Chinese Tech Firms Forced to Choose Market: Home or Everywhere Else
nytimes.com
nytimes.com
And too boot, it's amazing that Chinese companies are still doing a really poor job of figuring out how to connect well to the outside world. They'll turn to you asking why your API/whatever isn't working for their developers, and then expect that you have some miracle solution to get rid of the 200-400ms of latency (each way!) across the firewall, as well as a cure for the hours of it just dropping all traffic. Perhaps the Party has scared them enough they're not willing to chance employees doing illegal things on the company's connection...
The firewall is a fickle, cantankerous beast that, to me, is really at heart of this matter. Because they want throats to choke for every packet on Chinese soil, they've created this huge barrier that touches everything you might want to do in China or with a Chinese company.
actually, it is quite interesting that the great firewall can totally block most VPN's when the gov. wants it to, but most of the time they choose not to. they just make it enough of a pain for normal people to give up, yet they leave just enough access for those who really need international internet access to get by with VPN (albeit barely).
Some examples: - Dropping GRE packet so PPTP VPN is not possible - Send TCP RST to both end when a connection to dport=22 generated too much traffic
Also from my understanding, it's not that hard to use some basic machine learning techniques to classify the traffic. That's the reason why Tor project developed obfsproxy to obfuscate the traffic flow.
obfuscation of traffic to make it not look like VPN can be helpful, but traffic flow analysis based on source/origin IPs, timing and kbps/pps can still identify what looks like a VPN.
And their office has 4? different ISPs, so I know it's a bad day on the firewall when they're working from HK.
also the chinese version of the FCC will come along with their partyvan.
when you are dealing with a government where non-licensed non-compliant ISP type things will be shut down at OSI layer 1 by armed men with carbines, you have other problems.
Then consider possible alternatives.
In Shenzhen, there was a moment in the hotel where Google worked for about 10 minutes. I was elated but then disappointed when that brief window of openness ended.
A financial services "startup" in sz manages to run a VPN with some sort of official permission. Not sure what sort of connections made this possible...
Width of the Taiwan Strait = 180 km (coast to coast)
Height of antenna required for direct line of sight = 2,542 m or ~8,400 ft. This would be one antenna on a tower and one on the ground.
Tallest antenna in the world is on top of the Burj Khalifa skyscraper at 2,722 ft.
If you split the difference (so each antenna just sees the other at sea level), the tower would need to be 635m tall or 2,088 ft. So if you put a Burj Khalifa tower on each coast you could make it work.
The problem is when you have a global endpoint that Chinese customers want to access. What do you do then? You either have to figure out how close you can get your services to China and hope and pray they don't whack your traffic one day, or take the bigger risk of deploying your endpoint in China. Either is fraught, but if you want to service that population...
And remember, no multicast traffic in China...
The Great Firewall is only one aspect of the problem. Most companies would we willing to host their service within the firewall and deal with it that way. The problem is that running a service within the firewall requires going through the Chinese bureaucracy that is inherently hostile to foreign companies and internet companies.
Google executives long suspected China of using local regulations and the GFW to show favoritism to local companies:
"[T]he Chinese government against Google seemed less to do with regulations and more like harassment. The sanctions appeared directly tied to how well Google was doing [...] Google executives believed that [...] when [its] market share approached 30%, suddenly bad things would happen. In China, companies need a license to run a website, and it took Google massive effort to secure one. [...] Google’s executives in China realized they were always one step away from another sanction."
I think this is exactly what the GFW is for. Train/show local talent a great concept, create/replicate homegrown version, cut off foreign version when homegrown version is ready.
At some point, China needs to be concerned if it's pissing off foreign companies. If they want American users, the door has to open both ways.
Why the US puts up with this blatant WTO violation is baffling.
Yes, the pain of doing business in China is great and asymmetric, but in some fashion, I'm happy that at least the firewall is a symmetric, universal problem.
the fact that you have to do _anything_ is a problem... also dealing with mainland providers can be challenging.
Lower bandwidth, higher latency, more packet loss, less reliability. But everything can be achieved. It's not a great problem once you're used to it.
Slack and WeChat
If you want global, secure, internal chat that works, use XMPP on a VPN. It's pretty trivial to set up.
Github is a disaster in China
No, it works perfectly. It's not even firewalled. I use it every day, no problems.
They'll turn to you asking why your API/whatever isn't working for their developers, and then expect that you have some miracle solution to get rid of the 200-400ms of latency (each way!) across the firewall, as well as a cure for the hours of it just dropping all traffic
That's not across the firewall, that's across the Atlantic. A good solution would be placing servers inside of China, or outside but nearby in Hong Kong, Japan or Korea instead of the US. For businesses of any size desiring access to the Chinese market, another POP is not a huge expense. Even for me in the west of China, HK is ~70ms away, Japan is ~100ms.
LIES. WTF. My mother's friend's kids says that every one of his classmates is on WeChat and mobile gaming is HUGE. And look at how websites like Bilibili and Anime related 'Two-Dimension' culture prosper in China.
According to this report: https://www.gitbook.com/book/fhggogogo/bilibili/details
10-19 teenagers is the second largest demographic group of Bilibili's users, which is the NicoNico+Crunchyroll+Twitch in China.
China is a market that is large enough by itself to be self supporting, just like the US market. So you can create an Internet business that is "China only" or "US Only" and be successful. And as the size of the markets are comparable your large China only Internet companies can be as large as US only Internet companies.
The interesting bit is that those markets are different enough that approaches in one don't work in the other. Like Google's version of search in China didn't work, nor did Uber's version of ride sharing. We can discuss regulatory hurdles, or society expectations, or technological differences, but at the core of all this they are two very different markets. So you need very different products and organizations to succeed in one or the other. I have yet to see a multi-national/international organization which has the flexibility to achieve that.
One of the most informative experiments so far has been Airbus. It is interesting to look at how it splits itself across countries and works to achieve a common purpose.
https://www.reddit.com/r/dredmorbius/comments/4xe2k1/chamber...
Source: https://archive.org/stream/chambersencyclo00unkngoog#page/n1...
I've sketched in some related information at Ello which I need to incorporate. This is strongly related to Friedrich List's National System of political economy.
The 18th and 19th centuries were interesting times.
The FIDOnet was at that times practically a Russia only thing.
When the Internet went transnational, it was more or less universities-only for quite some time. Still not many people around, then. People mostly used English as a language, for the simple reason that nearly everybody knows it. It's just the simplest and most sensible option.
When the Internet finally really entered the public consciousness in the mid-90's - quite a bit after the first web server outside of Europe was set up in Stanford in 1991 - it had been a transnational thing for longer than not.
(But of course the world economy is a very complex and dynamic system, so take any such opinions with a grain of salt.)
At the backbone level, perhaps, but for historical reasons cable and phone companies were separate, and thus we have both Comcast and Verizon providing last-mile communication services. I already have both phone and cable lines to my apartment, so it's more of a natural duopoly there, and even duopolistic markets should have nonzero competition.
Even Google is having problems with this natural monopoly: http://www.theverge.com/2016/8/15/12492890/google-fiber-wire...
Is it? I don't recall the US erecting a massive firewall which keeps foreign competitors from competing here.
Baidu, Tencent, and Alibaba are all free to try to woo American consumers. So far they haven't seen much success.
one example off the top of my head:
https://en.wikipedia.org/wiki/Riot_Games
their giant shiny new office is right here in west LA, but they're owned by tencent in china.
http://www.bloomberg.com/news/articles/2016-08-17/china-call...
So instead they sold it to Zayo, the US telecom giant. At least from an ISP industry insider perspective Zayo is trustworthy and has the precedent of providing some 'critical' circuits for different US federal agencies.
http://www.cbc.ca/news/canada/manitoba/allstream-sale-to-acc...
On the other hand, the firewall outright blocks websites like Facebook and Google from competing in China.
But it is one of the things that prevented Google from competing in China. Here's an excerpt from an article previously posted on Hacker News: https://news.ycombinator.com/item?id=12218607
The hurdles could be unpredictable, with an element of deniability. Sometimes Google found itself at the mercy of China’s ability to manipulate the digital infrastructure. The site would work slowly, or there would be outages. In one instance, Google found not only that users were blocked from its site, but also that when they typed in the address, they would be redirected to it competitor Baidu. This played into the narrative spun by Baidu that Google was overmatched in serving China, and that the local option was more reliable.
If you look at the paragraph right before you see that it corroborates that it's China, not the firewall, to blame for the anti-competitive behavior:
>Yes, Google made its own mistakes, including some cultural miscues. But the actions of the Chinese government against Google seemed less to do with regulations and more like harassment. The sanctions appeared directly tied to how well Google was doing in the marketplace. Google executives believed that Chinese officials had drawn a line in the sand — that when Google market share approached thirty percent, suddenly bad things would happen.
Is that why you didn't link the article?
https://backchannel.com/when-it-comes-to-china-googles-exper...
As foreigner you might be fine with "free-trade" that allows you to freely sell opium, or take over cities on sovererign land, or to have foreign social networking companies plaster agenda driven poitical propoganda to people in your country (I'm talking about the facebook India snafu) because you have no investment or ties to the Chinese country, but they do have to think about national interest, and not foreign interest.
It's also not exactly a fair playground if foreign multinationals with decades of established dominance, experience, R&D, and human capital from the developed world compete against Chinese companies which most would be upstarts or recent companies, and with human capital from less developed sources. When none of the country has drinkable tap water, their people have a lot of things on their plate. They don't need foreign competition. It'd be like sending a fully armed US marine squad to duke it out with squad of high schoolers and blaming China for being unfair for erecting a wall around the high schoolers while they grow and train.
Protectionism is a valid strategy to help boost domestic economic development and it's fairly arrogant and imperialistic to assert that we as fully developed foreigners have any right to exploit markets in less developed areas. Any time there is a tariff, it's essentially being practiced.
On the latter point, I'd be surprised if it is ROI positive for the country. One would expect it would cut off significant communication with the outside world, resulting in duplicate work needing to be done (can't find that open source package on github as github is blocked? that sucks). The censorship regime additionally introduces self-policing costs to Chinese firms.
What you are putting forward is essentially a rhetorically-colored version of this argument: https://en.wikipedia.org/wiki/Infant_industry_argument . It was dubious at best when it was first proposed and it's more dubious still now.
PS: Side note, apparent "post-autistic economics" is a label that people self applied? Not sure on the branding on that one (they've since changed) https://en.wikipedia.org/wiki/Post-autistic_economics
> On March 24, 1791, the U.S. government granted patents for Parkinson's flax mill, even though he had admitted that they were "improvements upon the mill or machinery ... in Great Britain". Clearly, the U.S. government condoned something that, in modern phraseology, could be termed industrial espionage.
> "The extreme embarrasments of the United States during the late war, from an incapacity of supplying themselves, are still matter of keen recollection"
> His opponents cited abundant land and deficient capital and labor as reasons that America should remain a rural democracy.
Keep in mind that economists tend to focus on problems that their own societies face -- if protectionism was only really useful to small, underdeveloped economies, you wouldn't really expect mainstream US or European economists to get a lot of funding to look into it, would you?
Note that this is an idea that has been tried under many guises with different names and details:
https://en.wikipedia.org/wiki/Import_substitution_industrial...
https://en.wikipedia.org/wiki/Prebisch%E2%80%93Singer_hypoth...
https://en.wikipedia.org/wiki/Mercantilism
Maybe the real answer is that whether these efforts are beneficial for their countries depends on the context, and that sweeping generalizations aren't helpful?
Economically dominant nations are in favour of free trade. England / the UK in the 19th century. The United States since the 1950s.
Economically less-developed or backwards nations tend to oppose it, or at least, unrestricted free trade. The United States through much of the 19th century. The UK from about 1919 through the 1970s.
Ha-Joon Chang has been one of the louder voices for this recently, but his own scholarship points to many earlier instances. Friedrich List (mentioned in your article) wrote a book on the topic (The National System of Political Economy), available at the Internet Archive.
Among List's American publishers was J.B. Lippencott, who among other works also printed the authorised version of Chamber's Encyclopaedia. As I've just noted in another comment, there's a particularly illuminating bit of editorial umbrage expressed by the British publishers (Chambers) of some apparently unauthorised rewriting of select articles within the American edition:
https://archive.org/stream/chambersencyclo00unkngoog#page/n1...
In the interests of literature, and in defence of their rights as authors, Messrs Chambers have to make the following Satement regarding an American edition of their Encyclopaedia:
After a time, the American publishers began to make extensive alterations to the articles, a thing which had not been contemplated in the agreement. ...[I]t is a serious matter when, in a re-issue of a work, statements and opinions are introduced which are repudiated and hateful to the original proprietors...
The first "hateful" example was the article on free trade.
British: "This term, when used so late as twenty years ago, expressed a diputed proposition, and was the badge of a political party; it now expresses the most important and fundamental truth in political economy..."
American: "a dogma of modern growth, industriously taught by British manufacturers and their commercial agents...."
Also covered, "Protection -- Protection Duty" (tariffs), rather predictably "Slavery", and containing "a slanderous imputation concerning His Royal Highness the Prince of Wales, which we should be ashamed to copy" among other offenses, an article on Elizabeth I.
I find this interesting on multiple grounds, both in the debates over economics, and in light of claims that Wikipedia's highly visible edit wars are somehow anomolous. I've long maintained they're not by virtue of existence but rather visibility, and feel rather vindicated by this evidence.
I agree with the majority of your point, as I think we can all agree that without the GFC Chinese internet users would instead be revenue chum for Google / FB / Uber / Apple. I can't argue that their instead having home-grown alternatives isn't beneficial to China as a country.
However, I think it becomes debatable when you look at best for Chinese users. I'd argue that the optimal privacy situation for any user tends to be an app built by a large company headquartered and infrastructured outside the user's legal jurisdiction.
Without strong extra-jurisdictional competition, internal competitors are all subject to the whims and designs of national government. As a American, I'm grateful the EU (for example) raised such a strong fuss about privacy concerns -- without which, I doubt we'd have some mostly-internal American companies making the same positive moves we do see.
Its been shown to be largely counterproductive domestically as it provokes trade wars that destroy domestic industries that rely on the import/export market.
You cherry pick examples of a handful of things that had nothing to do with free trade (free trade has nothing to do with banning goods domestically, such as a specific drug or restricting speech).
> They erected a firewall because of centuries of Western imperialism and foreign bullying.
https://www.jacobinmag.com/2015/12/china-south-africa-imperi...
> In addition, the interaction of neoliberal capitalism and often oppressive labor practices has complicated attempts to secure elite assent. In 2006, a Zambian minister wept when she saw the environment in which workers toiled at the Chinese-owned Collum Coal Mine. Four years later, eleven employees were shot at the site while protesting working conditions. (After widespread outrage, the state eventually took control of the mine.)
> Scarce jobs, incidents like the Collum shootings, and poor working conditions at Chinese-owned companies sparked “anti-Chinese” riots in Zambia and some other countries on the continent. Despite some resistance, however, China — as well as other countries and companies — hasn’t been cut off from market and investment access. How has it been able to do so?
> However, the current configuration is not auspicious for economic diversification or for tackling inequality and poverty in countries like Zambia. In a 2011 speech at the third BRICS leaders meeting, South African President Jacob Zuma said, “We are now equal co-architects of a new equitable international system.” But the reality couldn’t be more different. South Africa’s current “sub-imperial” role (both dominated by external powers and transnational capital and dominating the Southern African region itself) is the one it has historically played. The main difference now is that China is the emergent potential hegemon, rather than Britain.
https://www.hrw.org/news/2016/02/10/dispatches-bangladesh-sh...
> As a result, it shouldn’t be surprising to hear that Ma Mingqiang, China’s ambassador to Bangladesh, objected vehemently last week after visiting the Dhaka Art Summit that featured facsimile images of handwritten notes written by some Tibetan self-immolators, among other subjects.. But what is surprising – and alarming – is that the organizers of the Dhaka Art Summit didn’t respond to the ambassador’s diatribe by defending the works. Worried that China might even prevail and force the Bangladeshi government to shut down the summit altogether, the exhibit’s artists, Tenzing Sonam and Ritu Sarin, chose another unique form of protest: covering the images. In a statement, the artists said their actions were intended to “draw attention to the unreasonable demands of the Chinese Embassy on an event taking place in another country and at the same time further highlight the nature of censorship and oppression inside Tibet.”
Where is your moral outrage on behalf of nations bullied by China?
It's protectionist for sure, but please don't frame it in moral terms of exploitative foreigners. China has played a viciously exploitative game the last 30 years or so.
Plus let's not forget the other major reason for the firewall and other government barriers to foreign market access have been to restrict free flow of information to the Chinese population for purposes of control. It's very righteous to bring up Facebooks occasional gaffe, but you don't consider the CCP to have any devious political slant of their own?
> Well, don't forget that China has been ready and willing to take the benefits of global trade when it suits them. 'We don't want aggressive imperialistic foreign multinationals coming in and bullying our poor domestic companies...', but sure, we'll take all of yor technology, programming languages, operating systems, do literally nothing to stop piracy of Microsoft software...
If you're talking about one-sided business deals, well, it's pretty stupid for multinationals to do that isn't it? They certainly aren't forcing multinationals to do that, but those multinationals obviously calculated the cost-benefits and determined they'd still benefit to doing business under the sovereign rules China imposed.
The difference when multinationals or foreign nationals wanting China to open up to their terms is that these terms are forced upon China and dictated. Fortunately for China it's powerful enough to simply ignore these demands.
Personally, I think the costs of Chinese protectionism (to China) outweigh its benefits. Yes, you can definitely make the infant industry argument and it has merit—after all, most of the West used mercantilism to develop. However, I think there are 3 major ways that it is counterproductive these days:
1. Chinese consumers simply have less access to the best tools and products. Yes, there are Chinese versions of everything but frankly they are often inferior to the foreign alternatives.
2. Incomplete access to world tools can cripple Chinese startups—especially if they're trying to expand abroad. This isn't a theoretical point: every time I've been in China, entrepreneurs have complained about the difficulties in using basic international tools like GitHub or Slack. If you don't have access to the best tools, it's harder to build a globally competitive tech company.
3. Companies are insulated from competitive pressure. The firewall gives plenty of insulation to build a company on the Chinese market, but once it's ready to compete internationally
> It's also not exactly a fair playground if foreign multinationals with decades of established dominance, experience, R&D, and human capital from the developed world compete against Chinese companies which most would be upstarts or recent companies
This is a really flimsy argument. Many of the companies being shut out of China aren't huge multinationals with decades of experience or capital—they're startups trying to quickly expand. It's not like China doesn't already have a domestic goliaths which are being competed against. WeChat shouldn't need protection from Line to succeed—Tencent has plenty of money to throw around.
The rest of your comment reeks of decades-old propaganda. Revenge for the opium wars and anti-imperialist dogma hardly have a very encouraging history.
It could be ineffective, but if you believe so you should go join the Communist party and start advising them. Certainly if foreign multinational companies cry foul, it's fairly obvious they are biased as they have a corporate and legal agenda to push profits.
I don't understand your comment about channeling Mao... Sovereignty and protectionism are the rights of any country, not just China. This includes Japan, which is also heavily protectionist, and even the US, when it comes to their inane corn subsidies.
You'd probably support the TPP (https://www.google.com/search?q=tpp&oq=tpp&aqs=chrome..69i57...) which aims to limit country sovereignty in favor of shifting power to global multinationals under the guise of "free" trade. Not really free when you consider the foreign multinationals have had a head start (the exact same problem China faces). Such an agreement is designed to take advantage of smaller countries and reduce their power when battling foreign multinationals that exploit those countries. This is essentially at least part of the battle China faces when employing protectionist policies—primarily against foreign multinational corporations.
As an American, I don't have a problem with the news website RT being accessible in my country, despite the fact that it's a blatant propaganda arm of the Russian government aimed at Americans. If we allow our government to censor sites like RT, then we run the risk of anything that disparages the government being censored as well.
There has been no documented instance of this happening.
Edit: by Huawei.
Mid-tier telecoms (e.g. Cricket Wireless) use Huawei routers, cellular equipment, and intermediary equipment. L3 Communications is suggested to have bought from them as well. [1]
Huawei mobile phones are doing well in the U.S. The Nexus 6P is one example of a popular Huawei product.
Huawei televisions also sell well in the U.S.
[1] http://fortune.com/2011/07/28/what-makes-china-telecom-huawe...
Do you or don't you concede that the significant sales of products contradicts your claim that they are shut out of the market?
> Cisco paid the lobbyists in DC very well.
This is a non-sequitur and sensational flame bait.
Bonus: Even in 2010 Huawei recorded over $500M in revenue in the United States. http://www.huawei.com/us/about-huawei/corporate-info/researc...
I am interested to hear your agenda. Clearly you don't work for Huawei, otherwise you would be better informed. Your insistence of this despite evidence to the contrary is backed by a personal belief. I'm interested in hearing your world view and want to know what that belief is.
[1] http://www.cnbc.com/2016/05/18/cisco-reports-q3-earnings-res...
However, you don't have a complete picture. True, the U.S. and other countries have gone to the WTO several times to protest dumping and other trade issues. Dumping is the WTO term for selling goods internationally far below cost in an effort to drive local competition out of business. And yes, the U.S. and other countries (India, Australia, etc.) have blocked Huawei's legitimate ventures in telecommunications critical infrastructure.
This isn't anywhere close to the same extent that the Chinese government has blocked international competition within its borders. The Chinese government routinely blocks foreign firms from competing through regulation or outright blocking of internet sites. Many of these sites do not pose a cultural or dissident risk to the Chinese Communist Party.
I'm not making the claim this is evil or wrong. Protectionism is one tactic that nations may use. The United States used a vigorous protective tariff for its first 200 years.
The naive world view that the United States' protectionism is propping up its companies is not accurate. Nor is the view that Tencent and Baidu would disappear without Chinese government protective assistance.
I would love to address the other concerns you have brought up but the scope of this comment thread is trade. I'm not going to let it be completely derailed.
$150 billion market cap.
$49 billion in sales.
$10 billion in profit. That's about 60% more in profit than Alibaba for comparison sake.
$63 billion in cash.
So one of the world's largest and financially strongest corporations, and it's decimated. Oh if they could all be so lucky.
I wish Taobao would come to USA and crush eBay!
If you have a web service you want to make available to .cn, perhaps you should try running your web servers on port 25/TCP instead. That seems to be pretty much wide open through the GFW.
Or the railroads in Australia in 2016.
The sequel to: "Non-Chinese Tech Firms Forced to Choose Market: China or Everywhere Else."
If you separate the medium where people communicate, it makes it easier to separate the people from one another and otherfy other groups.
(You would say that language already serves that purpose, but anyone "educated" or "smart" knows or wants to learn English anyway, regardless of where he lives.)
The sharing of information is vital for creativity. Yet, so too is diversity... And the more we share, the more alike, and the less diverse, we become.
there is something to be said for diversity of THOUGHT. And many times, not always, but many times, social networks become more like echo chambers than idea exchange tools. When you have many social networks, well, at least you can visit different echo chambers from time to time. When you have only one, you really have to remind yourself continuously not to fall down the rabbit hole so to speak.
I like looking at Weibo to see what's going on. I like looking at FB. If they were not 2 totally different populations, I think I would not be exposed to many of the things I'm exposed to every morning. This is no different than me checking Le Monde, the BBC, Al Jazeera and CNN. It's kind of the same idea.
And having all of those different ideas around me is kind of enlightening in a way.
Not even a little. Living in Shanghai as a foreigner, my social circle is heavily biased towards people who can speak to me in English. But it's still not enough to hide the fact that English ability among the most highly educated ranges from "fluent" (for those who went to specialized English schools) to "rudimentary" (it's true that at the top levels, everyone knows a bit), and desire to know English ranges from "intense personal interest" to "zero".
Wanting to learn English gets a big boost lower down the ladder, where the economic benefits of a solid grasp of English are painfully apparent. Just being a service worker in a part of town that caters to tourists is a huge step up for a lot of Chinese.