Despite Political Climate, Rainbow Technologies Expands into China

Rainbow Technologies (Nasdaq: RNBO), a provider of security systems for the Internet and e-commerce, announced today that it has forged a joint venture with Goldensoft Co. Ltd of Beijing to create a channel for domestic and international companies to market software in China while minimizing the risk of software piracy.

The announcement comes as the Chinese government continues to offer mixed signals on its policies regarding foreign Internet investment.

The new company, Rainbow Goldensoft Co. Ltd, will hold an estimated 80 percent share of China’s software security market. The new entity also plans to provide secure e-commerce for domestic and international business.

Rainbow Technologies, which has provided software security services in China for the past three years, is the majority shareholder in the joint venture. “This venture with Goldensoft will further extend our foothold in one of the world’s most important emerging markets,” said Humphrey Chain, Director of Asia/Pacific Rainbow Technologies.

China Yet To Release Clear Rules

Within the last few weeks, China has given mixed signals on its policies regarding foreign investors in Internet commerce. Over a two week period, Zhang Cunjiang, head of China’s telecommunications bureau with the Ministry of Information Industry, has warned about coming Internet investment restrictions, while also suggesting that China will gradually open up this potentially huge economic sector.

“Those already invested here must bear full responsibility for losses caused by clashes with government policies,” Zhang said last month. “We cannot ignore the disordered situation in the current Internet financing market, which is dominated by foreign investors,” he added.

The Sleeping Giant Is Waking

According to the China Internet Network Information Center (CNNIC), there were four million registered Internet users in China as of June 1999. Industry experts expect that number to double in the next year, and some anticipate it to reach 50 million by 2003.

China has long been viewed as a sleeping consumer giant that is just waiting to wake. With its mammoth population, once China begins purchasing consumer products, it is expected to have a major impact on international trade.

Internet concerns such as Yahoo! are eager to enter China’s market in spite of Beijing’s warning of protectionism, and many Internet companies believe that China’s bluster over international investment is merely posturing and rhetoric.

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