Online piracy could stifle innovation by the country's own dynamic Internet industry, the chief executive of one of China's oldest Web companies has suggested. "China needs to clean up piracy on the Internet or face a lag in innovation," Charles Zhang, chief executive of said at the China Internet conference Beijing.

"The Internet in China has reached an intense and more developed stage," he said. "Protecting intellectual property is becoming even more important ... solving piracy on the Internet will help the piracy situation in China."

In September, Sohu was one of several companies that led the formation of an alliance with 110 Internet video copyright owners set on tackling Internet piracy in China. Zhang also blamed piracy for hindering development of a vibrant movie industry in China, where illegal CDs are usually available within days of a movie's theatrical release for the equivalent of less than $2.

"If we don't solve the problem of piracy, no one will buy movies or watch TV shows," Zhang said. "Everyone will watch it on the Internet, and this will pull down the innovation streak in China."

China is one of the world's fastest-growing film markets, but it has also been one of the toughest for foreign film makers because of piracy and strict limits on the number of films they can export to China each year.