Y2K - China Makes Progress But Many Major Firms Behind 8-12-99

BEIJING (Reuters) - China has made good progress making air travel, banking and telecommunications safe from the millennium bug, but thousands of state-owned firms are still fumbling for solutions, a key official said on Wednesday.

The official also predicted rampant lawsuits by angry firms seeking to blame computer companies or business partners for lost revenues if the bug strikes.

"We still have major shortfalls in terms of addressing Y2K, and this is particularly true for enterprises," Zhang Qi, the official in charge of China's Y2K preparation, told a conference on the issue.

Zhang, head of the Ministry of Information Industry's information technology department, said several sectors such as finance, telecommunications and key enterprises under the supervision of the State Council, or cabinet, were doing well.

"In accordance with the instructions of the State Council, the insurance, banking, securities, seismatic and telecommunications industries are working on contingency plans," she said.

"Aviation is also one of the sectors that has best dealt with Y2K issues," she said.

Power failures, potentially the most damaging incarnation of the millennium bug, were unlikely, she said.

"We have not found any serious problems that would cause suspension of service," she said of the power industry.

Analysts have predicted temporary power shortages and telecommunications breakdowns.

China's military was tackling the millennium bug internally, and Zhang said she had no details.

Metallurgical and oil firms under the cabinet's State Economic and Trade Commission also "have done good work", she said, and pointed to Shanghai's Baoshan Iron & Steel as a posterboy of Y2K readiness.

But compliance in the rest of the country was patchy, with thousands of companies still in the dark.

Many companies "don't have a clear idea how to address Y2K", she said. "Little importance has been attached to embedded systems, especially at large-scale, state-owned enterprises."

Embedded systems refer to computer chips lurking in stand-alone electronics, from fax machines and elevators to equipment at power plants, airports and water treatment plants.

Many of those chips are date-sensitive and could go haywire when clocks strike midnight on December 31.

Analysts say such chips are a hidden demon largely overlooked by technicians seeking to kill the bug in computer networks and other obvious habitats.

"It's very, very late" to be tackling embedded systems bugs, said William Holmes, an expert on the issue for Solutions Plus, a U.S.-based Y2K readiness consultancy. "Really the best strategy is to go and buy a new one."

Zhang said a complete solution in time for the new millennium would be impossible, but that the risk posed to China was comparable to that of other nations.

"On December 31, I don't think there'll be a country in the world who dares say it wiped out Y2K," she said. "This is a huge country. We can only hope to minimise the losses to the greatest degree possible."

But Zhang said lawsuits would be unavoidable as firms blamed their troubles on software makers or companies who disrupt the supply chain.

"People will be asking 'who's responsible?'," she said. Lawsuits "are not a question of maybe, but an absolute certainty", she said.

Zhang said she planned to go to the United States for ideas on legislation, but U.S. officials said they knew of no bills in Congress dealing with Y2K litigation.

-- Andy (2000EOD@prodigy.net), August 12, 1999