Will China’s Internet purges inhibit their knowledge services industry?


Greatwall_2  The Guardian put out an excellent report last week entitled "Behind the Great Firewall", which discusses the Internet popularity in China, and the fact that there will shortly be more Chinese online than Americans.  The piece does a good job pointing out how much the Web is impacting society, but what concerns me is the fact that the Chinese government is working extremely hard to increase its level of censorship and keep the Chinese Internet-world sectioned off from the rest of the world.  The Guardian has since followed up with a further report entitled "China’s New Internet Purge",  which discusses how the Chinese government is ramping up its attempts to close down it’s "Black Web" bars. Just last month, there were 868 arrests made of people providing "unhealthy" content.  Google reports that the most searched for words in China are related to "money" and "technology", which indicates that this "unhealthy" content probably wasn’t all pornography.  People talk a lot about how China will be changed more by the Internet than the Internet will change China, but if the Chinese government manages to keep most Western sites from being accessed, and persists with stepping up attempts to block this "unhealthy" content, then surely there will be a limit to the level with which China can become "changed"?  How far could the Chinese government go to restrict the Internet within its borders?   And will the Internet really change China to a great extent if their citizen are only interacting amongst themselves across controlled media.  If it’s a battle for restricting information online, then surely the player with trillions of dollars will win out?

As we discussed here a few week’s ago, there are some clear challenges with China becoming a dominant force for delivering outsourced, or offshored, knowledge-services for Western businesses.  One of the key reasons for the success of India and the Philippines, for example, for delivering outsourced services such as application development, insurance services and accounting services, is the ability for their workers to learn and assimilate with Western business culture.  Interaction with Western staff is vital, and so is the ability for offshore workers to research information in the Web.  If the Chinese middle-classes are continually blocked from integrating their online culture with the rest of the world, won’t this impact their ability to assimilate, understand Western business culture and deliver knowledge services for customers outside of the Great Firewall?  They have proved themselves highly proficient at producing physical products in China at very low cost, and have clear potential to develop their engineering services on a global scale, but the constant attempts to keep China sectioned off from the rest of the world over the Web could substantially hold back the country from delivering knowledge-based business services for Western companies. If their development is stifled through restricted access to information and people outside of China, they could be left performing knowledge tasks that require very limited "business thinking" , for example data-cleansing services.


….who’s this Barack Obama guy?


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  1. You know you would think it would. But everyone said that of the USSR back in the days when such practices were common, and they said that during the period of Nazi Germany (not that I am comparing China to either of these two in anything other than this specific practice) … and yet both of these societies had highly advanced research programs.

    Whenever a society attempts to control things we often assume this is a bad thing. And – from a Western perspective it is.

    From the perspective that China will be obviously implementing a lot of controls – that requires a lot of technology. That requires a lot of brains working very long hours. Just because a society is controlling does not mean that it is not technologically advanced, in fact, very often the exact opposite is true.

    I hate to say that – but it is true.

  2. Robert,

    You have an excellent point, and I am not arguing that China is already a major, major economic superpower when it comes to manufacturing products, including technology hardware and (some) software. However, neither the USSR or (thank the Lord) Nazi Germany ever provided knowledge-services to Western business, for example IT support and development, accounting or HR services etc. Withouth developing a strong affiliation and comprehension of the Western business culture will potentially hold them back if they are not allowed first hand experiences of working with Western employees. Restricting the Internet access outside of the Great Wall will get rid of any of these “Flat World” scenarios we have all loved reading about…


  3. To some degree perhaps, but as a whole I don’t think so. What it will do is channel strategic business alliances to connected families, and well networked corporations. Rather than broad spectrum integration between entrepreneur and business need; insider knowledge of existing problems will be fed to China, by China, in a more ‘tiered’ or filtered manor. In China, you work for the company, and the company works for China. If you look close you can see this model re-staged for an emerging economic power. I believe the Chinese are more comfortable with this seemingly restrictive mechanism than we are. What they can’t achieve by shotguning the market with solutions only sharpens the resourcefulness of the elite. Someday soon, when our markets fully integrate, we may find that what can be solved cheap, or even free, will replace the cornerstone of our service-based economy.


  4. Restricting information will always degrade commerce and increase uncertainty, increase costs and reduce efficiency. As an extreme example — save the China Telecom fiber link to Sinuiju — North Korea has an intranet, but limited information inflow from the outside world. Even the limited internet there uses political loyalty throttles to determine who sees what. As a result, they spend a lot developing their own inefficient and substandard knowledge industries in their protected market, exemplified by Pyongyang Informatics.

    In China, however, the rule of the central government is not as overbearing, and most of the people had developed innovative ways to get around Beijing’s dictates for many years. Even Chairman Mao was forced to accept many of Fujian’s supply chains and local ways. Information will continue to be throttled and examples will be made of the unlucky few to scare the public into line. Local portals, such as Sina look promising, yet other innovations — such as hardware — will mimic foreign technology.

  5. Interesting…

    If they have somehow learned how to curb SPAM on a national scale, I might very well move there myself!

    Unfortunately, we aren’t privy to what the arrests were all about. China has committed themselves at least on paper to doing good business. So, if they have taken scammers and pornographers off of the internet for us, I am quite grateful. After all, the signal to noise ratio on the internet is not very good. Too many abuse SEOs to get their snake oil out to the masses.

    I think we should think about what precedent China has set here: we should not tolerate the abuse! I surely wish America would clean up it’s side of the internet!

  6. Having lived and worked in and around Chinese culture what is being left out here is the symbolism of the action taken. Being arrested is “losing face” for ones entire family and usually comes after several warnings and public announcements that certain actions should not be taking place, thus this big of a crack down and actual arrests shows how much of an issue this is with the gov’t. Scamming, trolling and even attempts to extort over the internet are big problems in China so my immediate assumption is that those arrested are a from that ilk, now if they could only go over to the African email cafe’s.

  7. As pointed out in the article, one of the biggest advantages of India is their ability in English and quickly assuming a western culture. China however is gradually opening up and soon it could be a big competition in the outsourcing industry.

  8. The last thing China should do is get into outsourcing it frankly does not good for their economy except create employement it will only increase forex and increase inflation . They have the money to go for foreign aquisitions and take over big software firms and establish a strong software industry and should not try to get into outsourcing They should avoid this outsourcing. It will lead to a disaster.They should go for acquisitions and develop a huge software industry in their country.They should get out of this mindset of producing cheap goods producing cheap services so on so forth .It will not help their economy

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