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As the year progresses, the inherent contradictions within these two mindsets, one that sees the Internet as a powerful tool for economic and social betterment and the other that sees the net as a threat, will begin to clash with increasing regularity. Efforts to control what can and cannot be done or accessed online could begin to impact everyday users and stifle growth and innovation within the China online community and cause growing resentment. These two opposing mind sets have manifested themselves in government policy, action, and public statements since the middle of last year. China has demonstrated an intense and increasing enthusiasm for the Internet, while at the same time attempting to rein in and control those elements it views as contrary to state interests.

China's concerns about computer crimes and the vulnerability of its financial infrastructure to intrusion are very similar to modern countries throughout the world. Yet the threat to the Chinese state goes deeper than the very widespread concerns over financial and other types of computer crime. For China, the Internet and its associated domain, cyberspace, are introducing fundamental new problems with the way the state has dealt with organized dissident activity and public challenges to its authority.

Though the concern about net threat remains, information technology has long been viewed as an important component of grand scheme for modernization of China. IT industry has become a pillar in economic growth in China. The success of China's IT industry and its prospects for future growth are closely linked to measures taken by government.

Policy Support

Technology Transfer

Since 1980 Chinese policy statements have stressed the need to improve existing facilities, to import technology rather than finished goods, and to renovate factories through selective purchase of key technology rather than through purchase of whole plants. This was an unprecedented problem, since China's previous experience with technology transfer, both in the massive Soviet technical-aid program of the 1950s and in the more modest purchases of fertilizer and petrochemical plants in the 1960s and early 1970s, featured large projects that brought in complete plants. In the 1980s much of the technology to be imported was production or process technology, representing better ways of producing items China already manufactured, such as truck transmissions or telephone cables. Such technology was usually the proprietary knowledge of foreign corporations, and China demonstrated an unprecedented willingness to cooperate with such firms. With the explicit aim of promoting technology imports, China made great efforts to attract foreign businesses and foreign capital and permitted joint ventures and even foreign-owned subsidiaries to operate in China. ⁶

Torch Plan.

In 1995, Ministry of Science and Technology (MOST) started the Torch Plan, a high tech development program. Chinese government gives funding to academic institutions and new small companies to commercialize products of academic research, and built 19 software parks across country. ⁷

High-tech zones.

China continues to be firm in its opening-up policy in economic and technological development zones to attract overseas investment, technology and management experiences. In these designated areas, high-tech startups could enjoy five years of significant tax breaks.

Financial Support

Seed money.

Notable seed money has funded IT-related projects and its related companies.

R&D Tax Incentives.

China maintains a number of preferential policies for high-tech investments, including tax holidays and refunds. One of the major Chinese Government taken is promote tax incentives for enterprises in China to develop new technology are tax treatment of research and development (R&D) expense.⁸