Winners and Losers: Some Implications of China’s Internet Restrictions

Jan 25, 2010

There is more to China’s regulation of the internet than censorship.

In the bad-old days when the Chinese economy was isolated and foreigners were barred from holding RMB (and instead had to use FECs – foreign exchange certificates) Westerners visited the Friendship Stores. These were CCP versions of a department store – clean, brightly lit, well stocked and restricted to “foreign friends” and the Party elite. While the rest of China struggled with shortage and inferior local goods, visitors to the Friendship story had access to a wide range of products – some traditional, and some imported conveniences. But something was always vaguely wrong with the Friendship Store – it was like shopping in a 20-year time warp. You could only buy what bureaucrats decided you should have access to – but it still made sense if there was shortage or structural impediments. When Deng Xiaoping opened China’s economy to the outside world, the Friendship stores folded in the face of normal competition. It seems that the Beijing notion of a properly outfitted shop couldn’t compete with market-driven businesses. For the moment, the Chinese Friendship Net is delivering all the same services and products as the international internet – in some cases even more. But as the two internets develop and diverge, we will return to a situation where commerce in China becomes separate but unequal. Those caught on the wrong side of the digital border will not have access to new media or technology – while a digital Chinese elite will have VIP access to the global Net. The sun is setting on China as a manufacturing center. China’s millions of unemployed grads are more likely to end up at a workstation in an office building than on a production line in a factory. In the short term, China’s fractured web offers the hope of long-term employment contracts at China’s new media firms. But in the mid-term, the fractured web makes China less attractive as a regional business center. It won’t be long before Taipei and Hong Kong start getting second looks as strategic “stand-off platforms” for marketing to and from China. Chinese marketers behind the digital blockade will be the first choice for selling to the second-tier cities, but these people will be ineffective at international online marketing.


Andrew Hupert also blogs at China Solved


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