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Annual Review

The dispute between Qihoo 360 and Tencent triggered wide discussions on the openness of the Internet, shifting the pattern from competition to both competition and cooperation. China's leading Internet companies such as Baidu, Tencent and Sina successively announced their open platform strategy, and a new open form thus took shape. Relying on their tremendous user base and platform advantage, Internet giants recruited application developers to their platforms, which was a win-win move since platforms provided user resources for applications and applications delivered good services to platforms. "Coexistence and win-win" and "ecosphere" became the buzzwords of the year.

The burgeoning microblog and WeChat services ushered in the age of instant dissemination, and became a new way of social mobilization; group buying websites burned substantial cash to growth; and Internet financial products started to go on the market. A series of emerging industries set to be hotpots in the upcoming years began to sprout in this year. "Social", "Local" and "Mobile" become the new directions of Internet marketing the Internet started to influence offline society.

In 2011, third-party payment licenses were granted for the first time by Chinese authorities, signifying that the online payment industry, the basis of e-commerce, officially became legal and will be subject to standard administration in the future. In the process of payment company registration, review and licensing, the authorities began to give attention to the VIE structure (Variable Interest Entities) of Internet companies.

The password breach incident at the end of 2011 threw a shadow on cyber security. In this incident, a mass of data of CSDN, Tianya, YY and other Internet products were confirmed to get leaked. As many netizens were accustomed to using the same e-mail address and password for different websites, the breach had exerted far-reaching impacts, arousing netizens' attention to data security of websites.

By the end of 2011, China had 513 million Internet users, of which the number of mobile phone Internet users reached 356 million.

According to data from the Ministry of Industry and Information Technology (MIIT), by the end of 2011, there were 128 million 3G users in China, an increase of 81.37 million, and the number of 3G base stations reached 814,000. In addition, the three operators (China Telecom, China Unicom and China Mobile) had accelerated the construction of Wireless Local Area Networks (WLAN). By the end of 2011, more than three million of wireless access points (AP) had been deployed across China.

Key Events

2011Internet companies launched

In 2011, domestic Internet companies brought a halt to disputes, and started to seek different development paths. They experimented with "Open Platforms" by starting with game applications, and established the development strategy centered on "Open Platforms". "Platform Ecosphere" thus became a buzzword of the year.

In 2011, a multitude of domestic Internet companies launched open platforms and announced their open platform strategies, changing the original operation mode and shifting the competition pattern to competition and cooperation. With the rapid development of mobile terminals, the Open Mobile Internet Alliance (OMIA) was established on June 18, 2011, bringing together Internet giants such as Baidu, Sina, Tencent, Sohu and NetEase, as well as upstream and downstream chip and operating system providers, terminal makers, and online counseling companies. "Open" had become a consensus in the Internet  industry.

Jan.21Tencent lunched WeChat on January 21

Instant messaging software for mobile devices cropped up in 2011. On January 21, Tencent launched its WeChat for iPhone, and on April 11, Shanda Games Limited rolled out "Youni". Coupled with the predecessors like Mi Talk and MOMO, they had quickly fueled the mobile instant messaging software market. Operators, soon aware of the shock instant messaging would bring to basic phone call and short messaging businesses, were also involved in the battle for users. China Unicom launched its instant messaging product "Wo You" on August 5, China Mobile released mobile voice communication product "Fei Liao" on September 28, and China Telecom offered its counterpart "Yi Liao" on October 18. In fact, China Mobile had launched its mobile instant messaging product "Fetion" as early as in 2007, which, however, had drawn tepid response on the market.

Relying on the tremendous user basis of QQ, WeChat had achieved rapid growth, and its users had exceeded 50 million by December 9, 2011. The service only supported texts at the outset, and the voice information feature was added in version 2.0 released on May 20, basically shaping the product an "intercom".

Feb.8Weibo helped save abducted child on February 8

During the Spring Festival of 2011, Peng Gaofeng found his abducted son in Hubei according to the information provided by netizens. Peng's son, Peng Wenle, was taken away three years ago, and Peng had since then tried every means to find him. Deng Fei, initiator of the "crackdown on abduction via microblog" project, had posted information about the missing child many times. On February 1, 2011, a netizens in Pizhou, Hubei, found a child look so much like Peng Wenle that he contacted Peng Gaofeng immediately. After looking at the photo, Peng Gaofeng confirmed the child was indeed Peng Wenle, so he called the police. On February 8, the police successfully rescued Peng Wenle.

In this case, the parent posted his child's information on the microblog platform, and thus got assistance from all the netizens, expanding the scale of search. Such a mode is similar to the "milk carton" campaign that derived from the United States in the 1980s, i.e., picturing missing child on the side of a milk carton. Since microblogging went viral, non-governmental forces such as Deng Fei have made use of the advantage of microblog platforms to release information on lost children, and motivated all the netizens to help track down missing children. On May 25, 2012, Deng Fei, Xue Manzi and Hua Nan, along with other well-known microbloggers, initiated the "fund for crackdown on abduction via microblog", in a move to arouse the public awareness of child abduction.

Yu Jianrong, professor of the Rural Development Institute of the Chinese Academy of Social Sciences, launched the microblog-based campaign on January 25, 2011, calling on all netizens to take photos of child beggars and post them online via mobile phones in order to help find missing children. The campaign drew lots of responses from netizens. Just ten days since it was launched, more than 1,000 netizens had taken photos of child beggars and posted them online. Different from the earlier case of Peng Wenle, this campaign later triggered disputes over the privacy of beggars.

Feb.22"Shaji mode" seminar was held in Beijing on February 22

On February 22, the Center for Informatization Study and Ali Research jointly held the "Shaji mode of rural e-commerce" seminar in Beijing. At the seminar, the "Shaji mode" investigation report was released, bringing up a new method to develop rural e-commerce.

Named after Shaji Town of Jiangsu Province, the "Shaji mode" represents a development concept of "Promoting industrialization via informationalization , and advancing informationization with industrialization". Through the "Network + Company + Rural households" trilateral cooperation, the "Shaji mode" allows farmers to directly sell their products online and make full use of market information for their production. On this basis, some rural households had founded their own companies, upgrading household-based businesses into economy of scale and also driving the development of relevant industries such as the courier industry.

Huang Hao, Party Secretary of Shaji Town, introduced that "Shaji Town now has 16 courier service companies. The delivery charges totaled nearly RMB 40 million in 2010, and online sales grew from RMB 100 million in 2009 to more than RMB 300 million in 2010".

May.4The Cyberspace Administration of China was set up on May 4

With the approval of the State Council, the General Office of the State Council announced the establishment of the Cyberspace Administration of China on May 4, 2011. Wang Chen would serve as the Director of the Office, which is composed of the Online News and Communications Administration Bureau, Online News Coordination Bureau, and Internet News Research Center. The main responsibilities of the Office are to: implement policies on online information dissemination and advance the legal system building in this regard; guide, coordinate and supervise relevant departments to strengthen online information content management, and investigate and handle illegal websites according to law.

May.18The first batch of third-party payment licenses were granted on May 18

On May 18, the People's Bank of China(PBC) granted the first batch of 27 third-party payment licenses ("non-financial institutions payment business license"). In August, Tencent, Alibaba and Ping An Insurance(Group) co-established the Shanghai Lujiazui International Financial Asset Exchange Co., Ltd., in a move to test the water of Internet finance.

The online payment business appeared in China in the late 1990s. In 1997, China Merchants Bank(CMB) launched its online banking business "All in One Net", followed by Bank of China (March 1998), China Construction Bank (April 1999) and Industrial and Commercial Bank of China (August 1998). Online banking has simplified bank payment process and boosted the development of B2B, B2C and other e-commerce services. Non-banking third-party payment platforms such as Alipay (launched by Alibaba) and Tenpay (launched by Tencent) also flourished. According to data from iResearch, China's third-party payment transactions amounted to RMB 1,010.5 billion in 2010, of which Alipay and Tenpay together occupied a market share of more than 70%.

It took six years before the first batch of third-party payment licenses were granted. In October 2005, the People's Bank of China(PBC) issued the Guidelines on Online-Payment Business, setting the rules for the first time to regulate online payments. In October of the same year, PBC released the Administrative Measures for Payment and Clearing Organizations (draft) to solicit opinions from different sectors of the society. On June 22, 2010, PBC officially circulated the Administrative Measures for Payment Services of Non-financial Institutions, legalizing the status of non-financial institutions. In April 2009, the preparatory meeting for the Payment & Clearing Association of China (PCAC) was held, and after two years of preparations, the PCAC was officially established with the approval of the Ministry of Civil Affairs, signifying that the payment industry has since been subject to state regulation as a formal industry. In April 2009, PBC started to register payment enterprises and launched the procedure for introducing third-party payment licenses. Among the 300-plus third-party companies in China, about 130 registered at PBC. In December 2010, 17 enterprises were shortlisted for the first batch of third-party payment licenses, and on May 18, 2011, licenses were official issued.

Jun.12The online ticket booking system of "" was launched on June 12

The online train ticket booking system of "" was launched on June 12, 2011, starting to offer online ticket booking services for Beijing-Tianjin intercity high-speed railways on a pilot basis. Online ticket booking services were available for all railways across the country during the Spring Festival, indicating that China's railways have entered the age of e-commerce.

On February 19, 2011, the website of China Railway Customer Service Center ("") was put into trial operation. "12306" was the national customer service hotline of China’s railways. The website was constructed jointly by TAIJI Computer Corporation Limited and Tsinghua Tongfang under the leadership of China Academy of Railway Sciences(CARS), the Ministry of Railways.

Shortly after it was launched, the website encountered various technical problems. It suffered from a system crash in June 2011, and broke down twice in three days in December 2011. To address the pressure caused by tremendous amounts of user clicks in short time, the website was upgraded several times, and the ticket release mechanism of the railway system was also adjusted. According to data released by Alexa, a professional Internet analysis company, on February 12, 2012, visitors of "" accounted for 0.902% of the total number of the global Internet users in seven days, with as many as one billion clicks every day.

Jul.23Weibo scoop Wenzhou bullet train crash on July 23

At 20:38, July 23, 2011, a high-speed train D301 traveling from Beijing South to Fuzhou rear-ended D3115, another high-speed train heading from Hangzhou for Fuzhou South. The two trains derailed each other, and four cars fell off the viaduct, killing 40 people. The first piece of information about the accident appeared on Sina Weibo, and the entire process of the emergency response operation was "broadcast live" on the microblogging platform, which shaped public opinions about the collision.

The immediacy of microblogging was greatly highlighted in this case. Just four minutes after two trains collided, a passenger, whose screen name was "Yuan Xiaoyuan", posted the first microblog on Sina Weibo, two hours ahead of traditional media reports. Lots of more microblogs on the accident later spread the Internet, including contents such as the accident site, passenger search, rescue information, and discussions about the responsibilities for the tragedy. The microblogging platform became a main source of information and a place for discussions about the accident.

The inappropriate words of officials soon brought ridicule from netizens. At a press conference on the evening of July 24, Wang Yongping, a spokesman of the Ministry of Railways, responded to the skeptics about the buried train cars by saying "whether or not you believe (this explanation), I believe it". This indiscreet reply immediately went viral, and led to serious negative influences.

Oct.10New rules of Taobao Mall on October 10 dissatisfied small and mid-sized sellers

On October 10, 2011, Taobao Mall issued the Notice on the Renewal of Seller Contracts and Adjustment of Rules in 2012, announcing to upgrading the seller management system. According to the Notice, the technical service fees would increase from RMB 6,000 a year to RMB 50,000 and RMB 100,000 a year, and the deposit from RMB 10,000 to RMB 50,000, RMB 100,000 and RMB 150,000. These measures heightened the threshold to Taobao Mall, significantly increased the operating cost of small and mid-sized sellers, and might force some sellers to retreat from Taobao Mall to taobao .

Upon its issuance, the Notice aroused strong opposition from small and mid-sized sellers. From October 10, 2011, thousands of sellers gathered on Channel 34158 of the YY Platform and established the "Anti-Taobao Alliance". At 21:00, October 11, they launched malicious operations targeting some big sellers of Taobao Mall, placing orders, giving negative comments and refusing to pay. It was alleged that as many as 7,000 people took part in the attacks. Big sellers under attack included Hstyle, OSA, Qigege and Uniqlo, among others. By 2:00 AM, October 12, the number of refunded orders had reached 19,420 for OSA in the past 30 days, 13,985 for Hstyle and 4,695 for Qigege. The shop owner of Hstyle said that "due to the substantial malicious attacks, Hstyle had to pull all items off the shelves. The loss on October 11 alone accounted for 30% of the usual turnover". At 11:00 AM, October 12, after attacking the seven big sellers on Taobao Mall, the Anti-Taobao Alliance set eye on and . The attacks continued until October 15, and at one time there were sellers protesting with banners in the vicinity of Taobao Headquarters in Hangzhou. At a press conference on October 15, officials from the Department of Electronic Commerce and Informatization of the Ministry of Commerce gave high attention to the incident, requesting relevant sides to handle it properly from the standpoint of stabilizing prices and supporting small and micro-businesses. Jack Ma, a founder of Alibaba, then held a press conference announcing to put off the new rules. In a statement on October 18, the "Anti-Taobao Alliance" said they were not satisfied about the five new measures, but promised not to organize attacks on the Taobao Mall.

Oct.8KPCB Internet Trends 2011 was released on October 8

At the Web 2.0 Summit on October 8, Mary Meeker, a partner of the international venture capital firm KPCB, presented the 2011 Internet Trends According to the report, among the world’s top 25 listed Internet companies, six were from China and 14 from the United States, indicating that China and United States were dominating the global Internet community. The report also points out that in the past three years (2007 to 2010), China's Internet users have increased the most in the world, with 34% of its population going on line.

In the same year, the 39 listed Internet companies of China raked in total revenues of USD 15.44 billion and had a combined market value of USD 127.28 billion. China's Internet industry has grown in pace with the country's overall strength, and the growth of the national economy has provided a solid foundation for the development of the Internet industry. With its late-development advantage emerging, China has become a world leader in the Internet industry.

Nov.9 NDRC disclosed broadband investigation information on November 9

In an exclusive interview with the CCTV's News 30' program on November 9, Li Qing, Deputy Director-General of the Price Supervision and Anti-Monopoly Bureau of the National Development and Reform Commission (NDRC), disclosed information about the price monopoly investigation on China Telecom and China Unicom. The investigation was intended to find, in the aspects of broadband access and inter-network charges, whether the two operators took advantage of their market dominance to deter other operators from entering the market. It was the first anti-monopoly investigation involving large-sized enterprises since the Anti-Monopoly Law of the People's Republic of China took effect in 2008.

In late April, 2011, the Price Supervision and Anti-Monopoly Bureau of the NDRC issued the notice concerning the investigation on China Telecom and China Unicom. In June, the NDRC released preliminary investigation conclusions, affirming that the two companies abused their market dominance in certain fields and would be punished according to 1%~10% of their total broadband income, or billions of yuan each. The two companies then submitted feedbacks defending themselves. On October 17, the NDRC solicited opinions from the Legislative Affairs Office of the State Council, the Supreme People's Court and the Ministry of Industry and Information Technology (MIIT). The authorities voiced divided pinions, but basically agreed that caution should be exercised since it was a significant matter and the evidence was still insufficient. Officials from the NDRC said that at the meeting, the relevant program would be submitted to the State Council after soliciting opinions from the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), MIIT and other departments. On the noon of November 9, before the NDRC started to seek opinions from relevant departments and enterprises, Li Qing disclosed the investigation information on CCTV.

Dec.16Regulations on real-name registration for microblog users were released on December 16

On December 16, the Beijing Municipal Regulations on the Administration of Microblogging Services was promulgated, which was jointly formulated by the Information Office of Beijing Municipal People's Government, Beijing Municipal Public Security Bureau, Beijing Communications Administration and Cyberspace Administration of Beijing. According to the document, microblog uses must register with authentic personal information in order to be allowed to post contents on microblogging platforms. Guangzhou and other cities followed suit. Beijing Cyberspace Administration stipulated that the deadline for real-name registration shall be March 16, 2012, and after that, non-real-name microblog users could only view without being allowed to post contents.

Following the exponential growth of microblog users in 2010, microblogging services further advanced in 2011, with opinions increasingly complicated on microblog platforms. Social events such as the wealth flaunting of Guo Meimei and the Wenzhou bullet train collision drew wide attention, and online opinions started to play a role in overseeing the performance of governments. In addition, because of different opinions and standpoints, online communities became divided, "microblogging fights" among individual netizens occurred from time to time, and some online confrontations even turned into real-life fights. For example, in August, Fang Zhouzi posted a series of microblogs accusing Li Chengpeng of real estate endorsements; in October, two netizens with the screen name of "Wu Fatian" and "Wuyue Sanren" claimed to resolve their online disputes "face to face".

The real-name registration system was introduced against this backdrop, with a view to regulating microblogging services and maintaining the healthy development of the Internet. After the policy was released, the share price of Sina plunged more than 10% before it edged up.

Dec.21Data on CSDN's 6 million users were leaked on December 21

On December 21, a compressed file named "CSDNdata.rar" was  dissimilated among QQ groups for IT specialists and soon spread on the entire Internet, triggering great panic among users. The file contained CSDN's user information before September 2010, involving more than 6 million registered e-mail addresses and passwords. On December 25, a data package containing information of 40 million Tianya users appeared on the Internet. A subsequent screenshot showed that user data of a dozen of mainstream websites had been breached, and later it was alleged that data of Alipay, dangdang and 360buy were also leaked. On December 29, the breach incident culminated in the online rumor that the account numbers, names and passwords of 70 million customers of the Bank of Communications and 35 million customers of China Minsheng Bank were leaked. The incident of user information leakage drew high attention from netizens to cybersecurity and information security.

On December 28, the MIIT announced that the corresponding contingency plan had been initiated. Cyberspace Administration of China said in a statement that in this incident, only three websites (CSDN, Tianya and YY) were finally affirmed to suffer from data breach. The user information of YY was leaked by its employee who took advantage of their position, and the data leakage of the other two websites was caused by hacker invasions before 2009. As of January 2012, the police had investigated and handled nine cases of data invasion, stealing and selling and three cases of fabricating and hyping information breach, put four persons into criminal custody, and imposed public security punishment on eight persons.