Businesses Lose to China’s ‘Great Firewall’

The US-China trade war is escalating into cyberspace, and the casualties include both businesses and consumers.

Several reports today, including one from Reuters, say that China's policy of blocking access to certain Websites is hurting foreign businesses:

The U.S. Ambassador to the World Trade Organization, Michael Punke, said in a letter to his Chinese counterpart on Monday that some companies based outside China had faced “challenges offering their services to Chinese customers” when their websites were blocked by China's “national firewall.”

Specifically, the Reuters article said, US businesses were having a hard time offering their products and services to China via the Internet.

The inconsistency of China's trade practices has been debated a number of times on EBN. For example, many of the people who assemble products such as smartphones can't fully use them, because of China's Internet access policies. (See: Made in, But Can’t Be Used in, China.)

Up until now, the China firewall debate has focused more on freedom of information and freedom of speech. But if companies are losing revenue from the world's largest consumer market, the stakes are getting higher. In fact, Consumer Reports reported today that online consumer electronics sales are soaring. According to a press release from the magazine:

Online shopping scored higher in almost every respect than did shopping at walk-in stores in Consumer Reports' Annual Electronics Buying Survey. Respondents made 34 percent of electronics purchases online, which is more than double the percentage from just five years ago.
“Our survey shows that consumers are getting more and more comfortable making electronics purchases online — even big-ticket items like TVs,” said Paul Reynolds, electronics editor at Consumer Reports.

Given China's geographic size and the remoteness of some regions, online purchasing seems like an essential tool for many consumers. China reportedly has 450 million Internet users, but the government exercises tight control over Internet access. Reports say the Chinese government fears sites such as Facebook, Twitter, and YouTube can incite social instability and threaten national security. In this regard, the government has a point: The Internet has been a key part of the drama that is playing out in the Middle East as dictators are being displaced by citizen uprisings.

At the same time, China can learn a lesson from what's going on in the Middle East: No matter how tightly access is controlled, users will find a way to use the Internet.

Let's set aside that debate for the time being and focus on the supply chain. Components and subassemblies are shipped into China for products that are assembled there. Finished goods are shipped out for final assembly and distribution. China's own policy may be preventing the purchase of those same goods by Chinese consumers. Granted, many of those goods stay within China's borders for consumption in local markets. But just as many leave the country.

China's national firewall isn't just hurting foreign businesses. It's limiting its own market.

23 comments on “Businesses Lose to China’s ‘Great Firewall’

  1. Ashu001
    October 20, 2011

    Barbara, Beyond doubt this policy is hurting companies in China and elswhere. But important question is whats the solution??? We can't expect the Communist party to change track here. They control access to information for their own survival. Release the information valves and their legitimacy crumbles and crumbles badly overnight. So what's the solution? Regards Ashish.

  2. Nemos
    October 20, 2011

    “challenges offering their services to Chinese customers” when their websites were blocked by China's “national firewall.” Amazing , unbelievable ….. In the end of 20th century, we had walls divided countries in the middle, and today we have firewalls to keep the people separated. It's really amazing because I have a lot of Chinese friends and most of them, they have a huge gap of information about history events…….

  3. Nemos
    October 20, 2011

    I don't think there is a solution from outside. The solution will come only when voices that will say, “it's enough” occur. Only people from China can solve the problem and give a solution, but I don't think that will come as China continues to grow – up because the people think that everything it is ok and well done.

  4. AnalyzeThis
    October 20, 2011

    I'm curious to hear Barbara's response to this as well, but my opinion on the matter is… there is no solution. China truly does operate under its own rules. Even Google found themselves unable to operate there. And they're Google . So what chance do smaller companies have?

    It's true that some people in China will find a way around the government's censorship, but they'll be exceptions rather than the rule.

    Obviously, I would not expect the government's situation to change any time soon… it's a frustrating situation indeed, but like I said, I don't think there's anything you can do about it except shrug your shoulders and deal with it.

  5. Clairvoyant
    October 20, 2011

    Tech4People, if I may comment on your question, I think there is only one option. The option is that the Chinese government would need to lift the blocking of websites in order to increase trade between China and businesses in other countries. If they never do, then markets in China and businesses atempting to sell to China will not reach their full potential.

  6. SunitaT
    October 21, 2011

    China can learn a lesson from what's going on in the Middle East: No matter how tightly access is controlled, users will find a way to use the Internet.

    @Barbara, I totally agree with your observation. China should stop this interference  immediately. Its all well knows how Libyan revolutionaries used dating website to dodge Gaddafi's secret police. So China should understand that its impossible to have control over the internet.

  7. SunitaT
    October 21, 2011

    But important question is whats the solution???

    @tech4people, I think all countries should come together and start pressurizing the chinese government to stop this interference. Countries can use different international forums to air their opinion. If Chinese government feels the heat of the international community, then they will be forced to stop this interference.

  8. prabhakar_deosthali
    October 21, 2011

    In my opinion every country has a right to decide on the such policies as to putting a firewalll against certain web content or web transactions, in its own national interest.

    The all pervading social networking sites such as Facebook, twitter or orkut are definitely affecting the social culture.

    Similarly the e-commerce is affecting the older model businesses.

    China's political leadship is very strong and they dare to do the things which many of the democratic nations desire to do but cannot do in order to retain their popularity and power.

  9. jbond
    October 21, 2011

    I'm sure there are many businesses being hurt by China's strict internet policies, not to mention their own citizens, but China does have the right to control what it might deem national security. I don't necessarily agree with it, but China has been running its strict government this way for a long time, and they are still the fastest growing economy in the world. Many people might not agree with their policies, but it is not hurting business within China.

  10. JADEN
    October 21, 2011

    I read an article sometime last year related to this blog, and my comment is that Chinese goverment is being unfair to the other World after copying their ideas and forcing them unfairly out of the market.  Imagine keeping Youtube out because they have their own domestic video sites Tudou and Youku, ban google, likewise facebook.  May be they are doing that to support their home growth services, and stamping out foreign competitions is nothing new,all countries do it, but China is becoming the most aggressive and protectionist country.

  11. tioluwa
    October 21, 2011

    This is not the first time China is being accused of trying to frustrate foreign business. In the case of RRE, China was accused of hurding it.

    I think china is just being selfish sort off. Any compnay cna make it big just doing business in or with China only, they seem to what to keep all their market to themselves only.


  12. Anne
    October 21, 2011

    China strategy is simple; keep imports to a minimum and exports to the maximum.

  13. Barbara Jorgensen
    October 21, 2011

    Great debate, readers and good point: China does have the right to do what it wants, whether the ROW agrees or not. Every nation does.

    This may not be realistic, but I know there is a way to allow and block certain domains on the Internet. Anything commerce-related should be allowed if China wants to conduct business as a global trade partner. Businesses already do this internally–there are certain sites I can't access through my company's network; and personally, I use the parental controls to limit access for my son.

    There should be a process by which businesses can apply for or appeal for access, and China should be required to outline reasons why a site is blocked. There should also be a remedy: if you are blocked, there should be a plan in place so you can modify your site to be compliant.

    That doesn't help with freedom of speech or freedom of information. I agree with most of you: restrictions should be lifted. But from the business standpoint, I do see room for compromise and consistency.


  14. Parser
    October 21, 2011

    It is still a communist country and as such they allowing some forms of business but all under control. For them business is not first is last. No improvement is needed unless ruling party changes their idea. Motivation to do so comes from political dogmas. They are barley satisfying population needs and that keeps them in power. No rational business deals will take place if they can affect or disturb political machine. 

  15. Eldredge
    October 21, 2011

    @Anne – I agree, and it doesn't matter if their practices are unfair to their trading partners.

    October 22, 2011

    I have experienced this first hand and agree with the article.  I hope China can open up access to everyone in a way that the people, government and companies can thrive.  Right now it is not optimal for business needs.

  17. tioluwa
    October 22, 2011

    So can someone tell me why on earth every on else is so dependent on china, when they are not willing to give back?

    is it not possible to do outsource economically elsewhere but china? The world feeds them, yet the boycot us all largely speaking.

  18. Nemos
    October 22, 2011

    I don't think China is a communist Country. It looks like a red dictatorship than a Country with democracy. Information today's is for the brain as it is the food for the body. It is vital for its people to have free access without censorship. Maybe you protect your state with this way, but you destroy your people and your business.

  19. Nemos
    October 22, 2011

    Why? Because our economical business model is based on low expenses in labor wages for having as much as it can be high percentage of profits. That's why almost all the big companies have their factories in China.  

  20. elctrnx_lyf
    October 23, 2011

    I do not understand if chaina can block something why not the other countries stop importing from china. if china is part of the world trade they should be cooperative like everyone else.

  21. Daniel
    October 24, 2011

    Chinese government is forcing their citizens to be aligned with government policies. By restricting the access to foreign national websites or ecommerce site, they are forcing the citizen’s to have business with other companies in their country. This may force other companies to stop selling foreign goods in their country or to invest them in china.

  22. Taimoor Zubar
    October 27, 2011

    If the Chinese government is blocking US websites in China, suppliers in China who want to contact and sell to US businesses would be deprived of this opportunity as well. Trade directories in US may be important means for contacting potential buyers for Chinese suppliers. I think the loss would be mutual.

  23. Adeniji Kayode
    October 27, 2011

    @Anne You are right,thats one of the ways of putting your economy in check. But then china seems to be in charge by trying to produce everything, how possible is that?


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.