Cisco Announces $16B China Expansion

Cisco Announces $16B China Expansion

Network gear maker Cisco Systems Inc. unveiled a multiyear, $16 billion expansion in China on Thursday with investments in manufacturing, venture capital and education.

"We're going to the next chapter for Cisco in China," John Chambers, Cisco's chief executive, said at a news conference.

The ventures include an agreement with Alibaba Group, China's biggest online commerce company, to explore developing business services for small and medium-size companies, Chambers said.

Other initiatives include doubling Cisco's manufacturing in China over the next three to five years, a possible $100 million (70 million euros) venture capital partnership with a government bank and more support for technology education. The company says its manufacturing and purchasing in China already support some 50,000 jobs.

Cisco, based in San Jose, California, is the world's largest network equipment maker, with more than 61,500 employees and $34.9 billion in revenue in the latest fiscal year.

China has the world's second-largest population of Web users after the United States, with 162 million people online. The communist government encourages Internet use for business and education but tries to block access to material deemed subversive or pornographic. Authorities stepped up censorship ahead of a key Communist Party congress last month, shutting down or blocking hundreds more sites.

Cisco has been criticized by activists who say it sells Beijing equipment that might be used in official efforts to monitor and control Internet use.

Chambers defended Cisco's dealings in China, saying it does not provide "unique capabilities" to any government, including that of the United States.

"I think if you really look at the capabilities of the Internet, it will weigh in in many, many positive ways," Chambers said. "And will there be some disadvantages along the way? The answer is yes. But the overall benefits are so positive," he said.

"Secondly, one thing tech companies cannot do, in my opinion, is involve themselves in politics in a country," he added.

Cisco and Alibaba, Yahoo Inc.'s local partner, agreed to explore cooperating on Web-based business services for small and medium-size companies and expanding Alibaba's overseas market, the companies said.

Chambers and Alibaba founder Jack Ma watched as executives of their companies signed a memorandum of understanding on the venture.

"We feel Cisco without a doubt is our most important partner for growth," Ma told reporters. "We are looking at a long-term partnership — five years, 10 years or even longer."

Cisco agreed earlier to invest $17 million in Alibaba as part of the Chinese company's planned initial public offering in Hong Kong that is expected to raise up to $1.5 billion (1 billion euros). Alibaba says it will use the money to expand abroad.

In other deals, Chambers said Cisco and the government-owned China Development Bank will explore jointly providing capital and expertise for Chinese businesses in fields including information technology, health care and communications.

In addition, Chambers said Cisco and China's Education Ministry will open 300 centers at vocational colleges to train students in networking technologies, adding to 200 centers already operating that have taught some 90,000 people. The company said it will donate equipment worth $6 million.

"Our commitment is to try to train 100,000 students over the next three years," Chambers said.