China’s web curbs pose real threat to foreign tech

March 3, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

China’s latest internet curbs are another setback for international investors in the People’s Republic. Draconian new rules threaten to stop foreign companies from putting text, videos, maps or games online. The regulations are drawn so broadly they pose a real danger to technology and media players like Apple and Disney.

Interpreted at their broadest, the rules issued by China’s technology and media watchdogs bar any foreign company from maintaining a website or issuing a press release online. Even joint ventures with local partners face the same constraints. All online content must be published by wholly owned Chinese ventures.

The rules, which come into force on March 10, are the latest manifestation of a drive by President Xi Jinping to tighten control of information. Their wide scope may be an inadvertent result of regulators’ eagerness to show loyalty to the Chinese leader. In reality, China doesn’t always enforce such sweeping bans. Legal experts doubt censors are going to take aim at advertising or corporate websites.

Nevertheless, the vague regulations give authorities a useful stick to bash foreign companies that offend censors or step on local competitors’ toes. Internet curbs already prevent the likes of Google and Facebook from challenging local rivals such as Baidu and Tencent.

Yet products like Apple’s iTunes, Amazon’s Kindle and Microsoft’s Xbox games console have an enthusiastic audience among China’s urban elite. Thousands of Chinese children love Walt Disney’s Mickey Mouse. The new rules have the potential to shut these companies out of China.

The directive is so broad it may even affect local web groups like Baidu and Sina that have listed overseas and therefore have foreign investors. These companies, too, will have to ensure that their content reflects “socialist core values”.

Even if they are watered down or largely unenforced, the rules are further evidence of the Chinese government’s desire to tighten its grip on foreign technology groups, media companies and non-governmental organizations. Combined with worries about China’s economic slowdown, the unpredictable environment is another factor prompting once-enthusiastic investors to take their business elsewhere.

Beijing has trumpeted its desire to build an innovation economy and bolster its “soft power”. But it is also seeking to strengthen control. For now, the iron fist is taking precedence.

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This is exactly why the future does not belong to China. It is a giant with brittle legs.

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