OUTSIDE Shaoxing, a textiles town in China's Zhejiang province, the houses are growing taller, even as the farms shrink in significance. The residential buildings are five and six storeys high; the agricultural plots a modest acre or two. Most follow the same eccentric design: their window-frames painted in strong shades of lilac; their gabled roofs topped by silver finials, shaped like miniature versions of Shanghai's Oriental Pearl Tower.

 Jack be nimbleEyevine

Cheap and cheerful is also the operating principle of Haolaiwu Textiles, which sells bright curtains to clients in Germany, Italy and elsewhere in Europe. On the ground floor of the factory, men feed rolls of synthetic fabric through a printing machine, under a pair of strip lights suspended low overhead. Dye fumes thicken the air, as floral designs are heat-pressed into the fabric. Upstairs about 30 young staff work their sewing machines, hemming as the radio hums.

Such modest technologies—machines that sew and print—are still the workhorses of China's industrial revolution, just as they once were for South Korea and Hong Kong. But if its production technology is traditional, Haolaiwu's marketing technology is modish. In 2005 it joined Alibaba.com, an e-business site that matches buyers and suppliers over the web. Within China over 21m businesses use the site to sell or procure parts and materials. Foreign buyers use the English-language version to fish for goods (everything from lawnmowers to folding dog-cages) or goodsmakers in China's teeming shoals. Haolaiwu, one of more than 3.6m registered users, found its first foreign buyer within three months of joining. Since then it has grown from about 20 staff to over 80.

Jack Mao

The Alibaba group's founder and leader is the sharp-featured Jack Ma, a man reporters cannot resist likening to a pixie or an elf. His grotto is on the sixth floor of an office building in the lakeside city of Hangzhou. In celebration of the company's eighth birthday (and Mr Ma's 43rd), the company's foyer is festooned with pink roses, a heart-shaped poster and an invitation to “share love”. Inside, the company monitors how far this sharing has progressed on a bank of screens that chart the ebb and flow of site traffic and the steady spread of e-business across China's map.

“We are lucky the business was not started in Beijing or Shanghai,” says David Wei, head of Alibaba.com. If it had grown up in those cities, he thinks, it might have evolved to serve the sophisticated multinationals nearby. Instead, it has aimed at the kind of small businesses, like Haolaiwu, that cluster around Hangzhou.

Alibaba is not the only Chinese technology firm to find its customers in unfancied places. Huawei became China's leading provider of telecoms equipment pursuing a similar strategy. In China's big cities—which might have been its natural market—it found itself harried by multinational companies such as Ericsson. Its chairman therefore followed Mao's advice for fighting a guerrilla war against well-entrenched incumbents: first occupy the countryside, before encircling the cities. In Heilongjiang province, in the far north-east, it employed over 200 people in the early 1990s, living and working in the towns and small cities where their equipment was sold. The multinationals, by contrast, spared only a handful of people, selling to the province's towns from afar.

Huawei also ventured to inhospitable backwaters outside China. It was in Algeria during its 2003 earthquake and Iraq during its war. In 2006 Huawei's overseas contracts were worth twice as much as its domestic ones. Sales are growing quickly in Africa and the Middle East. In Latin America the company's contract sales more than doubled last year.

But occupying the countryside was only the first part of Mao's strategy. The second was to encircle the cities. Huawei is now making respectable incursions into prosperous markets. It was awarded a bit of British Telecom's recent contract to build its 21st-century network. It also makes the 3G phones that Vodafone sells in southern Europe.

Capitalist re-education

Because Alibaba's members are small enterprises and individuals, some with little experience of the internet, they can need a lot of handholding. “Sometimes people do not even know how to upload pictures,” Mr Wei says. One company floundered because it answered requests for quotations only once every three months. The owner, it turned out, had to wait for his son to return from university at the end of each term to translate for him.

 The People's Online ArmyOnAsia

Alibaba is eager to educate its customers so they can profit from the technology it wants to sell them. It holds sessions of “Alicollege”, teaching the ways of e-business. And for the past two years it has cemented its online following with a big offline gathering, called Alifest. Thousands of small-businessmen travel to Hangzhou to unlock the twin mysteries of computing and commerce in bars and teashops.

Alifest's guests assemble at the Zhejiang Great Hall of the People, where some successful members are invited onstage to share their experiences, as if on a TV chat-show. One woman, a gold ribbon in her hair, gave up her job as a police officer to sell lingerie on taobao.com, Alibaba's consumer-auction site. Outside the hall, a booth sells a cartoon-booklet in which a young man explains to various technophobes that the “net” is not for fishing and the “web” has nothing to do with spiders.

The same province provided Huawei with one of its first customers—a small city neglected by the multinational vendors. Like Alibaba, the company helps its less experienced customers with tasks such as formulating their business plans. At their request, it also moved into making handsets, a sideline for which it is now well known, if only because phones are easier to understand than some of its other offerings, such as Multi-Reach Dense Wavelength Division Multiplexing Solutions.

Even as Alibaba tutors its customers, it must educate itself about their habits and predilections. Of the 25m registered users of its Chinese and international site, only about 300,000 pay anything for the privilege. They are charged an annual fee for a more prominent listing, rather than paying per transaction or per click. This is because a transaction fee, Alibaba thinks, would simply encourage companies to do their deals off-site. And if it asked a supplier to pay for every click on its webpage, the company's rivals might click maliciously to raise its marketing costs.

Last month Alibaba priced a public offering of shares in its two business-to-business sites on the Hong Kong Stock Exchange. Investors seemed confident that it can turn its loyal members into lucrative customers. But the firm's profits have yet to match its profile. The benefits of technology have a perfidious habit of flowing to the users not the inventors. Outside the Haolaiwu factory wall in Shaoxing, another four-storey home is being built. Farmers live there, the factory's manager says, but “they don't do farming anymore; only business. They're all millionaires.”