China Becoming World's No. 2 Market for Web and PCs
Wed Jul 31, 6:51 PM ET

By Eric Auchard and Jonah Greenberg

NEW YORK/BEIJING (Reuters) - China overtook Japan in July to become the world's second most active Web audience, and its personal computer market is set to surpass Japan later this year, according to several industry sources.

An international survey of financial executives of 680 companies found that the firms intended to invest $35.1 billion annually over the next three years.

The most populous nation, which in 2001 outpaced the United States to become the world's biggest mobile phone market, is benefiting from years of rapid economic growth of at least 7 percent a year that has fueled an explosion in electronics demand.

In international Web traffic, however, China remains a distant second to the United States. Chinese Web surfers overtook Japanese, despite Japan's higher number of individual users, because the Chinese have become more active users of the global Internet.

With 1.27 billion residents, China accounted for 6.63 percent of all global Internet traffic during July, according to San Diego, California-based WebSideStory Inc., a top supplier of Web customer tracking software.

"We're seeing China and other countries grow into significant players on the Web," said Geoff Johnston, vice president of WebSideStory's statistical service. Japan, which with a population of 127 million is one-tenth the size in China, was close behind with 5.24 percent of global Web site traffic, followed by the United Kingdom and Canada, each with about 3.9 percent. Fueling Japan's growth is the explosion of mobile phone networks used to reach the Web. Germany was just behind the United Kingdom and Canada, with 3.64 percent of the global Web audience, Johnston said.

The United States accounted for 42.65 percent of all Web traffic in July. This lopsided dominance reflects America's role in pioneering and commercializing the international network of networks which make up the World Wide Web. The U.S. audience has slipped from around 45.02 percent in early 2001. The rankings are based on electronic surveys of 125,000 sites globally using WebSideStory software. Some 20 to 30 million unique visitors are tracked through the survey.

"We probably monitor 10 to 20 percent of everyone who's on the Web in a given day," Johnston said.

TECHNOLOGY MARKETS TILT TOWARD CHINA

Separately, the Asia head of Intel Corp., the world's leading maker of computer chips, said in a speech in Malaysia that China was expected to overtake Japan in terms of the number of PC units shipped to customers in either market.

Christian Morales, Intel's vice-president of Asia-Pacific, said that Japan's decline reflected the stagnation in Asia's most mature economy over the past decade, and the countervailing vibrancy of emerging markets like China. "Before, we thought it would take another year or two. But this year itself, China will overtake Japan in the personal computer market," Morales said in a speech in Kuala Lumpur. Precise figures on global Internet use are impossible to come by, owing partly to incomplete record-keeping and concerns about privacy by Web users.

Estimates veer all over the map, from some 100 million to well above 250 million global users.

Last week, the closest thing to official numbers for China were released in a survey prepared by the nation's Internet address authority, the China Internet Network Information Center. This report, posted at http://www.cnnic.org.cn, showed fast growth in Web users compared with the second half of 2001. A surge of 12 million new Internet users in China in the first six months of this year pushed its users to 45.8 million. That's ahead of estimates by technology market research firm International Data Corp. of Framingham, Massachusetts, which had forecast the Chinese Internet audience to grow to 44 million for the 2002 year as a whole from 30 million in 2001.

John Gantz, research director of IDC, said that his firm estimates that Japan's Internet audience will grow to 59 million in 2002 from 46 million last year. This puts it still well ahead of China in its absolute number of Internet users. Furthermore, while analysts agree that China's numerical dominance is inevitable, overall spending on technology in China remains far below the levels in the United States, Japan and several Western European countries. This is likely to remain true for much of the next decade, Gantz suggested. WebSideStory does not track the absolute number of Internet users. Rather, it measures traffic to 10 to 20 percent of the world's Web sites, including most of the major attractions. As such, the statistics may undercount actual Internet use within China. The 6.63 percent figure represents Chinese-based traffic to Internet sites globally, Johnston said.

IDC's Gantz speculated that the difference between the two organization's findings may reflect the fact that China has less localized Internet content, forcing Internet users to search globally, while Japan is more self-contained online. While in the 1990s the penetration of personal computers was the principal driver of Internet growth, the wireless phone is now responsible for the bulk of new Internet users being added in the world. IDC estimates that more than 70 percent of users now coming online do so via handheld mobile screens.