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China’s Great Firewall: A Serious Pain in the Neck for European and US Companies

 
 

On June 20, the European Union Chamber of Commerce in China released its Business Confidence Survey 2018. Based on a total of 532 members’ responses, the report finds that for many European companies in China, doing business has become more difficult and challenging over the past year “due to longstanding regulatory barriers, market access restrictions, and unequal treatment.”

Among many issues, internet restrictions cast a particularly long shadow, as 64 percent of respondents in 2018 (a 15 percent increase from 2017) state that “unstable connections, slow internet speeds and restricted access have seriously impacted their business.”

According to the report, 58 percent of respondents reported difficulties in exchanging data and documents with their headquarters, partners, and customers; 50 percent saw lower productivity in the office; 49 percent pointed to an inability to search for information, and 16 percent saw lower productivity in R&D and manufacturing. Such difficulties are especially prominent during important political events, such as the 19th National Party Congress, when internet controls are tightened even further.

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Meanwhile, China’s increasingly harsh crackdown on virtual private networks, or VPNs, the only tool for netizens in China to bypass the Great Firewall, has added significant pressure on European companies, too.

Since only expensive state-sanctioned VPN services are permitted for business use now, the cost increase and concerns about data security have become “a real deterrent to foreign investments,” particularly for small and medium-sized enterprises (SMEs).

In addition, the current “lack of transparency” over the implementation of China’s Cybersecurity Law is also generating “significant uncertainties among foreign firms,” the report said.

This latest survey done by European Chamber is highly in line with another survey done by the American Chamber of Commerce in China (AmCham China) in late 2017.

According to AmCham China’s 2018 Business Climate Survey, slow cross-border internet speeds, inability to access certain online tools, and issues with internet access via VPN as well as  internet censorship are top IT-related concerns for American companies. For example, 47 percent of a total of 411 respondents state that slow cross-border internet speeds have had an “extremely negative” impact on their company’s competitiveness and operations in China.

In fact, early in 2016, the Office of the United States Trade Representative (USTR) made it clear that China’s Great Firewall presented a trade barrier to American suppliers, stating that “China’s filtering of cross-border internet traffic has posed a significant burden to foreign suppliers” in its annual National Trade Estimate Report.

The two recent surveys show that China’s authorities have decided to add to the internet burden for companies — foreign firms as well as hundreds of thousands of Chinese local companies — rather than relaxing it over the two years.

Ironically, on various occasions, China’s top authorities have repeatedly vowed to make China a “strong cyberpower” and a “digital country.”  In April 2018, for example, China opened the first Digital China Summit in Fuzhou, provincial capital of east China’s Fujian Province. In a congratulatory letter to this summit, Chinese President Xi Jinping called for “fostering new driving forces through informatization, to promote new development and make new achievements,” according to Xinhua.

But when Chinese top leaders talk of becoming a “strong cyberpower,” it’s increasingly unclear whether they really mean to build a “strong cyber censor.”

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