Take a look at Capital And Main for the podcast version of this, and the original appearance of these ideas, among far more interesting ones. And to it…
For most Westerners, information technology in China is headlined by the fact that it is censored. If you travel to China, you will find that you can’t load a Google map, check your Instagram likes, send your tweets, or even read articles from the New York Times.
After the riots in 2009 in the western province of Xinjiang, Facebook was blocked, along with other social media services. Chinese citizens like Wang Yi have been sentenced to labor camps for retweeting comments critical of the Communist government, and dissidents have met similar fates. The Communist Party in China maintains a tight rein over information flows, and it is doing its best to control the fluid and unpredictable nature of social media.
But other Western technology companies have struggled in China, too: Uber, once notorious for its ability to muscle a sizable share out of even the most intractable markets, merged with Didi Kuaidi, the Chinese competitor, after finding myriad challenges establishing itself in the country.
Amazon, arguably the Western world’s most successful modern company, *lost* market share from 2011 to 2016, while Alibaba, JD.com and other Chinese competitors continued to grow in the double and triple digits.
What, then, if the censorship piece—which looks, from a Western, free information, democratic lens, to be a political decision—is not only political, but a business decision, as well?
Consider this: The Chinese market is 1.4 billion people, or 18% of the world’s population. As culture, content, and commerce have spread thanks to the Internet and international travel, companies that want to succeed in the long-term have to take a global view.
Nobody understands this better than the Chinese government, which has invested hugely in mining natural resources in Chad, Angola, and other parts of sub-Saharan Africa, while dramatically expanding its telco footprint in the Middle East and Northern Africa.
The customer base for a company in the 21st Century is not simply those where the company is headquartered. It is, rather, the whole world.
At the just-concluded World Economic Forum in Davos, Jack Ma, the charismatic founder of Chinese tech conglomerate Alibaba, said, “I think globalization can not be stopped. Nobody can stop globalization. Nobody can stop trade.”
That is, except China.
The math is simple: Sina Weibo, Baidu, and Tencent—competitors to Twitter, Google, and Facebook, respectively—have an 18% bigger global market of potential customers than their American counterparts, so long as the latter are banned in China.
Didi Kuaidi merged with Uber, invested in Lyft, Ola (the Uber of India) and Grab (the Uber of Southeast Asia). Imagine operating as a global company, and having your government actively supporting you not just through tax incentives and diplomacy, but by outright banning your competitors. Whether this is the explicit intention of the Chinese government or not, it is incredibly effective.
Whatever your point of view on Sino-American relations, this muscular form of interventionist government—of business development as a form of realpolitik—deserves as much prominence in the discussion around China and the future of technology as political censorship does. It has led to a marketplace where Chinese companies have a structural advantage against their competition.
To be sure, political control of business fits tightly into the narrative of a Communist government, and it would be naive to assume that it is *not* about censorship. But Communist governments have censored media in the past. This one feels different: like censorship with business development attached.
As for what the West can do in response: Perhaps the answer lies less in igniting a trade war, as President Trump seems bent on doing by slapping tariffs on Chinese-made solar panels and threatening similar action on other products, and more in fostering an entrepreneurial environment that leads to the creation of truly irresistible goods and services. After all, soft power is contagious.
There are now tens of thousands of youth in China using virtual private networks, or VPN’s, to post and share on Instagram, a Facebook company. And no wonder. That’s where the soccer players and movie stars and fashion icons are. China is in no position to replicate that.
Perhaps free and open society supports a different kind of business, and perhaps that kind of business has something to offer that others do not. Over the long haul, China may have no choice but to move in this direction.
Thanks to Rick Wartzman at Capital and Main for editing and publishing me on this one!