China's Linux Gamble

By Maria Trombly

September 5, 2005

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On virtually any street in Shanghai or Beijing, you can buy a Hollywood DVD or hot new CD for $1 or less. Vendors peddle Microsoft Office, Windows XP, and every other popular software applications out of cardboard boxes jammed full of discs. Entire markets in the major cities are dedicated to selling knock-offs of designer goods for pennies on the dollar. If you're interested in high finance, $200,000 worth of annual derivatives data is available from online vendors for $500 a year.

According to Jones Day intellectual property rights lawyer Xiang Wang, the Chinese case law on many aspects of intellectual property rights is not yet well developed, and cases can take years to settle. The Business Software Alliance—a trade group including software giants such as Microsoft, Apple, and IBM—alleges that 90 percent of all software used in China is pirated and that software vendors suffered $3.5 billion in losses last year due to Chinese piracy.

The Chinese government has started to realize that this is an obstacle to economic development. And if anybody pays attention to economic development these days, it's China. Now, China is beginning to look at open source software as a way out of the intellectual property quagmire that doesn't involve paying high costs.

Linux is a keystone in this strategy.

In the past few months, the state-owned Industrial and Commercial Bank of China (ICBC) decided to roll out Linux in all of its 20,000 retail branches. The news was trumpeted by Turbolinux, the Tokyo-based vendor that won the contract. ICBC has 100 million customer accounts, and 8 million corporate accounts. It is the largest bank in China, and will buy an unrestricted user license and integrate Linux throughout its entire banking operations network over the next three years. It's the largest Linux deployment to date in the Chinese financial industry.

The bank will use Linux as the basis for its web server and a new terminal platform, and Turbolinux will provide three years of upgrade availability, virus protection, and maintenance service support.

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