Saturday, January 16, 2010

Google's Threat to exit China

On Tuesday, Google announced that it is considering shutting down its Chinese site and closing its China-based offices after hackers attempted to infiltrate the Gmail accounts of human rights activists. The company also said that it would no longer censor its search results in China, a virtual death sentence in China's cyberworld.

On the same day, Baidu, Google's dominant rival in China, saw its Nasdaq stock shoot up $64.01, or 16.6 percent. China's third- and fourth-place search engines, Sina and Sohu, witnessed their stocks increase 4.9 percent and 6.2 percent, respectively.

Google's move was not a brave stand against China's lack of Internet freedom. Instead, it was simply the last and inevitable straw. Google, like Yahoo before it, has been systematically forced out of the market by a Chinese government determined to purge all foreign competition from its Internet industry, which is expected to bring in $8 billion in advertising revenue in the next three years, according to Internet research firm That number is likely to grow quickly as China's Internet saturation is only about 25 percent, compared with more than 75 percent on average in OECD countries such as the United States.

In a country well-known for copying and mass-producing the ideas and products of other countries, from automobiles to movies, a new economic tool has been invented: an insidious, uniquely 21st-century form of protectionism.

Although this week's news has been perhaps the most visible and largest example of China's "firewall protectionism," Google's exit is just the latest in a long line of foreign Internet firms forced to leave the country on the shaky rationale of national security and censorship.

In March 2009, video-sharing site YouTube was permanently blocked by China's firewall. The Chinese version of the site had been quickly gaining market share against homegrown competitors Youku and Tudou. State news agency Xinhua said that the root cause of the blockage was a video showing Tibetans being beaten by zealous police officers. However, Chinese censors had always been able to block specific videos from being shown in China and had no need to shut down the entire site. Now, Youku is the eighth-most popular site in China, while Tudou is the tenth, according to Web-ranking firm Alexa.

Similarly, in July 2009, after the riots between minority Uighurs and Han Chinese in Xinjiang, China blocked Facebook. At the time, Facebook had been quickly becoming popular with young, coastal Chinese and had a fast-growing base of 1 million active monthly users. The reasoning behind the blockage was that Uighur activists were using the site to communicate and organize. However, the entire Internet was shut down in Xinjiang after the riots and was not restored for a significant period. Meanwhile, direct Chinese copies of Facebook, Ren Ren Wang and Kai Xin Wang, have been enjoying enormous success. Now, Ren Ren Wang has 22 million active users and Kai Xin Wang is the 56th-most visited site globally.

Also in the aftermath of the Xinjiang riots, microblogging site Twitter was cut off by the Chinese firewall for similarly dubious reasons. Less than two months later, Chinese Internet giant Sina launched a near identical microblogging service. To further the business-over-politics angle of China's foreign Internet purge, China's wildly popular instant-messaging service QQ removed a censorship filter after users' complaints. Dissidents and riot organizers can now use Chinese versions of Twitter to organize.

Even a seemingly harmless site, like photo-sharing website Flickr, has been blocked in China, while its identical clone Bababian has grown steadily with foreign technology and no foreign competition. Likewise, blog-hosting sites Blogger and WordPress have long been blocked in China. Instead, Chinese netizens use Tianya, the 13th-most popular site in China. Far from being a sanitized land of boring blogs about daily activities, Tianya also hosts China's largest Internet forum, a vitriolic, sensationalized, and hate-filled arena that makes Western gossip sites seem like the Economist.

In the face of an obvious and systematic form of protectionism in perhaps the most important industry for the future, the cheering from many leading American figures for Google's "brave" decision seems strange. If China were attempting to block the import of American tires, instead of American Internet media, would Americans applaud Goodyear and Congress for not putting up a fight against blatant WTO violations?

Firewall protectionism is part of a greater and dangerous trend. China has recently shown that it is willing to protect its own industries at any cost, even to the point of all-out trade war. By pegging its currency to the weak U.S. dollar, it has made Chinese goods artificially cheap. Third World countries are outraged, and some, like Vietnam, have devalued their currencies to be more competitive. Europe and the United States are also thinking of retaliating and have consistently been increasing pressure on China to allow its currency to float. In addition, China has instituted more traditional protectionist measures in the green-tech industry by excluding foreign companies from bidding on several wind turbine projects.

So when media reports that Google's decision is a reaction against China's desperate need to censor the Internet and spy on activists, and not about protectionism, it rings false. In a country where dissidents are routinely jailed for years without fair trials under the dubious charge of "inciting subversion of state power," and poor petitioners from the countryside are routinely thrown into Beijing's horrendous black jails for simply airing grievances, it seems strange that China truly needed to hack into human rights activists' email accounts. A more likely explanation is that it was simply trying to find a way to block the world's biggest Internet giant out of the Chinese market and was searching for the right button to push. As for Google's "threat" to pull out of the country, China will certainly not be begging them to stay.

Article courtesy foreign Policy 

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