When in Beijing, I spend considerable time at an assortment of smoky coffee shops (common décor: dark purple velvet sofas and beaded lace curtains), as well as in airport and hotel lounges that offer free Wi-Fi—well, sort of free Wi-Fi.
Because of the infrastructure of China’s Internet censorship and surveillance system, most online traffic runs at a limping pace, whether accessed directly or through a virtual private network (VPN), software designed to allow users to circumvent the Great Firewall and access websites currently blocked in the country. The wide-ranging list of blocked sites includes Businessweek.com, Bloomberg.com, NYTimes.com, Twitter, Facebook (FB), YouTube (GOOG), and, unsurprisingly, various sites championing the cause of Free Tibet. Much of the time, Gmail is so slow it’s only semifunctional.
In recent years the sophistication of online censors’ ability to detect VPNs and terminate connections has grown, so much so that anyone using such software invariably spends a lot of time starting and restarting their programs and refreshing Web pages in vain. Even if you’re accessing content from unblocked sites based outside China, download speeds can be so slow as to be prohibitive. (The short video clip of James Bond and the Queen of England “parachuting” into the opening ceremony of the 2012 London Olympics took me an hour to download, counting all the times the browser stalled out entirely.) Streaming Internet radio from outside China? Forget it, unless you have the patience to hear your favorite tunes stretched out in psychedelic slow motion.
Censorship in China is usually discussed as a political issue, which of course it is, but there are business and productivity costs as well. For the past two years the American Chamber of Commerce (AmCham) in Beijing has included questions about Internet and cybersecurity concerns in its annual survey of firms operating in China, alongside questions about market access, intellectual property rights, and labor costs. The 2013 Business Climate Survey (PDF), released on March 29, sheds light on how U.S. firms feel about the Great Firewall.
Of the 325 respondents, 55 percent see China’s Internet restrictions as negatively or somewhat negatively affecting their capacity to do business there. Some 62 percent said the disruption of search engines such as Google (GOOG) make it more difficult to obtain real-time market data, share time-sensitive information, or collaborate with colleagues based outside China. And 72 percent said that slow and unstable Internet speeds impede their ability to efficiently conduct business in China.
While 38 percent of respondents said their companies were shifting resources to cloud-based computing, only 10 percent said they would consider using cloud services based in China, with the top concern cited being security risks. Moreover, 26 percent of respondents said they had already been victims of data theft; 40 percent said the risk of data theft in China seemed to be growing.
“Even if you’re not a direct target of corporate espionage, just having to overcome the mundane issues of slow Internet speeds and restricted access impacts your productivity and ease of conducting business in China,” says Patrick Chovanec, chief strategist at Silvercrest Asset Management and a former professor at Tsinghua University’s School of Economics and Management in Beijing. “It’s a daily burden.”
Despite these annoyances, a majority of survey respondents said they felt optimistic about the short-term outlook for their businesses in China, although “the percentage of respondents who say China’s investment environment is improving fell markedly—in line with the widespread impression that market reform and opening has slowed in recent years,” AmCham Chairman Greg Gilligan wrote in an introductory note. Inconsistent regulatory interpretation, corruption, and rising labor costs were listed as top business risks. “As China enters a new period geared towards higher-quality GDP growth, our member companies are adjusting to structural shifts in the economy,” wrote Gilligan. “Rising labor costs are now considered as great a business risk as a Chinese economic slowdown.”
Larson is a Bloomberg Businessweek contributor.
