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Made in, But Can’t Be Used in, China

It's a peculiar paradox that an iPhone produced in Shenzhen cannot be used in China the way it can be used elsewhere because the Chinese government has developed one of the world's most effective information suppression systems.

The person who made my computer can't find this story via EBN's Twitter feed, for example, because the service is blocked in China, along with the rest of Twitter. There are ways around it, of course, and certainly some of the people reading this story are in China, but the larger paradox remains: How long can China bar its population from using the products it makes? It is the type of economics we see in countries that produce oil, copper, or gold and don't themselves benefit much from the sales.

A far more detailed version of this question popped up this week in the form of a talk by Rebecca MacKinnon, a former CNN China bureau chief, who now studies Internet governance and freedom of expression in new digital spaces. She spent years in China and speaks Chinese fluently. (Disclosure: I worked last year with an organization MacKinnon founded, Global Voices, and have met her a few times, though can't say I know her well.)

Her brief talk, which can be seen here, looks at some of the ways in which old systems for guaranteeing freedom of speech, which used to come from governments, aren't working in the digital age, where privately-held corporations have a growing role in the mediums through which we express ourselves. Before, if you stood up in a plaza and said something, you would seek a law to protect your right to say that. But if now the plaza is Facebook, and China bans Facebook, and Facebook doesn't push back against China's government, what do you do?

The reason this matters for the electronics industry and supply chain professionals is that at some point, China's reluctance to let people within its borders use these devices is going to start crimping the market for the products. China has 450 million people online and a rising middle class. It's a huge market. And what are the device makers really selling? Sales pitches to consumers shopping for smartphones and tablets now turn not on their usefulness as phones or computers, but on their usefulness as social networking and media consumption devices.

Except, you can't do either of those things very freely in China. So eventually, Apple or Samsung or Google will have to look at China and think: “We are selling this device because it's such a great way to use Internet tools, and in the world's largest potential market, no one's allowed to do that. And even weirder, the person making the device is also, simultaneously, my potential customer, and the person the Chinese government is restricting. And one of these days, that person is going to get a little frustrated about that.” Like a gold miner who can't afford a ring for his own wife, this is going to get annoying after a while. Something has to give.

It may, in fact, already be giving. A report, released last week at about the same time as MacKinnon's interesting talk, noted that the number of new Websites in China plunged a remarkable 41 percent last year. The South China Morning Post quoted Wu Qiang, an Internet researcher at Tsinghua University, who blames the drop on successful restriction efforts by the Chinese government.

“The number of interactive websites, including online forums, has plummeted. The drop in numbers was effective in controlling speech. Online forums and bulletin boards are much less active than before,” Wu told the Post, a Hong Kong daily published in English.

So if you're {complink 379|Apple Inc.}, say, you have to wonder: If 450 million people can’t speak freely online in China, at what point does that lower some of those people's incentive to spend $500 on an iPhone? If you're a device maker, a supplier to a device maker, or an investor, the world's largest market is probably a place where you want people looking for more use out of their devices, not less.

30 comments on “Made in, But Can’t Be Used in, China

  1. Nemos
    July 15, 2011

    The article it is up to date and presents a subject that a lot of people they don't know about China and all of these bans that has set in the Internet for its citizens.

    Even if you avoid seeing, or you don't see the human rights violation and speak only in economic terms you will see a huge market waiting to consume but with the restrictions and the bans in the Internet the sales in China are very low . I will repeat the same Made in, But Can't Be Used in.

  2. AnalyzeThis
    July 15, 2011

    Quite a coincidence that I saw this article shortly after watching this video: China's Ghost Cities and Malls.

    To sum it up? There's a lot of things about China that just doesn't make any sense, and the government there is going to have to change because keeping things the way they are will be ultimately unsustainable.

    Anyhow, I highly recommend taking the 15 minutes to watch the video!

  3. Eldredge
    July 15, 2011

    The rapid advances in technology must be a bit unsettling to the old guard in China's government. It will be very difficult to control the technology that is, and will become, available to the general populace.

  4. Anna Young
    July 15, 2011

    “And one of these days, that person is going to get a little frustrated about that.” Like a gold miner who can't afford a ring for his own wife, this is going to get annoying after a while. Something has to give”.

    This is well said. Something has to give.

    If a country like China, with total population of 1.3 billion and 450 million on the Internet, cannot speak freely online, yet electronic devices and smartphones are produced in such a country?

    What are the device maker, supplier and investors doing about it? Do you really think the manufacturers worry about this or have they accepted they cannot do anything about this? I believe it's more likely they don't believe they should engage with China's government in its political and social battles with the citizens. One day, perhaps, high-tech equipment makers may decide to have a say but it's not now. They need China for cheap production for Western and local consumption. That's the only thing in focus right now. Everything else is blurry!

     

     

  5. prabhakar_deosthali
    July 16, 2011

    In my opinion, the freedom of expression apart, such restrictive policies may actually be doing something good for the Chinese younger generation. Today  the younger generation in other “FREE” countries is spending so much of their valuable time on those numerous social networking sites , updating their status for every yawn and sneeze that sometimes I think some kind restrcition IS required. This younger generation is wasting millions of man-hours in those non-productive activities (even while in their office or college or school – under the noses of their bosses/teachers) that such kind of a restriction is denitely needed.  may be there will be some percentage of the population which has the real use of such tools , will suffer from such restrictions but the overall effect on the society as a whole could be positive.

  6. Adeniji Kayode
    July 16, 2011

    I wonder what in for China to ban the same products and services she manufactures?

  7. Adeniji Kayode
    July 16, 2011

    I agree with you on that but on the other hand there is nothing good that can not be abused.This same services you are talking about is solving communication problem daily for alot of people.

    In addition, what kind of restriction can be placed on an internet services such as this ?

  8. Adeniji Kayode
    July 16, 2011

    Could it be that China is doing for security reason or for moral reason or at least to prevent or protect somethin, but what?

  9. prabhakar_deosthali
    July 16, 2011

    Mainly it must be to protect their own local products. I believe China makes cheap copies of the international brand products. So for an original Apple Iphone there will be an equivalant Chinese product at a fraction of the price.

  10. Wale Bakare
    July 16, 2011

    Chinese people are unique and their modus operandi in all areas utterly differentiated them from others in world. I think prabhakar_deosthali caputred some points. It may be a save in precious time being wasted by young ones spending on socialising on social network sites for a short while. Who knows?  Time diversion on more rewarding and productive tasks can greatly help build stronger economy. 

     

  11. Anand
    July 16, 2011

    “Like a gold miner who can't afford a ring for his own wife, this is going to get annoying after a while”

    @Marc,

     This is perfect example to reflect the situation in China. The only solution I can think for this problem is all the companies coming together and asking Chinese govt to open-up the market. Else these companies should shift their business to other asian countries like India.

  12. Adeniji Kayode
    July 16, 2011

    How do you mean local products. Do you mean to say that China has better products locally than the ones their sell to the world? In what way is this a gain to them.

  13. Adeniji Kayode
    July 16, 2011

    Are these companies affected and if yes, in what way are they affected to have to make such move>

  14. Nemos
    July 16, 2011

    For example, you can buy an IPad , the   ban it is not to the product, but you cannot use facebook. Most of the of the restrictions are in the social pages so what to do with the tablet if you cannot use it freely.

  15. eemom
    July 16, 2011

    This is a very interesting article.  China restricts the use of the products it makes for non-Chinese companies in order to restrict speech.  This is not really surprising since this is the same country that allows deplorable conditions in its factories.  Why allow one human right while you don't another.  China seems to not care about its own people and their rights, just its financial gain.

  16. Houngbo_Hospice
    July 16, 2011

    “so  what  to  do  with  the  tablet  if  you  cannot  use  it  freely.”

    Tablet ownership in China is surely inceasing and “t he volume of tablet PC annual sales in the nation is expected to break 4.5 million units in 2011 ” according to this blog post. Not being able to use facebook or twitter in China doesn't mean that Chinese are not using tablets at all. It has been reported that Apple sold 600,000 iPads in China  in the fourth quarter of 2010. iPad2 was relesead in China on May 06 and was sold out just four hours after its launch in one of the biggest Apple's store in Beijing. 

  17. itguyphil
    July 17, 2011

    eemom,

    This is a great example for those who say that democracy-capitalism  is a failure and we should look into other methods of economic and political structure.

  18. Daniel
    July 18, 2011

    Marc, it’s true with most of the electronic equipments in China. As a part of global investments they had attracted many global players to china, for investment and creating jobs. China is only looking for economic growth through such ventures and not encouraging these companies to sell their products in China. In such cases, they are encouraging local products within the limit of guidelines and policies of China. But most of the equipments and products from global brands cannot be used in China due to spectrum issues and official bans.

  19. saranyatil
    July 18, 2011

    They are so fast to replicate original products. During  my last visit to china i saw duplicate of all the products of Apple from ipods to iPads. they were selling iphone for 70$ which looked just like the original one but it s obious that it doesnt work like the original iphone.

  20. Jay_Bond
    July 18, 2011

    This is an excellent article pointing out one of the major flaws to China's controlling government. China is trying to paint their global picture as a fast growing republic with an increasing middle class, when in fact they are still a controlling communist country that doesn't want their citizens to have free reigns to speak their minds. It is a shame to see China's growing middle class finally be able to afford luxuries in life, only to have them restricted by their government and not used to their full potential. At some point China's people will grow sick of their restrictions and could cause global financial problems with an uproar.

  21. Adeniji Kayode
    July 18, 2011

    Some how china is still making all effort to be at the top of manufactureres list but then they make use of inferior materials and that is a reason for cheap consumer goods but short lifespan

     

  22. Ariella
    July 18, 2011

     If 450 million people can’t speak freely online in China, at what point does that lower some of those people's incentive to spend $500 on an iPhone?  That's a key point to consider in a global economy. One of its components, of course, is also how much is $500 to an average person in China vs. how much it is to an average person elsewhere.

  23. JADEN
    July 19, 2011

    The restriction is a barrier to information.  As China is growing economically, with lack of internet freedom the impact will tell on their trade and economic growth soon.

  24. garyk
    July 19, 2011

    The question to be asked is APPLE going to be in trouble? The iphone isn't made in the USA, I have no idea what taxes Apple pay , but I do know there taxes should be based on the percentage of manufacturing and assembly thats done in the US and there should only be tax breaks on what is produced in the US not CHINA or Taiwan. If these rquirements are no met the US people should stop buying the iphone at $500 a pop. ( Bring jobs back to US and other free Counties).

  25. Kunmi
    July 19, 2011

    Jaden, I agree with you because that tactic will not last long neither would it be able to stand the test of time. It is an indirect way of being a power breaker. If USA could move in to China to manufacture products and marketing that products in China is limited or prohibited, the marketiing strength of the USA companies will be seriously impacted, and in turn, China will increase her economic power because supply strength to the rest of the world will be strong. The more the demand they can meet the more financial boyancy the country will be. I believe deprivation of the Chinese from buying their products is not fair to humanity.

  26. Adeniji Kayode
    July 20, 2011

    China must have a reason for doing this, its just that what they are trying to protect is what i dont understand and for they not to have bothered about the consequences of this action on their people and the ecomomy, they must then have a strong reason(S) doing that

  27. JADEN
    July 20, 2011

    There reason could be political, in a situtation where people can't exercise their freedom.

  28. hwong
    July 21, 2011

    I can think of a reason why they aren't letting the people in China use it. It might have been a pact made with Apple Corporation 😉 They don't want the counterfeit products out in the market. If they restrict use in China, then they are less likely to produce counterfeit products.  Actually I am pretty surprised at how well Apple has hold up counterfeit products throughout the supply chain. We don't have to worry that the iphone or ipad that we bought may not be the real one. That's a reassurance

  29. Mr. Roques
    July 22, 2011

    I heard that Sony agreed to offer songs ONLY in china to a particular service. (can't remember the service's name) but maybe things are changing…. who knows!

    The entire issue is beyond what Apple can do … maybe I'm being too blind sidded to say that but seems too much for one company to do.

  30. Ashu001
    July 29, 2011

    Marc,

    Reading your last statement,

    If you're a device maker, a supplier to a device maker, or an investor, the world's largest market is probably a place where you want people looking for more use out of their devices, not less .”

    makes me wonder.Are you planning regime change in China?

    If Yes,let me make one thing perfectly clear.The Chinese Communist Party is way more determined and entrenched in its ways than you and me can even imagine.

    Its going to need extremely determined change coming in from Inside China to make a difference.Not a bunch of Western Corporations/NGOs or few freedom loving activists.

    Unless the status quo breaks down and breaks down decisively(the Contract of Social Upliftment in return for compliance with the rules of the Communist party);I don't really see much point in anyone trying to talk about “Change” or “revolution” in China.

    It just won't happen the way we expect it too,especially after the Revolutions all over Central Europe/Former Soviet Union;the Existing powers that be have become more and more careful about letting someone voice there opinions online.

    Case in point-Following the High Speed Rail disaster in China,the media/independent writers were decisively muzzled and stopped from saying anything about the tragedy.

    This pattern will continue unless the status quo breaks down decisively.

    Regards

    Ashish.

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