Written by Leo Tallay
When the internet first arrived in China in the 1990s, it was hoped a free and uncontrolled world wide web would help transform the world's most populous country into a more open society. Today, China is widely recognised as having developed the most advanced system of internet repression in the world, and instead of the internet transforming China, many are now in fact wondering if it is not China that is going to transform the internet.

Western information technology (IT) firms have played a crucial role in the setting up of China's internet "model". This is despite the fact that these firms are among the strongest defenders of free speech in the West, and seem to believe, in all apparent honesty, that they are a force for good in the world. Microsoft releases a yearly citizenship report, which in 2003 declared: "responsible corporate citizenship is defined by good behaviour, not good intentions". Yahoo! claims that it is "committed to providing individuals with easy access to information and opportunities to openly communicate and exchange views and opinions". And of course, Google has chosen for itself a motto that is highly principled: "Don't be evil". All these noble ideals seem to evaporate once these companies start dealing with China.

A repressive environment

Chinese authorities use intimidation to make sure private-sector internet companies practice "self-regulation" (in fact self-censorship): to operate in China, companies must sign a licence agreeing not to circulate content on certain subjects; however these regulations remain intentionally vague, forcing the internet companies to interpret what the government will not like. Through its Information Ministry, the Chinese government keeps up the pressure with random crackdowns: Reporters Without Borders (RSF) recently reported that 11 websites were blocked or shut down in China in July 2007 alone.

This pressure ensures internet companies censor more than they need to, just to be on the safe side. The result is what Human Rights Watch calls a "race to the bottom", with Western internet companies complicit in actively censoring political material. The risks for internet users are certainly high: at least 50 of them are currently detained in China, simply for peacefully exercising their right to freely express their views a right entrenched in international law and the Chinese constitution.

Why they do it

The reason these Western IT firms behave in such a way is that they have come to believe, under pressure from the Chinese authorities, that toeing the line will be good for their business in China, a notoriously difficult market for foreign technology companies. When Google first set up a Chinese version of its google.com search engine in 2000, it encountered the same success in China as it had in other countries, quickly amassing an estimated 25% of all search traffic in the country. Then, in September 2002, the Chinese Government decided to temporarily block access to google.com, adding it to its long blacklist of sites internet users within China cannot access, as they are blocked out by the "Great Firewall of China" ("router" switches at the edge of the fibre-optic networks that bring internet traffic into the country, some of them made by Cisco Systems, an American firm).

Google suspects the Chinese Government intervened to favour its Chinese rivals, first among them Baidu (pronounced "by-doo"), a home-grown search engine. Google's setback did indeed give Baidu the chance to grab the lion's share of the Chinese search market and hold on to it: the most recent figures (second quarter of 2007) show Baidu holding a 58% market share, while Google is a distant second at 23%. The conclusion Google has drawn from this episode is that it must become more like Baidu to succeed in China. In 2006, google.cn was launched from Chinese territory: in exchange for submitting itself to China's self-censorship laws, access to Google China would from then on be unhindered.

Likewise, Microsoft has reached the conclusion that cooperation with Chinese authorities is the only way for its business to prosper in China. The company's performance following its arrival in 1992 was disappointing, at least during its first decade there. Microsoft's reaction was to form a strong partnership with the government, the exact opposite of what it does in the West. Today, few Western companies have better access to the upper echelons of the Chinese Government than Microsoft: Chief Executive Officer Bill Gates and Chinese President Hu Jintao visit each other when they travel to their respective countries. This cosy relationship has produced results: Microsoft's China revenue in 2007 is expected to be three times what it was in 2004. This of course sets a worrying precedent for future dealings by Western firms in China.

Yahoo! turns informant

Of all the Western IT firms doing business in China, it is Yahoo! that has gone the furthest in its complicity with the authorities. First of all, its search engine is the one that censors the most, as shown in tests carried out by RSF in 2006: the press freedom organisation found that Yahoo! was censoring more even than Baidu when "subversive" keywords were entered such as 'human rights' or 'Tibet independence', using a variety of techniques: returning pro-Government results, displaying an error message or actually blocking all searches for up to an hour before the search engine could be used again.

Then, and far more seriously, came the disturbing revelations that Yahoo! had handed over user data to Chinese law enforcement officials, and this was used to arrest and convict at least four people who had used email accounts from the cn.mail.yahoo.com service. Among these people is Shi Tao, a journalist who is serving a ten-year prison sentence for sending an email: in April 2004, he used his Yahoo! account to send an email to a US-based website in which he summarised a Government order directing media organisations in China to downplay the 15th anniversary of the 1989 pro-democracy protests and subsequent crackdown in Tiananmen Square and elsewhere in China.

Finally, in a show of impressive cynicism, Yahoo! invested US$1 billion (a 40% stake) in Alibaba.com, China's largest e-commerce firm, and transferred ownership of Yahoo! China to Alibaba, in 2005. This has enabled Yahoo! to hide behind Alibaba and argue that decisions about cooperating with Chinese authorities lie with the China-based company, not itself. While such behaviour is technically legal, it raises serious ethical questions.

Good for business?

Yahoo!'s sustained efforts to pre-empt the Chinese Government's desires has not turned its dismal business fortunes around in China. After almost a decade there, it remains quite insignificant as an internet portal compared to local rivals like Sina, Sohu and Baidu; as a search engine it was chosen by only 5% of users as a first choice for searches in 2006. Google, for its part, has not been able to repeat in China the success it has achieved elsewhere in the world, despite bowing to pressure from the Chinese authorities. While Microsoft has seen its results improve since it started courting top Chinese leaders, the US$700 million it expects to make in China in 2007 still only represent 1.5% of its global sales.

Most importantly, alignment with the Chinese authorities is probably a very short-sighted strategy. There is a strong political movement within the creative class inside China fighting for more freedom, and being on the opposite side of that creative class may eventually prove to be very costly to corporations that have chosen to stand with the government. Western IT firms are under no obligation to behave the way they do at present in China, and are increasingly aware that making an exception to their own principles in one single country could affect their business worldwide.

One thing these companies could do is team up to exert pressure on the Chinese Government, which has so far managed to dictate its will by dealing with each company individually and playing them off against each other. In January 2007, Amnesty International joined a multi-stakeholder initiative with a number of companies, including Google, Microsoft and Yahoo!, to develop a set of voluntary principles to promote and respect human rights on the internet. While this is a welcome first step, these companies now need to match their rhetoric with actions, and in turn encourage the push for a more transparent society in China.