China’s growth policies and free, unfiltered internet access for all just don’t go together. It’s not in Beijing’s best interests to give outsiders unfettered access to its population – or to give everyone inside China free access to the world. A fractured web where entire populations of users can be ring-fenced and access can controlled brings the online world in step with existing policy.

No other form of media or infrastructure in the PRC is exempt from state planning – it is illogical to assume that the internet would enjoy special privileges. Mao ordered the gauge of the railroad track linking China and Russia changed to prevent large-scale invasions using the nation’s own infrastructure. The internet has the potential to be an even more power force. The obstacles preventing Beijing from regulating the internet in the past have been technological – and it seems that they’ve got them licked now. If China is strong then the global internet is fractured and filtered. China has the muscle and the method – they can completely firewall a quarter of the planet.

It’s not the end of the world. It’s just policy.

It’s probably not a sign of the apocalypse. Maybe it’s not a big deal at all – judging by the round-the-clock media coma we’re seeing devoted to the China’s month long shut down of 3 of the big ‘Lifestyle 2.0’ sites for American users – Facebook, Twitter and YouTube (the last one has been blocked in China since March).

It does mean, however, that the world’s fastest growing online market (China) is now one degree of separation further away from the world’s richest producer – and consumer – of online content and services (US). The world wide web is no longer one world. The Chinese internet already has the critical mass needed to thrive and develop on its own, independent of western media brands – even Twitter. There is no mechanism for pressuring or coercing the Chinese government. Economically, a fractured web could very well do more benefit than harm to China. Simply put – we’re not witnessing a momentary hiccup or infrastructure malfunction. This is policy. Deal with it.

So what will this mean to you?

Let’s say you’re a savvy American doing business in China or Chinese targeting an international market. The underlying forces driving your China business are your ability to move across cultural boundaries and to exploit positive economies of scale for marketing and operational costs. Your goal is to take an existing operation and expand to or from China as part of a continuous, incremental global expansion plan.

Well, Comrade, I got a steamin’ bowlful of dystopia heading your way. A fractured web – where national bureaucracies filter access to the internet – will be a lot more far-reaching than many people may understand. Not being able to get Tweeted may sound like a minor thing, but owners and managers have to start planning for a future where you can’t access your Gmail, company site, private server or business email when you are in Shanghai or Beijing. The problem isn’t that China will do all of it – it’s that they can do any of it. We’ve been given notice – and demonstrations. The onus now falls to international managers to process the new reality and start making provisions.

US-China Trade implications of a fractured web.
Let’s take a look at a few of the big business issues that could arise from a policy that restricts internet access in China.

Possible trade issue? No one in Washington seems to eager to speak on the issue because A) it still sounds like slackers twittering when they should be working, B) this issue has the potential to get very ugly very fast (freedom of speech & human rights vs. decadent porno filth corrupting youth), and C) we’ll be doing it in the US in a few years. HOWEVER, sites like Youku and Tudou that violate copyrights could be an interesting test case in the US. Retaliation is ALWAYS an option.

Getting your brand message across to a Chinese market will still be possible, but will be harder and more specialized. You’ll be spending money you can’t track, which makes some people queasy. Social media marketing is messy under the best of circumstances, but doing it in Mandarin on platforms you’ve never heard of is pretty challenging. The bar will be higher, and it will be worthwhile for fewer and fewer firms.

Trade barriers may protect western markets – or at least parts of it. China is growing faster, but the real money is still in the highly developed western markets where mainstream buyers spend big on authentic brands. China has demonstrated a real talent for online marketing and networking – and it was one of the areas where Chinese entrepreneurs had a real shot at going global. The wider the gap between the two internet universes, the less likely that Chinese companies can make the jump. It’s like Marvel and DC. It’s not easy to cross over. (The same is true for US companies that want to go to enter China, but western firms with an existing presence in China should be able to manage the change easily.)

China allowed to develop strong media players – and it’s own internet trends. The fractured web gives breathing room to big names like Youku and Xiaonei – and a host of smaller newer outfits we haven’t heard of yet. They will likely start to attract a lot of attention from international VCs that are betting on the Chinese internet – so look for lots of startups and a highly fragmented market that will take its time finding a direction. China will be a vibrant incubator of internet creativity – but it will be hard for anyone to get critical mass.

China as mobile specialist. Chinese users will continue to spend much more time on mobile screens, and their sites and platforms will develop and cater to mobile interface. Americans – stuck in ridiculous, bloated telecom contracts – will rely more and more on keyboards. Email and reading text for us – instant messaging and images for them.

This was bound to happen anyway – whether the Chinese did it first or someone else. Bush Cheny would have done it if they understood enough about the interwebs to know how important it was. There may be opportuntieies for some, challenges for others. Thje losers will be the ones paralyzed by the shift – or betting on the wrong direction.

Source: China Solved (August 12, 2009)