Western companies slam China’s Internet firewall

The American and European Chambers of Commerce in China released separate surveys in the past two days showing that 83 and 86 percent of their members respectively believed that those restrictions – under a system known as China’s Great Firewall – were having a negative impact on their business operations.

Four out of five European companies surveyed also reported that the business environment had deteriorated further since controls were tightened at the start of this year.

In recent weeks, Gmail and some virtual private networks — the tools many people use to jump the firewall — have been blocked or restricted, as President Xi Jinping wages a concerted campaign to control the Internet, block criticism and prevent the infiltration of “Western values” he fears could undermine the Communist Party’s rule.

In a sharply worded statement, European Chamber President Joerg Wuttke said the measures could backfire on China.

“These worrying trends illustrate how excessive tightening of Internet controls can choke business growth and stifle investment in technology and R&D – areas which are crucial for China’s development,” he said.

“This is compounded by the fact that these measures are also discouraging much-needed foreign talent from relocating here. Restricted access to key Internet tools is not merely an unfortunate inconvenience for individuals – it is an increasingly onerous cost of doing business here that many companies are finding harder to bear.”

Mark Duval, President of the American Chamber, AmCham China, said his conversations with members showed most were frustrated with the slow Internet speeds experienced in China, and their ability to transfer data and files quickly, rather than the blocking of specific sites.

While domestic Web sites can be accessed relatively quickly, even those foreign Web sites that are allowed here tend to load slowly. Using a VPN to access blocked sites also typically involves a sacrifice of browsing speed. China ranks 93 rd in the world in terms of peak Internet speed, with connectivity rates less than quarter of those in Hong Kong, which tops a list compiled by cloud computing company Akamai.

The European survey showed that 13 percent of respondents had recently deferred R&D investment in China or had become unwilling to set up R&D operations here since restrictions on the Internet were tightened this year.

“It’s obvious that information-based, global-facing businesses will fuel China’s growth in the years ahead, and it is in China’s own interests to ensure that Internet supervision does not hamper legitimate, value-added commercial activity,” Wuttke said.

“Remember, this is not just a problem for international business — we know from extensive conversations with the Chinese public and the private sector that many domestic companies are just as frustrated as our members.”

The speed of Internet connections is far from the only problem foreign companies face in China. Sixty percent of U.S. companies surveyed said the risks of intellectual property leakage or IT/ data security threats were greater in China than elsewhere in the world.

More generally, nearly half, or 47 percent, said foreign businesses are less welcome in China than before, while increasing Chinese protectionism was ranked among the top five challenges by 30 percent of the companies surveyed.

But the biggest challenges for American companies continue to revolve around labor issues — labor costs, as well as a shortage of qualified employees and of qualified management. For the first time, a majority of companies, 53 percent, said they had experienced difficulties in recruiting executive talent because of air pollution. That rose from just 19 percent in 2010.

Nevertheless, there is still plenty of money to be made in China, and Duval said executive recruitment firms had told him they could still find plenty of people willing to come to China to advance their careers. Of the companies surveyed by AmCham, some 61 percent expected revenues to rise in 2015, down from 81 percent in 2012.

 

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