China Shuts Down the Internet, But Here's Why It May Backfire

It has been a strange week for the internet and China. First, almost 6,000 people were arrested for “internet porn,” most of which were tied to a site featuring erotica (not porn).  Government censors have reportedly cracked down on sites such as Sina Weibo (the Chinese Twitter) and are closely monitoring sites that allow user-generated content, including deleting hundreds of thousands of posts. The latest government smack down on social sites followed a tumultuous week in Chinese politics where Bo Xilai was ousted and pictures of tanks on the streets sparked rumors of a government coup. 

Now the interwebs are aflutter because it looks like the government may have actually turned off the internet – basically created a virtual blockade via what experts call “The Great Firewall.” People outside the country couldn’t access Chinese sites, while Chinese users were unable to access international sites for approximately one hour.

While international concerns over censorship and control are hardly new tactics of the Chinese government, this particular case highlights a tension over a very real asset (the internet) that drives so much Chinese innovation and economic success. Misteps by the government could cripple the very thing that has made China so remarkable in the face of a communist regime – its staggering economic growth. With more internet users than any other country in the world (nearly 500 million) and an online retail market set to be valued at $364 bn by 2015, disturbing the internet in China risk disrupting a central market.

There are some basic facts I need to get out of the way here before I say more. Censorship is bad.  Dictatorship is bad. Human rights abuses are bad. Bad. Bad. Bad. My stance on these issues is crystal clear and I think an analysis that devolves solely into repeating these facts about China misses the opportunity for a richer, more nuanced discussion.

Economic growth and globalization isn’t all good and it isn’t all bad. It pulls some people out of poverty, creates assets that address the public good (like companies that cure disease, create items that get people clean water, etc.). Growth can raise the standard of living of entire generations. It also has massive downsides. It can exponetially increase income disparities, lead to exploitation, and many other problems.

China has remakably shifted global power relations between the East and the West. Along with India, China has managed to radically change its economic landscape by supplying the global economy with labor and by using free enterprise to build economies to (at least somewhat) support their staggering populations. The internet has been at the heart of this effort. If China takes down the internet in order to maintain a façade of social control, not only does it stand to drive activists and the international community to more drastic action, but it stands to cripple its own economic machine. 

Here are three reasons the internet is important to Chinese economic prosperity:

1) Virtual Borders and Foreign Direct Investment (FDI):  If your borders are not secure, your FDI will go down. Investors want to make sure that their money is safe.  And while these discussions are centered around virtual borders, it’s valuable to note that in the tech space this can clearly be defined as access to data, servers, and users.  If you show that virtual borders are not reliable, your FDI goes down.

2) Stifling User Generated Content Stifles Innovation: This one is pretty obvious. If you stifle user generated content, whether that is commenting, social sharing or discussion, this doesn’t just control the flow of information on a specific subject. It also stifles massive innovation, from solving specific problems to establishing teams that ultimately found start-ups that revolutionize industries.

3) You Could Kill Tech – An Anchor Sector: One of the major engines of Chinese economic growth has been tech – whether that’sites like Alibaba, massive hardware manufacturing centers, or the rest of the activity making up the hundreds of billions of dollars of business the country is doing online. This is obvious, but shutting down the internet means you are losing hundreds of thousands of dollars for every hour you’re experimenting with tightening up those virtual borders.

It will be interesting to see how the situation in China evolves in the next decade on a variety of levels. But considering the impact and the power of the internet – not just on those fundamental issues of self-expression and self-determination – but also on the economy and innovation, the Chinese government would be wise to consider the implications of its actions.