Tuesday, February 14, 2006

China and the Internet

This week I welcome a new group of students who have chosen to take my course, The Economics of the Internet, at the University of Portsmouth. As a large proportion of the students are from China it would seem appropriate to take a special look at the Internet in China. Unfortunately we must also mention some issues of privacy and censorship and the stance taken by some of the biggest Internet companies, especially Yahoo! and Google.

Let's look first at the number of Internet users in China. In the list of countries ranked by the total number of Internet users China now stands in second place, behind the USA. A round figure estimate is 100 million people (source: [1]). Of course as a proportion of the total population (which is somewhere around 1.3 billion) this still represents a small minority of the people (rather less than 8%). However the number of people in China connected to the Internet is growing rapidly, and a report produced by the market analysis company Panlogic predicts that by the year 2008 China will overtake the USA in terms of the number of Internet users (see [2]). However the Panlogic report also notes that most people in China don't have direct access to the Internet at home or at work - instead they connect to the Internet via one of the many Internet cafes. Internet access at the moment is very much of an urban phenomenon and is clustered mainly around the country's three main cities on the east coast of the country.

Chinese people use the Internet mainly to keep in touch with friends and family, or to get the news. E-commerce is still relatively underdeveloped in China. The Panlogic report says that credit cards are still quite rare and most people still prefer to pay for goods in cash. However this is gradually changing as more foreign banks open branches in China.

One area of activity on the Internet where there has been dramatic growth in China is the online games market. A year ago ChannelNewsAsia.com reported that in 2004 over 20 million of China's Internet users were online games enthusiats. [3] A more recent report [4] gives the total number of online games players in China as 26.34 million for 2005, generating in revenue as much as 1 billion yuan (around US$120 million).

Privacy and censorship. Now let's turn to the controversy about the behviour of some of the major US Internet companies as they have sought to expand into the potentially very lucrative Chinese market. Perhaps the strongest criticism is reserved for Yahoo! over allegations that the company supplied the Chinese government with information that led to the conviction and imprisonment of two Chinese men who have been critical of Chinese government policy (see [5]..[9]).

According to these reports Yahoo! provided details to the Chinese authorities on the author of various postings that criticised the government and the way that it has dealt with accusations of official corruption. The information led to the identification of the man, Li Zhi, who was later charged with subverting state power and sentenced to 8 years in prison. Last year Yahoo! was also accused of providing information to the Chinese authorities which led to the imprisonmnet for 10 years of the Chinese journalist, Shi Tao. Yahoo! says that they only complied with what they were legally obliged to do.

Google has also come under fire for censoring its search services in China - a compromise which it feels has been forced on it by the Chinese government (see [1]..[20]). The google.cn site restricts access to terms that are sensitive to the Chinese government, such as Tiananmen Square (the site of the 1989 massacre when troops with tanks attacked protestors) and Taiwan (the independent country that China still regards as part of its territory). Although Google has been heavily criticised by such groups as "Reporters Without Borders" and the "Free Tibet Campaign", BBC commentator on Internet matters Bill Thompson believes that the company made the right decision and applauds what he calls their "constructive engaement"(see [13]). He notes that the new Chinese language service lets users know if their search results have been restricted, something that wouldn't have happened if the filtering was being done by the Chinese government itself. And in the New York Times, Tom Zeller describes how determined Internet users in China can evade restrictions by the use of proxy servers and anonymous communication networks [16].

Let's finish with some reports on areas where China is making a positive contribution to the future of the Internet. Back in April 2004, as a concession during wide-ranging trade talks with US government officials, the Chinese government agreed to drop its own standard for wireless technology and move to the standard being used by most of the rest of the world [21]. The adoption of common standards in Internet technology is one of the key reasons behind the rapid growth of the Internet, which is then able to function as one integrated interconnected network instead of a set of smaller parallel networks.

Last month China and the European Union signed a joint statement relating to strategic cooperation on the development of high-speed network infrastructure [22]. And China is making special efforts to upgrade its networks to broadband standards {24]. Beginning later this year 18 provinces in the south and 8 in the north will have their Internet links upgraded.

[1] 100 million go online in China. BBC News 28th June 2005.

[2] Chinese 'to overtake US net use'. BBC News 20th January 2005.

[3] Online games soar in Internet-mad China. ChannelNewsAsia.Com 15th February 2005.

[4] Internet games on the rise. ChinaView.Com 12th January 2006.

[5] Chinese man 'jailed due to Yahoo'. BBC News 9th Febraury 2006.

[6] Yahoo! in second Chinese dissident rumpus. The Register 10th February 2006.

[7] Fresh US outrage ahead of China Internet hearings . Reuters, via C|NetNews.com 10th February 2006.

[8] Yahoo grapples with online rights. Tom Zeller Jr. New York Times. 13th February 2006.

[9] Firms face moral dilemma in China. Jane Wakefiled, BBC News 7th September 2005.

[10] Google censors itself for China . BBC News 25th january 2006.

[11] Google move 'black day' for China . BBC News 25th January 2006.

[12] Version of Google in China won't offer E-Mail or Blogs. David Barboza. New York Times. 25th January 2006.

[13] Why Google in China makes sense . Bill Thompson, BBC News 27th January 2006.

[14] Google says China decision painful but right. Ben Hirschler, Reuters. 25th january 2006.

[15] So Long, Dalai Lama: Google Adapts to China. Joeseph Kahn, New York Times, 12th February 2006.

[16] How to outwit the world's Internet censors. Tom Zellner Jr. New York Times, 29th January 2006.

[17] Microsoft opens up censored blogs. BBC News 2nd February 2006.

[18] China Tightens its Restrictions for News Media on the Internet. Joseph Kahn, New York Times, 26th September 2005.

[19] Chinese expert says Internet can't be controlled in China. The Star Online 22nd November 2005.

[20] Internet a voice China can't quiet. Patrick Casey. Associated Press 22nd November 2003.

[21] China is praised for preserving global wireless standard . Elizabeth Becker. TechNewsWorld 23rd April 2004.

[22] China, EU cooperate in developing next generation Internet . People's Daily Online 13th January 2006.

[23] Chinese revolution turns hi-tech Spencer Kelly, BBC News, 6th January 2006.


At 8:48 AM, Blogger Guy said...

Yahoo!, Google, and also Microsoft and Cisco Systems today face questioning about the way that they operate in China at a US Congressional hearing. The companies have all stressed that they are doing nothing illegal and that if the government of the US is unhappy with what they are doing it should take the initiative itself. Interestingly the New York Times reports today that the US State Department yesterday announced the formation of a new Global Internet Freedom Task Force to look into the way in which foreign governments "restrict access to political content and the impact of such censorship efforst on US companies".

Online Firms Facing Questions About Censoring Internet Searches in China
Tom Zeller Jr, New York Times, 15th February 2006
[2] Net firms face grilling on China . Matthew Davis, BBC News, 15th February 2006.

At 8:22 AM, Blogger Guy said...

Andrew McLaughlin, senior policy counsel at Google, has posted an item about Google in China on the Google blog. which concludes with the following sentence "To some people, a hard compromise may not feel as satisfying as a withdrawal on principle, but we believe it's the best way to work toward the results we all desire".

For a cartoon take on the Yahoo! position go to

At 8:43 AM, Blogger Guy said...

More links to contributions on this story

Web Firms Are Grilled on Dealings in China
Tom Zeller Jr. in the New York Times 16th Febrauary 2006.
[2] Net firms criticised over China BBC News 16th February 2006.

At 11:19 AM, Blogger Ling said...

Actually, as I know, Chinese government got some technology which can make the special websites which they don't want the public visit become invisible. I'm not familiar with Yahoo! but Google, their search egine can detour the barriers and give a quick link which was totally offended Chinese government(also some websites which would be paid to watch) years ago.


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