How China’s internet censorship affects foreign business

How China’s internet censorship affects foreign business

Control over the Internet has gradually tightened in China since President Xi Jinping came to power. What is the effect on foreign businesses, and will they keep operating in this increasingly hostile business environment?

On an Internet-user level, Instagram, Gmail (and all other Google products and services), and Snapchat have been the latest victims of the Great Firewall. For those working in the IT sector, it may be necessary to check the latest changes to censorship on websites like Great Fire on a daily basis, but censorship is also impacting business relations between China and abroad, and causing trouble for foreign companies.

This is not a new phenomenon, as foreign companies, particularly Internet companies, have been worrying about China’s internet situation for years now, but the situation still seems to be spiralling. Authorities have been tightening restrictions on virtual private networks (VPNs) generally used to circumvent the Great Firewall, following the complete blocking of Gmail (after years of semi-censorship on Gmail) in December last year.

Problems for foreign businesses include the required levels of censorship that all information has to go through. This slows down the Internet, and makes it hard to maintain operations, especially for IT companies. The American Chamber of Commerce in China said in 2012 that 300 businesses surveyed said unstable Internet access has been an obstacle. In the years since then, with increasing censorship, this has only become a bigger problem.

On top of that, many devices cannot be used the way they should. For example, Samsung Galaxy phones have trouble downloading and using certain applications, as they are Google powered, and iPhones’ VPNs are constantly changing meaning and users frequently have to update their phones to access their Gmail accounts.

In light of these issues, the European Union Chamber of Commerce’s research shows similar concerns: 86 percent of respondents to an internal survey said they had a “negative effect” on business. This is a 15 percent increase from the same survey conducted in June 2014. Many companies now consider Internet troubles an extra ‘cost’ for operating in China.

Another lobby group has surveyed developments in the innovation sector, where 13 percent of respondents have deferred or cancelled new research and development centers in China, hurting China’s innovation industry.

Regardless of the problems this poses for effective communication within a multinational company, foreign staff also tends to be skeptical about moving to a country where access to the Internet is restricted. This is especially so for companies using email platforms powered by Gmail.

These concerns are adding to an uncertain future for many foreign companies that have fallen victim to China’s anti-monopolisation laws or have been fined for tax evasion. US-based chipmaker Qualcomm was the latest of these cases, given a record fine of 631 million pounds for ‘charging unfairly high licensing fees’ and abusing its wireless technology dominance.

Qualcomm has not been alone, as carmakers and technology suppliers based abroad have been subject to the same fines. Last September, British pharmaceutical giant GlaxoSmithKline was also fined 315 million pounds in a bribery case.

As a combination of laws, regulations, and changes to Internet censorship make doing business in China hard, it is uncertain whether more companies will end up leaving China for a more favorable environment like Google did in 2011.

About Author

Margaux Schreurs

Margaux lives in Beijing and works as an editor at a Beijing-based magazine and website, and writes on a freelance basis for a wide range of publications throughout the world, mainly focusing on East and Southeast Asian current affairs. She is a London School of Economics and Political Science MSc graduate.