChina. The Web site will have local information and advertisements from mainland China and will be run by a new joint venture between Yahoo and Beijing Founder Electronics Co., a leading Chinese computer firm.
Yang's gambit is just one of many methods that foreigners are employing to deal with the surprise announcement by Wu Jiquan, the powerful conservative who heads the Ministry of Information Industry. On Sept. 13, Wu declared that Chinese companies that build Web sites are off-limits to foreigners under long-standing rules against foreign investment in telecommunications services.
Many U.S. executives are forging ahead with existing arrangements until the rules are clarified. Executives from Intel Corp. spoke at the high-profile launch of an e-commerce site run by Sohu.com just three days after Wu's comments. The site is one of China's leading entryways onto the Internet, and Intel is a key investor.
America Online is planning to launch a version of its online service in Hong Kong next week and its chairman, Steve Case, is traveling to China for discussions with officials there.
Others have taken a lower profile. The head of a Web start-up funded by a major Western company said "gray areas" still exist in Chinese regulations, so work on the site continues unadvertised but unabated.
Jim McGregor, the chief representative in China of Dow Jones & Co., another investor in Sohu, said uncertainty about the new rules has already forced many foreign investors to delay their plans to pour money into China's capital-hungry Internet industry.
"There are a bunch of deals waiting to go, and none of them are moving ahead," he said. "Venture capitalists cannot invest in an unclear legal environment. They use other people's money."
Wu's announcement has sparked a battle with Chinese reformers. Officials from his own ministry, as well as from Shanghai and other cities that have actively encouraged foreign Internet investment, have opposed the ban.
In an unusual move, the state-run Beijing Youth Daily printed an article Wednesday that directly contradicted the minister's public position. The paper argued that foreign money has kept unprofitable local-content providers alive long enough to lure millions of new users onto the Internet. China's online population has more than doubled to 4 million since the beginning of the year.
"The large amount of foreign investment was like adding fuel to the fire," the article said.
Political analysts in China say the battle over the future of Internet investment in China is actually part of a broader fight between the market-oriented reformers who gather around Premier Zhu Rongji and protectionists such as Wu who have worked strenuously to prevent foreign and domestic competition. Wu opposed Zhu's offer last April to dramatically lower trade barriers in telecom services as part of China's effort to join the World Trade Organization, the global body that regulates international commerce.
At the launch of YahooChina today, senior Founder executive Wang Xuan tried to steer clear of such politically sensitive conflicts, while still arguing that his company's joint venture with Yahoo should be allowed to stand.
"I don't support the opening up of the telecommunications market, but Internet sites are different," Wang said. "There is a lot we can learn from Yang Zhiyuan and Yahoo, especially their risk-taking spirit," he added, using Jerry Yang's Chinese name.