Chinese Internet Population Grows, as does U.S. Frustration

According to recent reports, there are now an estimated 457 million internet users in the People’s Republic of China.  Not to point out the obvious, but considering that the entire population of the United States (online or not) is a mere 312 million… that’s a pretty big market, to say the least. 

Wow, that sounds like a great opportunity for U.S. tech firms, doesn’t it?

Not so fast.  Due to a string of strict internet controls implemented by China’s government, U.S. tech firms have found that capitalizing on China’s expansive online market isn’t so easy. 

Huh?

China’s government initially implemented internet restrictions in order to prevent its domestic internet users from accessing pornography and other forms of vulgar and “sensitive” information.  However, as the scope of “sensitive” internet content has grown in recent years, so has the severity of China’s internet controls, perhaps to oppressive levels.  That is, in addition to strict controls over sexually-explicit material, the restrictions have spanned to regulate media reports, social networking applications and any other forms of web-based technology that may facilitate the discussion of topics found controversial or objectionable by the government.

As a result, popular websites such as Facebook, Myspace, Youtube, Twitter, Blogger, and Wikipedia have become inaccessible in mainland China.  In addition, Google (the world’s most popular search engine) has been forced to alter its Chinese search results in order to remain operational in the PRC.

And then?

The predominant U.S. perspective on China’s strict internet controls is that the policies are essentially protectionist, and restrictive to free trade.  As stated by David Drummond, Google’s Chief Legal Officer:

“Internet censorship is really a trade barrier, and is operating that way for U.S. companies that are trying to do business abroad.  If this were happening with physical trade and manufactured goods, we’d all be saying this violates trade agreements pretty fundamentally…  If you want to be part of the free trade community, you are going to have to find a way for the internet to be open.”  

Some even argue that the motivations behind China’s strict internet controls are more economic than social; suggesting that China’s fight against pornography and “sensitive” information is merely a façade for China’s true (and arguably rightful) interests in promoting “indigenous innovation” in high-tech industries, such as software development.  In other words, by eliminating reliance on various foreign technological innovations, it is suspected that China’s true objective in censoring the internet is to spur the growth of its domestic technology sector, perhaps to eventually compete in the global market. 

So what does all of this imply for the global economy?

Well, it depends… I guess we’ll have to wait and see.