Dysmey Post > Essays > Politics > China Is Not A Market

China Is Not A Market

This is a commentary on the following C|Net article: What Google Might Leave on the Table in China.

Explain this:

These are all quotes from the article above. And they are wrong on their face.

China has 1.4 billion human beings. But, even with the continuing migration from country to city, most of China's people are poor and rural. And, since you cannot fit more a billion people into the cities without massive urbanization of China's east coast (feasible but unlikely), those poor and rural Chinese will remain poor and rural.

The presence of those poor and rural makes a mockery of the idea that China is one big market. The Chinese poor do not buy the stuff that even their own businessmen try to push on them, unless one or the other is subsidized by the State. What makes American businessmen think they can do any better, when they get no subsidies at all? No: The only reason American businessman come to China is to exploit the super-cheap Chinese labor to make stuff to import into the United States and to push on Americans. That is what Walmart and its suppliers do, and why their goods are so cheap.

This illusory market is the problem for American technology companies in doing business in China. If they are hardware companies, like Dell or HP or Cisco, they have to compete with native Chinese companies (like Champion Sail) for the technically savant consumer and businessman, who are a tiny fraction of the Chinese populance. And they are weighed down by layer after layer of parasitic bureaucracy and by security requirements that even the past Republican administration never employed in this country. So, they build their stuff for the American market, where (I suspect) regulation and security requirements do not apply.

As for those "research and development labs", they all belong to the American companies themselves, outsourced to China for its cheap engineering and programming labor. The cost for this cheap, cheap labor is that at least some of those engineers and programmers probably moonlight as industrial spys for China's State Security Ministry, its version of the old KGB. It's only fair: You want to do business there, what is yours becomes theirs.

If they are software companies, they face the spectre of rampant theft of their product, which is all too easy in China, whose intellectual property laws are notorious for their laxity and unpredictability. Unless you are Microsoft, which is clever enough to manipulate China's bureaucracy like a pinball machine; or Apple, who is prudent enough to hire intermediaries who can do the manipulating for it; then it makes no sense whatsoever doing business in China.

It is different for Internet companies like Google and Yahoo! They are compelled to comply with the regulations of the Chinese State.

Remember, that China is still a Communist state, in which law does not exist in any real sense. But it has regulations, and lots of them. Those regulations boil down to the State is god, and no criticism of the least of its policies is permitted. If you are content to live for your belly or your status, the State is content to leave you alone. Otherwise, prepare for a new age of pain. This is why the Great Firewall exists: China cannot enforce its regulatoria on the rest of the world, as the WAPI fiasco in 2006 made clear; but it can screen out the world from its people. And it does.

Also, those poor and rural Chinese — the ones who are too poor to buy American stuff — also have either no access to the Internet, no desire to use the Internet (like a lot of Americans), or access the Internet only through cafés where access is heavily restricted to sites within the Great Firewall. This is the Internet era of China in its maturity, not at its very beginning.

A small, heavily regulated and censored internal Internet is not the kind of market that Google had in mind when it came to China. It is likely that Google is disillusioned with the Chinese market and the antics of the Chinese State, of which the crackery of its local servers (ironically, via a weakness in Internet Explorer, its competitor's software) is the latest. The announcement about Google dropping its censorship is probably Google getting China to give it an excuse to leave the country.

If Google leaves, then it can walk away with the glow of moral rectitude, that Google is once again living up to its motto Don't be evil. This may not help its bottom line for awhile. But it will gain the respect of the programming community, especially the open-sourcers (who still call themselves by their traditional name hackers) who consume and improve upon Google Apps, Chrome, Firefox (which Google subsidizes) and its other low-level products. This can only help Google in the long term — to the detriment of its competitors and their cheap, cheap labor.

By the way, you cannot speak out …

… against repressive internet regimes such as those in China, while at the very same time being a strong supporter of ACTA which could push for very similar secondary liability rules for ISPs in the US that are the foundation of Chinese internet censorship.

… and also …

… knocking China for not doing enough to stop copyright infringement online, complaining about their weak and ineffectual measures.

Well, you have the constitutional right to do so, but that becomes irrelevant when speaking out in that way makes you look like a hypocrite and a fool, even to the Chinese. Yeah, you can speak out all you want, but nobody will pay you any attention: even if you are the congressional representative to the Disney/Apple concern and the head of a powerful congressional committee.

Written by Andy West on 26 January 2010. Updated 6 April 2010.