Page 348 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
remained steady and rapid growth; profit growth its dependence on pirated software are becoming
accelerated month by month, but the export situation clear. Researchers believe large numbers of computers
is still in the doldrums. From the regional perspective, running unlicensed versions of Windows probably
some provinces and cities in central and western contributed to the reach of the so-called ransomware
regions continued to grow rapidly. Software business attack, according to the Finnish cybersecurity company
income is steady, but the growth rate has dropped F-Secure. Users often miss major security patches
year-on-year (MIIT, Software). China’s technology, media that could ward off assaults because pirated software
and telecommunications (TMT) overseas mergers and usually is not registered with the developer. It is not
acquisitions (M&A) market is expected to grow steadily clear whether every company or institution in China
in 2017, according to the latest report by Deloitte. China affected by the ransomware was using pirated software.
served as an active sponsor country for deals in M&A in But universities, local governments and state-run
TMT from 2012 to 2016, with a compound annual growth companies probably have networks that depend on
rate, in terms of overseas M&A numbers, of 27 percent, unlicensed copies of Windows. Microsoft and other
far exceeding North America, Europe and other regions. Western companies have complained for years about
Deloitte attributed the increase to a slowdown in the widespread use of pirated software in a number of
global economy, desire for fresh funds from small- and countries that were hit particularly hard by the attack. A
middle-sized enterprises in developed countries, as well trade study conducted by BSA Software Alliance found
as China’s Belt and Road Initiative. The transactions were that 70 percent of software installed on computers in
mainly in the technology subsector, which accounted for China was not properly licensed in 2015. Zhu Huanjie,
more than half of the entire TMT industry in 2016. “This who is studying network engineering in Hangzhou,
means China is showing a growing interest in overseas China, blamed a number of ills for the spread of
advanced technology,” said Keat Lee, a Deloitte China the attack, including the lack of security on school
consulting partner. “Demand for foreign technology networks. He said piracy was also a factor. Many users,
and new growth incentives in overseas markets made he said, did not update their software to get the latest
China a major driving force in the TMT M&A market,” said safety features because of a fear that their copies would
William Chou, a Deloitte China TMT industry managing be damaged or locked, while universities offered only
partner. Deloitte expects China’s pace in overseas M&A older, pirated versions (Mozur).
investment to accelerate in the technology sector in
2017 and the total number of M&A transactions to grow “Most of the schools are now all using pirate
steadily as Chinese tech companies try to acquire foreign software, including operation system and professional
high-tech and realize their globalization strategy. In the software,” Zhu said. “In China, the Windows that most
global market, the number of M&A transactions in the people are using is still pirated. This is just the way it
TMT industry registered a compound annual growth is.” Using copied software and other media has become
of 7 percent between 2012 and 2016, with the trading embedded in China’s computing culture, said Thomas
volume hitting a five-year record high to $440 million Parenty, Founder of Archefact Group, which advises
in 2016. The report also highlighted challenges in companies on cybersecurity. Some people are under
TMT cross-border M&A, including various political and the impression that using pirated goods in China is
legal restrictions from governments, operational and legal, while others are simply not used to paying for
financial risks brought by high premium M&A, as well software, he said. Parenty cited an instance when he was
as post-merger management problems. It said better working at the Beijing office of an American client. “It
communication would ensure a smooth operation for turned out every single one of their computers, all the
companies during transition periods and an effective software, was bootlegged,” he said. The twin problems
integration plan would help with such challenges (Yu). of malware and the unwillingness to pay for software are
so ingrained that they have led to an alternative type of
China is home to the world’s largest group of security company in China. Qihoo 360 built its business
internet users, a booming online technology scene by offering free security programs; it makes money
and widespread software piracy that encapsulates its from advertising. The issue has led to political battles
determination to play by its own set of digital rules, between Microsoft and the Chinese government. In a
but as the country scrambled to recover from a global bid to get more organizations in China to pay for their
hacking assault that hit its companies, government software, Microsoft has tried education and outreach. It
agencies and universities especially hard, the risks of has also stopped distributing Windows on discs, which
348
remained steady and rapid growth; profit growth its dependence on pirated software are becoming
accelerated month by month, but the export situation clear. Researchers believe large numbers of computers
is still in the doldrums. From the regional perspective, running unlicensed versions of Windows probably
some provinces and cities in central and western contributed to the reach of the so-called ransomware
regions continued to grow rapidly. Software business attack, according to the Finnish cybersecurity company
income is steady, but the growth rate has dropped F-Secure. Users often miss major security patches
year-on-year (MIIT, Software). China’s technology, media that could ward off assaults because pirated software
and telecommunications (TMT) overseas mergers and usually is not registered with the developer. It is not
acquisitions (M&A) market is expected to grow steadily clear whether every company or institution in China
in 2017, according to the latest report by Deloitte. China affected by the ransomware was using pirated software.
served as an active sponsor country for deals in M&A in But universities, local governments and state-run
TMT from 2012 to 2016, with a compound annual growth companies probably have networks that depend on
rate, in terms of overseas M&A numbers, of 27 percent, unlicensed copies of Windows. Microsoft and other
far exceeding North America, Europe and other regions. Western companies have complained for years about
Deloitte attributed the increase to a slowdown in the widespread use of pirated software in a number of
global economy, desire for fresh funds from small- and countries that were hit particularly hard by the attack. A
middle-sized enterprises in developed countries, as well trade study conducted by BSA Software Alliance found
as China’s Belt and Road Initiative. The transactions were that 70 percent of software installed on computers in
mainly in the technology subsector, which accounted for China was not properly licensed in 2015. Zhu Huanjie,
more than half of the entire TMT industry in 2016. “This who is studying network engineering in Hangzhou,
means China is showing a growing interest in overseas China, blamed a number of ills for the spread of
advanced technology,” said Keat Lee, a Deloitte China the attack, including the lack of security on school
consulting partner. “Demand for foreign technology networks. He said piracy was also a factor. Many users,
and new growth incentives in overseas markets made he said, did not update their software to get the latest
China a major driving force in the TMT M&A market,” said safety features because of a fear that their copies would
William Chou, a Deloitte China TMT industry managing be damaged or locked, while universities offered only
partner. Deloitte expects China’s pace in overseas M&A older, pirated versions (Mozur).
investment to accelerate in the technology sector in
2017 and the total number of M&A transactions to grow “Most of the schools are now all using pirate
steadily as Chinese tech companies try to acquire foreign software, including operation system and professional
high-tech and realize their globalization strategy. In the software,” Zhu said. “In China, the Windows that most
global market, the number of M&A transactions in the people are using is still pirated. This is just the way it
TMT industry registered a compound annual growth is.” Using copied software and other media has become
of 7 percent between 2012 and 2016, with the trading embedded in China’s computing culture, said Thomas
volume hitting a five-year record high to $440 million Parenty, Founder of Archefact Group, which advises
in 2016. The report also highlighted challenges in companies on cybersecurity. Some people are under
TMT cross-border M&A, including various political and the impression that using pirated goods in China is
legal restrictions from governments, operational and legal, while others are simply not used to paying for
financial risks brought by high premium M&A, as well software, he said. Parenty cited an instance when he was
as post-merger management problems. It said better working at the Beijing office of an American client. “It
communication would ensure a smooth operation for turned out every single one of their computers, all the
companies during transition periods and an effective software, was bootlegged,” he said. The twin problems
integration plan would help with such challenges (Yu). of malware and the unwillingness to pay for software are
so ingrained that they have led to an alternative type of
China is home to the world’s largest group of security company in China. Qihoo 360 built its business
internet users, a booming online technology scene by offering free security programs; it makes money
and widespread software piracy that encapsulates its from advertising. The issue has led to political battles
determination to play by its own set of digital rules, between Microsoft and the Chinese government. In a
but as the country scrambled to recover from a global bid to get more organizations in China to pay for their
hacking assault that hit its companies, government software, Microsoft has tried education and outreach. It
agencies and universities especially hard, the risks of has also stopped distributing Windows on discs, which
348
