China is facing economic and business challenges as overspending and overbuilding take its toll. The country also faces a battle placating tech companies and the country's 640 million Internet users as it introduces more draconian regulations.
Threat to growth
China may have become the world's largest economy - by some standards - but a credit-fuelled construction binge threatens its future growth.
China's official growth rate of 7.4% in 2014 was at its slowest pace since 1990, a time when the country still faced sanctions in the wake of the 1989 Tiananmen Square massacre.
The International Monetary Fund has lowered its growth forecast for China for 2015 from 7.1% to 6.8% and predicts the country's gross domestic product will grow slower than India next year for the first time in decades.
The effects of a China slowdown could spread far beyond China's borders. The "slowdown in China could turn into a disorderly unwinding of financial vulnerabilities with considerable implications for the global economy," the World Bank warned this month.
Global impacts
In fact there are already signs of an impact reflected in global commodity prices, including oil, and in the stuttering performance of economies in Brazil, Germany, Australia and much of Asia, which are all increasingly reliant on Chinese demand.
Overspending, especially at a local level, and often overlooked by Beijing has not helped matters. Building projects, funded by enormous loans, have certainly kept China's economy moving. It has kept millions in work too from construction workers to their suppliers and support industries. But the chickens may be coming home to roost, since all debts have to be repaid. In essence spending to control debt is unsustainable [WSJ / FT].
"Intrusive" rules on foreign firms
While China sits back to take stock on its growing debt and slowing economy it has another challenge. Newly implemented regulations require technology firms such as Cisco or Microsoft to hand over source code and incorporate backdoors in products supplied to China's banking and financial industry.
The US Chamber of Commerce and other groups have called the rules "intrusive" and business groups are now seeking "urgent discussions" with the Chinese authorities.
The new rules, laid out in a 22-page document approved at the end of 2014, also require firms to submit to invasive audits and are just latest in a series of policies designed to strengthen cybersecurity in China.
But many tech companies are not comfortable with the new rules, which many see as yet more protectionist measures designed to oust foreign competition.
The US Chamber of Commerce has called for "urgent discussion and dialogue" about what they said was a "growing trend" toward policies that cite cybersecurity in requiring companies to use only technology products and services developed and controlled by Chinese firms [NYT / BBC / Guardian / WSJ].
Caught between a Rock and a Hard Place
Many Western tech companies might well baulk at revealing their source code and other data. But to not do so risks losing a market worth billions of dollars.
According to the American market research firm the International Data Corporation [IDC] China was expected to spend some $465 billion in 2015 on information and communications technology and that the expansion of China's tech market would account for 43% of the worldwide tech-sector growth.
And according to Frank Gens, the IDC's chief analyst, the main driver of ICT spending growth was the sheer size of China's market and its growing number of Internet users estimated in 2015 to be around 680 million, more than two-and-a-half times the number of users in the United States.
Tough challenges
But foreign firms doing business in China face other headaches too as authorities tighten Internet censorship.
In the last few months there have been sporadic several turnings of the screw with Google's GMail and other Internet services being almost completely blocked,
But authorities ramped up censorship even more this week as they began to target VPN's, or Virtual Private Networks, which many people and businesses use to circumvent Internet blocks.
Slowing legitimate commerce
"One unfortunate result of excessive control over email and Internet traffic is the slowing down of legitimate commerce, and that is not something in China's best interest," said James Zimmerman, chairman of the American Chamber of Commerce in China. "In order to attract and promote world-class commercial enterprises, the government needs to encourage the use of the Internet as a crucial medium for the sharing of information and ideas to promote economic growth and development."
However China seems unrepentant and appears to ignore any criticism of its control of the Internet. In fact one official claimed the blocking of VPNs was to do with "Internet safety" [China Daily].
Wen Ku, a top official from the ministry, said that VPN providers must abide by Chinese laws to operate in the country and reiterated the government's commitment to the 'healthy development of the internet sector'. The Ministry of Industry and Information Technology has requested that VPN providers register with the government agency. However given that the main function of a VPN is to circumvent the Great Firewall, this seems unlikely and indeed none have done so thus far [CNN / NYT / Time].
In November last year China blocked access to hundreds of websites just days before they held the World Internet Conference [Guardian].
Premier Li Keqiang seemingly did not see the irony nor the contradictions as he hailed the Internet as one of the greatest inventions in human history and claimed China was a lucrative market for all the global Internet giants [Xinhua].
The stifling of the Internet hasn't just angered expats and foreign businesses, it is also annoying Chinese students, academics and researchers who say their work is directly affected by the blocks.
In recent weeks, a number of Chinese academics have gone online to express their frustrations, particularly over their inability to reach Google Scholar, a search engine that provides links to millions of scholarly papers from around the world.
"Living in the Middle Ages"
"It's like we're living in the Middle Ages," Zhang Qian, a naval historian, complained on the microblog service Sina Weibo.
Meanwhile a biologist also criticised the policy of blocking VPNs and legitimate websites. "For a nation that professes to respect science and wants to promote scientific learning, such barriers suggest little respect for the people actually engaged in science."
This week Zhang Jianguo, director of the State Administration of Foreign Experts Affairs, bemoaned the nation's shortage of scientists and technology entrepreneurs and beckoned foreign experts to come to China [China Daily].
But the very nature of China's Internet may dissuade many expats form relocating, Avery Goldstein, a professor of contemporary Chinese studies at the University of Pennsylvania, says. Indeed, the growing online constraints could also compel ambitious young Chinese studying abroad to look elsewhere for jobs.
China has yet to see an exodus of experts or businesses thus far. Nor are there obvious signs of a slow down of foreign experts heading to the country. But should online restrictions worsen that situation may change and may slow China's economy further still.
Threat to growth
China may have become the world's largest economy - by some standards - but a credit-fuelled construction binge threatens its future growth.
China's official growth rate of 7.4% in 2014 was at its slowest pace since 1990, a time when the country still faced sanctions in the wake of the 1989 Tiananmen Square massacre.
The International Monetary Fund has lowered its growth forecast for China for 2015 from 7.1% to 6.8% and predicts the country's gross domestic product will grow slower than India next year for the first time in decades.
The effects of a China slowdown could spread far beyond China's borders. The "slowdown in China could turn into a disorderly unwinding of financial vulnerabilities with considerable implications for the global economy," the World Bank warned this month.
Global impacts
In fact there are already signs of an impact reflected in global commodity prices, including oil, and in the stuttering performance of economies in Brazil, Germany, Australia and much of Asia, which are all increasingly reliant on Chinese demand.
Overspending, especially at a local level, and often overlooked by Beijing has not helped matters. Building projects, funded by enormous loans, have certainly kept China's economy moving. It has kept millions in work too from construction workers to their suppliers and support industries. But the chickens may be coming home to roost, since all debts have to be repaid. In essence spending to control debt is unsustainable [WSJ / FT].
"Intrusive" rules on foreign firms
While China sits back to take stock on its growing debt and slowing economy it has another challenge. Newly implemented regulations require technology firms such as Cisco or Microsoft to hand over source code and incorporate backdoors in products supplied to China's banking and financial industry.
The US Chamber of Commerce and other groups have called the rules "intrusive" and business groups are now seeking "urgent discussions" with the Chinese authorities.
The new rules, laid out in a 22-page document approved at the end of 2014, also require firms to submit to invasive audits and are just latest in a series of policies designed to strengthen cybersecurity in China.
But many tech companies are not comfortable with the new rules, which many see as yet more protectionist measures designed to oust foreign competition.
The US Chamber of Commerce has called for "urgent discussion and dialogue" about what they said was a "growing trend" toward policies that cite cybersecurity in requiring companies to use only technology products and services developed and controlled by Chinese firms [NYT / BBC / Guardian / WSJ].
Caught between a Rock and a Hard Place
Many Western tech companies might well baulk at revealing their source code and other data. But to not do so risks losing a market worth billions of dollars.
According to the American market research firm the International Data Corporation [IDC] China was expected to spend some $465 billion in 2015 on information and communications technology and that the expansion of China's tech market would account for 43% of the worldwide tech-sector growth.
And according to Frank Gens, the IDC's chief analyst, the main driver of ICT spending growth was the sheer size of China's market and its growing number of Internet users estimated in 2015 to be around 680 million, more than two-and-a-half times the number of users in the United States.
Tough challenges
But foreign firms doing business in China face other headaches too as authorities tighten Internet censorship.
In the last few months there have been sporadic several turnings of the screw with Google's GMail and other Internet services being almost completely blocked,
But authorities ramped up censorship even more this week as they began to target VPN's, or Virtual Private Networks, which many people and businesses use to circumvent Internet blocks.
Slowing legitimate commerce
"One unfortunate result of excessive control over email and Internet traffic is the slowing down of legitimate commerce, and that is not something in China's best interest," said James Zimmerman, chairman of the American Chamber of Commerce in China. "In order to attract and promote world-class commercial enterprises, the government needs to encourage the use of the Internet as a crucial medium for the sharing of information and ideas to promote economic growth and development."
However China seems unrepentant and appears to ignore any criticism of its control of the Internet. In fact one official claimed the blocking of VPNs was to do with "Internet safety" [China Daily].
Wen Ku, a top official from the ministry, said that VPN providers must abide by Chinese laws to operate in the country and reiterated the government's commitment to the 'healthy development of the internet sector'. The Ministry of Industry and Information Technology has requested that VPN providers register with the government agency. However given that the main function of a VPN is to circumvent the Great Firewall, this seems unlikely and indeed none have done so thus far [CNN / NYT / Time].
In November last year China blocked access to hundreds of websites just days before they held the World Internet Conference [Guardian].
Premier Li Keqiang seemingly did not see the irony nor the contradictions as he hailed the Internet as one of the greatest inventions in human history and claimed China was a lucrative market for all the global Internet giants [Xinhua].
The stifling of the Internet hasn't just angered expats and foreign businesses, it is also annoying Chinese students, academics and researchers who say their work is directly affected by the blocks.
In recent weeks, a number of Chinese academics have gone online to express their frustrations, particularly over their inability to reach Google Scholar, a search engine that provides links to millions of scholarly papers from around the world.
"Living in the Middle Ages"
"It's like we're living in the Middle Ages," Zhang Qian, a naval historian, complained on the microblog service Sina Weibo.
Meanwhile a biologist also criticised the policy of blocking VPNs and legitimate websites. "For a nation that professes to respect science and wants to promote scientific learning, such barriers suggest little respect for the people actually engaged in science."
This week Zhang Jianguo, director of the State Administration of Foreign Experts Affairs, bemoaned the nation's shortage of scientists and technology entrepreneurs and beckoned foreign experts to come to China [China Daily].
But the very nature of China's Internet may dissuade many expats form relocating, Avery Goldstein, a professor of contemporary Chinese studies at the University of Pennsylvania, says. Indeed, the growing online constraints could also compel ambitious young Chinese studying abroad to look elsewhere for jobs.
China has yet to see an exodus of experts or businesses thus far. Nor are there obvious signs of a slow down of foreign experts heading to the country. But should online restrictions worsen that situation may change and may slow China's economy further still.
tvnewswatch, London, UK
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