Doing business in China: March 2010 Archives

By Michael Bristow | BBC News
March 29, 2010

By Miguel Helft and David Barboza | The New York Times
March 22/23, 2010

Just over two months after threatening to leave China because of censorship and intrusions from hackers, Goolge on Monday closed its Internet search service there and began directing users in that country to its uncensored search engine in Hong Kong.

While the decision to route mainland Chinese users to Hong Kong is an attempt by Google to skirt censorship requirements without running afoul of Chinese laws, it appears to have angered officials in China, setting the stage for a possible escalation of the conflict, which may include blocking the Hong Kong search service in mainland China.

The state-controlled Xinhua news agency quoted an unnamed official with the State Council Information Office describing Google's move as "totally wrong."

"Google has violated its written promise it made when entering the Chinese market by stopping filtering its searching service and blaming China in insinuation for alleged hacker attacks," the official said.

The Chinese Foreign Ministry said on Tuesday that the government will handle the Google case "according to the law," Reuters reported. The ministry spokesman, Qin Gang, said at a regular briefing in Beijing that Google's move was an isolated act by a commercial company, and that it should not affect China-U.S. ties "unless politicized'' by others.

Google declined to comment on its talks with Chinese authorities, but said that it was under the impression that its move would be seen as a viable compromise.

"We got reasonable indications that this was O.K.," Sergey Brin, a Google founder and its president of technology, said. "We can't be completely confident."

Google's retreat from China, for now, is only partial. In a blog post, Google said it would retain much of its existing operations in China, including its research and development team and its local sales force. While the China search engine, google.cn, has stopped working, Google will continue to operate online maps and music services in China.

Google's move represents a powerful rejection of Beijing's censorship but also a risky ploy in which Google, a global technology powerhouse, will essentially turn its back on the world's largest Internet market, with nearly 400 million Web users.

"Figuring out how to make good on our promise to stop censoring search on google.cn has been hard," David Drummond, Google's chief legal officer, wrote in the blog post. "The Chinese government has been crystal clear throughout our discussions that self-censorship is a nonnegotiable legal requirement."

Mr. Drummond said that Google's search engine based in Hong Kong would provide mainland users results in the simplified Chinese characters used on the mainland and that he believed it was "entirely legal."

"We very much hope that the Chinese government respects our decision," Mr. Drummond said, "though we are well aware that it could at any time block access to our services." Some Western analysts say Chinese regulators could retaliate against Google by blocking its Hong Kong or American search engines entirely, just as it blocks You Tube, Facebook and Twitter.

Google's decision to scale back operations in China ends a nearly four-year bet that Google's search engine in China, even if censored, would help bring more information to Chinese citizens and loosen the government's controls on the Web.

Instead, specialists say, Chinese authorities have tightened their grip on the Internet in recent years. In January, Google said it would no longer cooperate with government censors after hackers based in China stole some of the company's source code and even broke into the Gmail accounts of Chinese human rights advocates.

"It is certainly a historic moment," said Xiao Qiang of the China Internet project at the University of California, Berkeley. "The Internet was seen as a catalyst for China being more integrated into the world. The fact that Google cannot exist in China clearly indicates that China's path as a rising power is going in a direction different from what the world expected and what many Chinese were hoping for."

While other multinational companies are not expected to follow suit, some Western executives say Google's decision is a symbol of a worsening business climate in China for foreign corporations and perhaps an indication that the Chinese government is favoring home-grown companies. Despite its size and reputation for innovation, Google trails its main Chinese rival, Baidu.com, which was modeled on Google, with 33 percent market share to Baidu's 63 percent.

The decision to shut down google.cn will have a limited financial impact on Google, which is based in Mountain View, Calif. China accounted for a small fraction of Google's $23.6 billion in global revenue last year. Ads that once appeared on google.cn will now appear on Google's Hong Kong site. Still, abandoning a direct presence in the largest Internet search market in the world could have long-term repercussions and thwart Google's global ambitions, analysts say.

Government officials in Beijing have sharpened their attacks on Google in recent weeks. China experts say it may be some time before the confrontation is resolved.

"This has become a war of ideas between the American company moralizing about Internet censorship and the Chinese government having its own views on the matter," said Emily Parker, a senior fellow at the Center on U.S.-China Relations at the Asia Society.

In China, many students and professionals said they feared they were about to lose access to Google's vast resources.

In January, when Google first threatened to leave China, many young people placed wreaths at the company headquarters in Beijing as a sign of mourning.

The attacks were aimed at Google and more than 30 other American companies. While Google did not say the attacks were sponsored by the government, the company said it had enough information about the attacks to justify its threat to leave China.

People, inside and outside of Google, investigating the attacks have since traced them to two universities in China: Shanghai Jiao Tong University and Lanxiang Vocational School. The schools and the government have denied any involvement.

After serving Chinese users through its search engine based in the United States, Google decided to enter the Chinese market in 2006 with a local search engine under an arrangement with the government that required it to purge search results on banned topics. But since then, Google has struggled to comply with Chinese censorship rules and failed to gain significant market share from Baidu.com.

Google is not the first American Internet company to stumble in China. Nearly every major American brand has arrived with high hopes only to be stymied by government rules or fierce competition from Chinese rivals.

After struggling to compete, Yahoo sold its Chinese operations to Alibaba Group, a local company; eBay and Amazon never gained traction; and Microsoft's MSN instant messaging service badly trails that of Tencent.

Google's departure could present an opportunity for Baidu, whose stock has soared since the confrontation between Google and China began. It could also give a chance to Microsoft, a perennial underdog in Internet search, to make inroads in the Chinese market. Microsoft's search engine, Bing, has a very small share of the market.

Miguel Helft reported from San Francisco, and David Barboza from Shanghai. Steve Lohr contributed reporting from New York.

>> Original Report

By Christopher Bodeen - Associated Press | via UNCENSORED Yahoo! News
March 22, 2010

A growing number of foreign businesses in China feel shut out under new government policies promoting homegrown technology, according a survey released Monday.

Fully 38 percent of foreign firms questioned by the American Chamber of Commerce say they feel increasingly unwelcome to participate and compete in the Chinese market.

That marks a 12 percentage point rise from the last survey taken just a few months before. Over that period, the government has increasingly steered business toward state-owned companies, ostensibly as part of efforts to boost innovation among Chinese firms.

The chamber said it strongly supports promoting indigenous innovation, but believes current policies give an unfair advantage to domestic companies that enjoy strong government backing and political connections.

"Domestic innovation creates the potential for more partnerships between U.S. and Chinese firms in China and globally. However, limiting market participants and reducing competition does not encourage innovation," AmCham China President Michael Barbalas said.

The chamber's data, gathered earlier this year from 203 companies, portrays a steadily worsening environment for foreign companies in China over the past three years. Only 23 percent said they felt unwelcome in the chamber's 2008 survey.

The disquiet was most pronounced among foreign firms specializing in high-tech and information technology, with 57 percent saying they felt negatively affected by government policies. In that sector, 37 percent of foreign companies said they were losing sales as a result of Chinese government policies.

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By Radio Free Asia
March 17, 2010

But one year later, Gao Zhisheng remains missing.

China's foreign minister Yang Jiechi has referred to a "sentencing for subversion" in the case of rights lawyer Gao Zhisheng, who has been missing for more than a year, but the minister was still tight-lipped about his exact whereabouts.

"Gao Zhisheng has been sentenced for committing the crime of subverting state power," Yang told reporters at a joint news conference with visiting British Foreign Secretary David Miliband in Beijing. U.S. President Barack Obama has also raised Gao's case.

He didn't say whether the sentencing referred to a suspended sentence handed down at a one-day secret trial in 2006, or to a new charge against Gao--once a top defense lawyer lauded by the ruling Communist Party for his work on behalf of the least privileged in Chinese society.

Gao's wife, Geng He, was granted political asylum in the United States recently, along with the couple's two children. His relatives back in China said Yang's statement wasn't good news.

"We are waiting to see what happens," said Gao's Shaanxi-based older brother, Gao Zhiyi.

Back in prison

"We'll wait until there is some fresh news. If it's true about the sentencing, that wouldn't be a good result."

Gao's nephew said he had heard rumors that Gao has been seen in Beijing in the past three months.

On Wednesday, the BBC quoted Gao Zhiyi as nervously saying he had spoken to his brother on the telephone within the last three weeks and that "I know that he's fine."

"He [Gao Zhisheng] said he's quite well, everything's fine, and told the family not to worry," his brother was quoted as telling a visiting BBC crew. "Please go home soon, don't stay for too long. Because if the local authority finds out, it won't be nice."

Fan Yafeng, a legal scholar at the official China Academy of Social Sciences (CASS), said the government's handling of enquiries about Gao has been very messy, ever since the lawyer's disappearance .

"I think it's most probably to do with the original conviction in 2006, and they've done a bit more paperwork on that, and put him back in prison again," Fan said.

But in another case, Beijing-based lawyer Li Dunyong is currently under suspended sentence, and any form of further criminal activity would lead to further charges and require a legal process including a trial.

"If they want to cancel the suspended sentence they have to do it through a court," Li said.

"They wouldn't necessarily inform the family. A lot of courts are now passing sentences without informing the person's relatives," he said.

Foreign minister Yang denied allegations that Gao had been tortured, as feared by his family, supporters and fellow activists.

"His relevant rights based on this law have been protected, so the question of torture does not exist," Yang said.

Fears of torture

A torture investigator at the United Nations said last week he was very concerned about Gao's fate, while an international group of lawyers has called on the U.N. Working Group on Arbitrary Detention to declare Gao's disappearance a violation of international law.

Hong Kong Democratic legislator Albert Ho, who has led a campaign of lawyers calling for Gao's release, signed a petition from a global legal team last week, calling on the United Nations to condemn Gao's detention as a violation of international law.

"At the very least they will look into this matter, because China is a member of the United Nations," Ho said.

"They can't just ignore it, especially as China has already said that Gao Zhisheng is in such-and-such a place."

"This shows that the authorities have him under detention. The Chinese government hasn't been able to shirk responsibility for him since his disappearance on Feb. 4 last year."

A U.N. spokesman on human rights said that a number of human rights departments handle complaints, and that they receive a great many petitions and letters, so any response would take time.

Gao's case has drawn international attention for the unusual length of his disappearance and for his own earlier graphic reports of the torture he said he endured in detention.

Born in poverty, Gao became a member of the Communist Party and was named by the government a decade ago as one of the 10 best lawyers in China.

He then ran afoul of the authorities by taking on cases related to corruption, religious freedom, and how the government has treated the Falun Gong movement--which Beijing has labeled a dangerous cult.

His law license was taken away, and in 2005 he resigned his Party membership.

He was convicted of inciting subversion in a secret trial, given a suspended sentence, and released in 2006. Gao gave a graphic account of torture he said he suffered during another detention in 2007.

Civil rights lawyers and international rights advocates say the entire Chinese legal profession is under increasing strain, with many law firms losing their licenses--or being threatened that they will have their licenses revoked--should they choose to take on sensitive cases.

Original reporting in Cantonese by Hai Nan and in Mandarin by Ding Xiao. Cantonese service director: Shiny Li. Mandarin service director: Jennifer Chou. Translated from the Chinese and written for the Web in English by Luisetta Mudie. Edited by Sarah Jackson-Han.

>> Original Source

By Michael Wines | The New York Times
12 March 2010

One of China's top Internet regulators warned bluntly on Friday that any move by Google to stop censoring its Chinese search engine would be "irresponsible" and would draw a response from Beijing.

The statement by Li Yizhong, China's minister of industry and information technology, followed a statement on Wednesday by Google's chief executive officer, Eric Schmidt, that "something will happen soon" in the two-month standoff over Internet censorship between his company and the Chinese government.

But it was no more clear on Friday what that something might be than it was two months ago, when Google executives first threatened to pull out of China unless the government stopped forcing it to censor the results of users' Internet searches.

Chinese journalists outside Google's Beijing offices on Friday said they had heard the company was planning to close its doors here. But a Google spokeswoman denied that in an article on Thursday in the government-run English-language newspaper, China Daily.

Google's China businesses "are still at normal," and rumors that the company had ordered its Chinese advertising agencies to cease work were not true, the spokeswoman, Marsha Wang, told the newspaper. At Google's headquarters in Mountain View, Calif., another spokeswoman, Jill Hazelbaker, declined to comment on the statements from Mr. Li or any other aspect of its dispute with China.

A company spokesperson said Wednesday that Google expected the dispute to be settled "in weeks, not months."

Speaking on the sidelines of the annual meeting of the National People's Congress, China's party-controlled legislature, Mr. Li said that he hoped for an amicable resolution to the standoff. But he gave no indication that the government would ease the censorship rules that are at the heart of Google's ultimatum.

"I hope Google will abide by Chinese laws and regulations," The Associated Press quoted Mr. Li as saying. But "if you want to do something that disobeys Chinese law and regulations, you are unfriendly, you are irresponsible and you will have to bear the consequences."

Whether the company chooses to remain in China, he added, will be up to Google.

Since it opened shop in China four years ago, Google has captured roughly 30 percent of the search market in the world's largest assemblage of Internet users, and it is a favorite among the better-educated and wealthier classes that advertisers covet. But the company has long been uncomfortable with Chinese demands that it censor search results to prevent users from viewing some kinds of content, notably political matters that the government deems unacceptable.

Google's Chinese Web site does censor some of its content, but its restrictions are generally less onerous than elsewhere, and the censored items are clearly identified as having been banned by the authorities.

>> Complete Report

Michael Evans, Giles Whittell | TimesOnLine (United Kingdom)
March 08, 2010

Urgent warnings have been circulated throughout Nato and the European Union for secret intelligence material to be protected from a recent surge in cyberwar attacks originating in China.

The attacks have also hit government and military institutions in the United States, where analysts said that the West had no effective response and that EU systems were especially vulnerable because most cyber security efforts were left to member states.

Nato diplomatic sources told The Times: "Everyone has been made aware that the Chinese have become very active with cyber-attacks and we're now getting regular warnings from the office for internal security." The sources said that the number of attacks had increased significantly over the past 12 months, with China among the most active players.

In the US, an official report released on Friday said the number of attacks on Congress and other government agencies had risen exponentially in the past year to an estimated 1.6 billion every month.

The Chinese cyber-penetration of key offices in both Nato and the EU has led to restrictions in the normal flow of intelligence because there are concerns that secret intelligence reports might be vulnerable.

Sources at the Office for Cyber Security at the Cabinet Office in London, set up last year, said there were two forms of attack: those focusing on disrupting computer systems and others involving "fishing trips" for sensitive information. A special team has been set up at GCHQ, the government communications headquarters in Gloucestershire, to counter the growing cyber-threat affecting intelligence material. The team becomes operational this month.

British and American cyber defences are among the most sophisticated in the world, but "the EU is less competent", James Lewis, of the Centre for Strategic and International Studies, said. "The porousness of the European institutions makes them a good target for penetration. They are of interest to the Chinese on issues from arms sales and nuclear non-proliferation to Tibet and energy."

The lack of routine intelligencesharing between the US and the EU also contributes to the vulnerability of European systems, another analyst said. "Because of Britain's intelligence-sharing relationship with America our systems have to be up to their standards in a way that some of the European systems don't," he explained.

Jonathan Evans, Director-General of MI5, warned in 2007 that several states were actively involved in large-scale cyber-attacks. Although he did not specify which states were involved, security officials have indicated that China now poses the gravest threat. Beijing has denied making such attacks.

Robert Mueller, FBI Director, has warned that, in addition to the danger of foreign states making cyber-attacks, al-Qaeda could in the future pose a similar threat. In a speech to a security conference last week, Mr Mueller said terrorist groups had used the internet to recruit members and to plan attacks, but added: "Terrorists have \ shown a clear interest in pursuing hacking skills and they will either train their own recruits or hire outsiders with an eye towards combining physical attacks with cyber-attacks."

He said that a cyber-attack could have the same impact as a "well-placed bomb". Mr Mueller also accused "nation-state hackers" of seeking out US technology, intelligence, intellectual property and even military weapons and strategies.To help to fight the growing threat, the Office of Cyber Security, set up last year as part of the Government's national security strategy, liaises with America's so-called cyber czar, Howard Schmidt, who was appointed by President Obama to protect sensitive government computers.

British officials said that everyone in sensitive jobs had been warned to be especially cautious about disseminating intelligence and other classified information. Whether British intelligence is involved in retaliatory attacks is never confirmed. However, officials said that there was a significant difference between being part of an information war and indulging in aggressive attacks to disrupt another country's computer systems.

Dr Lewis said that neither the US nor any of its Western allies had formed an effective response to the Chinese threat, which has its origins in a massive boost to Chinese technology ordered by Deng Xiaoping, the late Chinese leader, in 1986. The West's own cyber offensives have so far been directed largely at terrorists rather than nation states, giving China virtually free rein to penetrate Western systems with its own world-class hackers and increasingly popular Chinese-made components. "You almost have to admire them," Dr Lewis said. "They have been very consistent in their goals."

>> Original Source

By Michael Wines | The New York Times
March 02, 2010

Chinese security agents in Sichuan Province detained Liao Yiwu, a prominent author and critic of the government, as he prepared to fly Monday to a literary festival in Germany, human rights activists said.

It was the 13th time Mr. Liao had been prevented from leaving the country. The Associated Press reported that he had been placed under house arrest after being questioned by security agents for four hours.

"How can this happen?" The A.P. quoted him as saying. "It's a cultural event, nothing political. Such drama!"

Telephone calls on Tuesday to Mr. Liao's home in rural Chengdu produced a recording saying that the line was temporarily unavailable. Calls to his cellphone went unanswered.

Mr. Liao was removed from a plane at Chengdu's airport as he prepared to fly to Germany to attend lit.Cologne, one of Europe's largest literary festivals, where he was to read from one of his books, "Miss Hello and the Farm Emperor: Chinese Society From the Bottom."

"The reason for inviting Mr. Liao was simple: he's a great writer," Traudle Berger, a spokeswoman at the Cologne Festival, said in an interview on Tuesday. "And China should be proud of such a great writer."

Ms. Berger said Mr. Liao's scheduled reading would still take place, with an actor assuming his role. Proceeds from the ticketed event will be donated to the human rights group Amnesty International, she said.

Last September, Mr. Liao was barred from traveling to Berlin to attend an event affiliated with the Frankfurt Book Fair, at which China was designated the honored guest.

A poet, screenwriter and new-journalism author, Mr. Liao, 51, is one of China's best known and most outspoken writers. Many of his works tell stories of people who have been left behind in the nation's rush to economic and political prominence, characters that include prostitutes, a grave robber, and a lavatory attendant.

His 2008 book "The Corpse Walker," another view of Chinese society's lower rungs, was published to international acclaim. His works are banned in China, but he has gained a large underground following, and pirated versions of his works can be found in some Chinese bookstores.

Mr. Liao was imprisoned for four years in the early 1990s after writing an epic poem, "Massacre," which denounced the Chinese government's suppression of the 1989 Tiananmen Square protests. In December 2007, when he traveled to Beijing to receive an award from the Independent Chinese PEN Center, a writers' rights organization, he was detained by the police and sent back to Chengdu.

In a text-message exchange last month, Mr. Liao said he had repeatedly met with Chengdu security officials to negotiate for permission to attend the Cologne event, but was told that he had been blacklisted by Beijing officials and forbidden to travel abroad.

In a Monday interview with the German network Deutsche Welle, Mr. Liao said he was seated on the plane at Chengdu's airport on Monday morning when a flight attendant approached and told him that "someone is looking for you."

"I asked who it was, and she said it would be best if I got my luggage," the newspaper quoted him as saying. "I got my bags, and while I was walking to the cabin door, I saw a police officer."

Mr. Liao said the police told him, "You cannot continue doing whatever you want."

"I told them there will be many readers at the festival," he said. "I would like to go and meet them and read some of my own pieces and play the traditional Chinese mouth organ, the xiao. I said it was purely a literature festival and nothing political. They said they understood and were only doing their job following orders from the top."

On Monday, the PEN American Center, which like the Chinese organization is one of 145 affiliates of the International PEN Center, called on China's president, Hu Jintao, to lift restrictions on Mr. Liao and other writers.

"It is hard to figure what the Chinese government hopes to accomplish by preventing one of its most compelling literary voices from meeting with international colleagues and readers," Larry Siems, who directs the American center's Freedom to Write program, said in a written statement.

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