U.S. Must Stand Up To Chinese E-Commerce Restrictions

Earlier this week, when the Chinese government announced that it was imposing yet more regulations on the Internet and the development of e-commerce, a bitter chill was felt across the vast new economy.

One set of new rules will make it easier for the Chinese government to censor online content, while a separate set of rules will make it harder for new ventures to receive funding.

This latest bout of bureaucratic heavy-handedness comes just after the release of data by the China Internet Network Information Center (CINIC) showing that the number of Chinese Internet users has quadrupled from about 2.1 million in 1998 to 8.9 million at the end of 1999.

Restriction of Software

The Chinese government also announced sweeping new regulations on encryption technology. These laws could restrict sales of everything from imported software to mobile phones in China.

All the same, in a case of typical Chinese double-speak, Foreign Ministry spokesman Zhu Bangzao told Western reporters that the regulations “will not affect the pace of foreign companies entering China.”

A Recurring Pattern

This episode is not the first time that China has decided to change the rules midstream, nor is it the first time that it has tried to soft-pedal its ever-increasing draconian restrictions.

As reported in September by the E-Commerce Times, Chinese Minister of Information Industry Wu Jichuan delivered a frank message to all Western companies that had been planning to pump billions into the Communist country’s Internet infrastructure.

Speaking at a World Trade Organization (WTO) meeting, Wu said that foreign companies with investments in Chinese industry are “in violation of current Chinese policies.” The statement jolted such major players as Intel, IBM and Yahoo!, which had already invested in China.

For much of this year, Chinese officials have been unclear about their position regarding foreign investments in the Chinese Internet culture. Although officials have met with American technology leaders — and major U.S. players have already made significant investments in China’s Internet industries — China never stated its acceptance of international commerce.

A History Lesson

The lesson we must remember is that China has a long history of not wanting foreigners to dominate its commerce.

In 1900, after foreigners had virtually invaded China in an attempt to force it into becoming a trading partner, a group of Chinese patriots called “Boxers” killed several hundred foreigners. By doing so, they also kicked off the infamous “Boxer Rebellion” in an attempt to rid China of foreign domination.

If history is any guide, then it is safe to assume that China’s present government is willing to slow the growth of the Internet in order to make certain that ownership of its enterprises remains in Chinese hands.

Chinese Government Obviously Afraid

What should we make of this new round of restrictive edicts? The most obvious observation is that China’s government is ambivalent about the Internet. While it wants the Net in order to develop international e-commerce, it fears the impact of a technology that will loosen its control of its population.

Therefore, it is my belief that American CEOs should stand up now and work with the U.S. government to put as much pressure on China to reconsider its latest edicts. Otherwise, China will continue to add restrictions at the slightest sign that the growth of the Internet is getting out of control, and e-commerce will continue to bob on the waves of mixed messages and contradiction.

What do you think? Let’s talk about it.