Will Chinese internet industries become a Chinese factory. or Chinese market? policies in Chinese internet. industries

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1 Will Chinese internet industries become a Chinese factory or Chinese market? policies in Chinese internet industries Abstract : Chinese internet industries become the subject of considerable research in recent years. But relatively little research has paid attention to policies in the industries. This research intends to use qualitative methods to examine and evaluate policies in Chinese internet industries and ask: What are current policies in Chinese internet industries? How have the policies changed since 2002, when the industries developed? Will the policies direct Chinese internet industries to become another Chinese factory, as some Chinese cultural industries being, or to become a new Chinese market? This research adopts methods of secondary data analysis, documentary analysis and in-depth interview. This research analyses all news reports and industrial reports relating to Chinese interent industries from 2002 to 2014, to examine how have the policies changed from 2002 to Meanwhile, this research interviews 20 executives/managers from five most successful Chinese internet companies, in order to discuss how the state aims to control or manage Chinese internet industries via relative policies. This research examines how the state dominates the industries from 2002 to 2014 via relative policies, and how the business internet companies negotiate with the state in the process of implementing these policies. This research shows how Chinese internet industries have developed since 2002, and how it will develop in the next few years under government's policies. Ross (2005) points out that China joined the world market in the beginning of the 1980s with its cheap labour, and it has become an effective competitor to many Western countries with its highly skilled workers, especially workers in the ICT industries (the hardware industries). Nowadays, it is not uncommon to hear Chinese internet workers saying that they are doing minor innovation, which in their definition refers to modifying the copied code to create new programs to fit into the Chinese

2 market. During my fieldwork for my PhD project, which focuses on the working life in Chinese internet industries, I heard from more than one of my interviewees that s/he had certain sense of innovation, just as workers in American internet industries do. Most workers told me that they are different from workers in other industries, as they are creative and ambitious. They join the internet industries to create something through practices of innovation, rather than by simply producing something. The Chinese internet content market, the part of the internet industries which I focus on in this research, is shared by monopoly enterprises. For example, Sina, Sohu and Netease monopolise the portal market; Alibaba dominates the online commerce market; and Tencent is the main player in the instant messaging market. These monopoly companies tend to copy ideas and technologies from American internet companies, rather than creating their own. For example, Alibaba provides the same service as Ebay and Amazon; Tencent copies the majority of its programs from ICQ and MSN; and Renren is branded as the Chinese Facebook. Their monopolistic position in the industries builds a copycat culture rather than a label created in China. These facts evidently are in conflict with the creativity and innovation workers expect from and express about their work. It then becomes interesting to ask whether the internet industries are able to remake China with the new label created in China, and how the related policies intervene in this transformation. The Chinese internet content market has developed exponentially since the end of 2002, when the market was revived from the dot-com crash in At that time, some portals in the industries, such as Sina, Netease and Sohu began to make profits and lead the market into a golden era. In 2003, the market was developed with the blooming of varied content services, such as search engines (Baidu), online gaming (SNDA), instant messaging (Tencent), and online commerce (Alibaba). In 2012, the annual market value had reached billion RMB ( 38.5 billion), an increase of 54.1% from 2011 (iresearch 2013). By contrast, in 2012, the annual investment in Chinese real estate, which was evaluated as an overheating industry by most Chinese media, was billion RMB ( ), only 18 times more than the internet industries (Xinhua news 2013). And there were 591 million active internet users in China by the end of 2013 (Creemers 2014: 7). In this process, the state issued hundreds of policies and laws to regulate the market. As Creemers concludes (2014), there are two stages in the development of Chinese internet policies: the first stage when the policies mainly focus on the role

3 and obligations of Internet service providers (ISPs) and Internet content providers (ICPs), as well as commercial surfing venues such as Internet cafes (p.8); and the second stage when the policies focus on the structures and responsibilities of the media departments (ibid.) and internet users. In the first stage, for example, the state issues several regulations to require ISPs to self-regulate, such as Self-Discipline Norms for Internet Searching Engine Service Companies on Resisting unlawful and Harmful Information (sousuo yinqing fuwushang dizhi weifa he buliang xinxi zilv guifan) issued in This regulation requires all search engine companies in Chinese market to filter unlawful and harmful information. It is difficult to find how the state defines such unlawful and harmful information from the regulation. But, according to Taubman, internet criminal activities are defined as activities that prejudicial to state security or public order (p.264) in certain Chinese internet regulations. Likewise, the unlawful and harmful information certainly includes information that prejudicial to state security or public order. Meanwhile, as Fu, Chan and Chau (2013) state, according to the license conditions, Chinese ISPs are required to act as censors to screen customers messages or disable accounts (p.43), in order to ensure a healthy and harmonious online environment. Lee, Liu and Li (2013) claim that ISPs implement filtering hardware and software to effectively control the online content flowing from abroad (p.420). In the second stage, the state issues policies focusing on internet users, as users themselves became increasingly responsible for their postings, either through direct governmental sanction or through contractual relationships with service providers (Creemers 2014: 8). For example, at the end of 2011, the Beijing government issued a policy entitled Several Provisions of the Beijing Municipality on the Administration and Development of Microblog in Beijing (Beijingshi weiboke fazhan guanli ruogan guiding) 1 to force internet users registering for microblog platforms to use their real names and identity cards. This real-name system limits anonymity online and control internet users online activities. As a consequence of these regulations, Google quitted its business in mainland China by closing down Google.cn in Since then, Baidu, the local search engine, 1 Beijing Municipality, 16 th December 2011

4 almost dominates the Chinese search engine market 2. This domination results in a negative impact on the information Chinese internet users can access via search engines. As figures 1and 2 show, searching Hong Kong Occupy on Baidu and Google lead to different results: on Baidu, most results either label this protest as US-backed Sedition, or highlight Anti Occupy Central ; whilst Google shows more positive results, such as news reports from BBC and South China Morning Post, and related archives. As Lee, Liu and Li (2013: 420) argue, only negative comments on such issues are retained on the domestic internet network, and this censorship illustrates how a contemporary government can shape public opinion via power and technology (ibid.). 2 Baidu holds over 70% market share in 2013

5 Figure 1: Searching Hong Kong Occupy on Baidu, access data: 21 st April 2015

6 Figure 2: Searching Hong Kong Occupy on Google, access date: 21 st April 2015

7 In other words, Chinese states policies on censorship result in limited information being provided by internet content companies, such as Baidu. This certainly restricts a creative culture or innovative culture ; rather, it builds a copycat culture in the current industries. As the workers state, they can only do the minor innovation to fit into the Chinese market. Indeed, a creative culture in the internet industries is not only restricted by policies on censorship that we can find from media, but also restrained by the state via directly intervening in the business and internet workers daily practices. For example, in 2010, Qihoo 3 and Tecent 4 accused each for using their software to block users from accessing the other s software. This resulted in a dispute between the two companies, and lots of internet users were victims who were informed to remove other s software. Due to this, several government departments, such as the Ministry of Industry and Information Technology (MIIT) and the Ministry of Public Security, intervened in the dispute. As a result, both companies apologised to internet users, and officials in MIIT announced that they would take effective measures to ensure the fair, just and orderly competition within the internet market to protect the interests of internet users (China Daily 2010). It then shows power of the state in terms of intervening in internet companies business. Meanwhile, according to Leo, an interviewee from the first interview group I did in February 2010, who worked in the Open Platform Department at Campus 5, officials from the State Administration of Radio, Film and Television (SARFT) visit Campus every month, in order to have regular meetings with workers in the Security Department. In these meetings, officials inform the workers about recent sensitive issues, which are usually related to politics and pornography, and ask the workers to delete references to these issues from all Campus online products, such as forums. As Lee, Liu and Li (2013) point out, regulatory authorities, such as SARFT, the Ministry of Culture, and MIIT, can easily shut down internet companies via refusing renewal of licenses or revoking licences if the companies do not comply with the 3 Qihoo 360 Technology, a Chinese internet security company known for its antivirus software, Web Browser, and Mobile Application Store. 4 A Chinese internet company that operate many services, such as the well-known instatnt messenger QQ and mobile chat service WeChat. 5 Anonymity for one of the internet companies I visited

8 state s policies, such as filtering sensitive information as stated above. For example, the state issued a policy titled Supplementary Notice concerning Further Perfecting the Management of Online Dramas, Microfilms and other such Online Audiovisual Programmes (guanyu jinyibu wanshan wangluoju weidianying deng wangluo shiting jiemu guanli de buchong tongzhi) in March 2014, to order online video sites to hold their responsibilities of having good and healthy programmes. It then banned online video sites, such as Sohu and Youku, from showing popular American TV shows, such as The Big Bang Theory, in the next month. It was said that these TV shows were banned because the state tightened regulations on streaming services, as the supplementary notice showed. But, indeed, in the same month, People s Daily, the official newspaper of Chinese government, announced that these American TV shows would not be banned, as CCTV was doing the translation work for the comedy The Big Bang Theory. CCTV s drama channel would broadcast this comedy when the translation and editing work was finished. In other words, the policy was used as a tool by the state to take business from these online video sites. This again shows the state s strong power in terms of intervening in internet companies business. Because of the state s strong intervention, internet companies are busy with following the state s order, such as filtering sensitive information. Take the 1989 Tian anmen Square Protests as an example: according to Alex, another interviewee in the first interview group I did in February 2010, who also works in the Open platform department at Campus, at the end of April every year, the company starts to organise a number of meetings to prepare for the coming 4 th June, where lots of internet users usually organise various online activities for the anniversary of the protests. The company makes great efforts to stop these online activities, obeying the rules set by the state. Normally, there are two ways the company filters information relating to this sensitive issue: filtering key words using censorship technologies and filtering pictures by manual examination. The User-generated Content Department and the Security Department take charge of filtering key words, such as explosion and bomb. The state provides a list of sensitive words as a guideline, which includes millions of words relating to the Tian anmen Square Protests, and asks the company to delete them from its website. Alex s roommate, who worked in the security department, told him that such lists included 7,300 words relating to AV (Adult Video) actresses, not to mention numerous words relating to the Tian anmen Square Protests, which remains one of the

9 most sensitive political issues in contemporary China. Moreover, such prohibited words on the list include not only those written in Chinese, but also words from many other languages. The manual examination of sensitive pictures requires efforts from lots of workers. According to Alex, almost all workers, including full-time workers and interns, and even the boss of Campus, work day and night around 4 th June, in order to filter pictures posted by internet users and delete the sensitive ones. Normally, online pictures are examined after users have posted them, but, during this special period, these pictures need to be examined before being shown on the website. Thus, more workers are required to work overtime in order to filter all the pictures. The workers, who usually work in relays, are required to work together at the same time around 4 th June, in order to deal with the mountain of work. Generally, the officials do not provide the workers with lists of sensitive words and pictures that need to be deleted; rather, they give general information about the issues, and the workers need to decide for themselves what kinds of related words and pictures should be deleted. If the workers fail to delete the right things, the company may be punished by the state, through fines, and even through closure. As Lee, Liu and Li (2013: 423) claim, the companies are required to have the responsibilities of figuring out which content to be filtered independently. This also suggests another possibility that the state can directly stop certain programmes or products, because they may still find certain sensitive issues after the workers have filtered the information. For example, Leo, the former interviewee from the Open Platform Department at Campus in 2010, said that the popular online game, Godfather, created by the department in 2010 and ranked as one of the top 10 most popular online games by users, was stopped by the Ministry of Culture, because it was perceived to contain sinister gang and gambling-related content. In this case, the workers creativity was directly intervened with by the state, when they stopped the product because of sensitive issues. This is China, where all businesses need to consider political issues. Some companies are closed because of political reasons, such as Fanfou [a Chinese website similar to Twitter, which was closed by the state in 2009, because large numbers of internet users discussed sensitive political issues, such as the Tian anmen Square Protests, on the website] Actually, the Tian anmen Square Protests is not the only case reflecting intervention by the state; the Xinjiang riot [ethnic violence erupted in Xinjiang Province, a western province in China, in early July Thousands of people were killed and hundreds were injured in the violence] is another sensitive

10 issue that needs to be deleted from websites. (Alex, former technical worker in the Open Platform Department at Campus, 27 th February 2010, interview) Galeno, another interviewee I did in December 2011, provided me with some examples of such direct intervention from the state: Netease, one of the most popular news websites, was suddenly stopped by the state, because it reported the scandal of the President s son bribing We have had a similar experience: there was a hot topic on our website that civil servants in Beijing were being offered houses for 7.70 per month. Then, we [all the workers in Campus] were asked to have a meeting, as the leader [of China] was quite furious about this news, and asked us to immediately delete all the related news on our website (Galeno, technical worker in the Product Administration Department at Campus, 20 th December 2011, interview) In these two cases, workers practices were directly stopped by the state, because these practices hurt the state. Put simply, the state assigns the responsibility of filtering sensitive issues to internet workers, by requiring them to delete sensitive words and pictures in relation to certain issues without giving detailed lists. When the state is unsatisfied with workers practices or programs, it easily stops them. Such rough intervention from the state influences workers practices and creativity, as the online game Godfather case indicated. Therefore, on the one hand, some internet workers are forced to spend lots of time, even work overtime, on following the state s regulation, such as filtering sensitive information; on the other hand, internet companies are also busy with dealing with these issues that they limit the time and space to innovate products. It is not only the state s intervention with related policies and strong power, but also some economic difficulties that stop the initiation of an innovation culture in the industries. For example, some of my interviewees said that they make a compromise in terms of copycat culture, because their pay cannot meet the high living costs in big cities, where most internet companies are based, when their ambitions to innovate are not supported by the companies. Compared to peasant workers peasants that rush into big cities to be cheap labourers and peasants, most internet workers are better rewarded, but this does not guarantee that they can enjoy a middle class life in big cities, such as Beijing and Shanghai. For example, during my fieldwork, one of my participants said that she hesitated to have a baby, although she was already 30, a late age to have baby in China. The high cost of buying a house and caring for a baby in

11 Shanghai made her postpone her plan; the cheapest old flat in Shanghai, with a size of 80 square metres, is around 3,000 per square metre, a total of 240,000. It needs an initial payment of 60,000, compared to her monthly salary of 1,200. In other words, the initial payment would be 50 times her monthly salary, and the total cost would be 200 times her monthly salary, compared with 108 times people s monthly salary in UK. 6 Therefore, the high expenses in Shanghai prevent her being a mother, not to mention having a middle class quality of life. In fact, it is not only the workers who cannot afford to spend time on innovation, but also the internet companies that need to profit quickly; otherwise, they will be eliminated from the fast developing industries, because of the high costs in big cities. Louis, a former technical worker at Campus, who ran his own internet company in Beijing at the time of my writing, says that the rent of his office is more than 1,800 per month, which is equal to the monthly salary of a senior manager with five years work experience. Put simply, the costs of running a business in the big cities is so high, that most internet companies could not afford to wait for profits from innovation. Instead, they choose the cheapest and easiest way of profiting: by copying. Therefore, some policies in Chinese internet industries during these ten years lower the innovation in the industries, via tightening regulations on information flow. This not only limits internet users access to information, but also undermines internet workers ambitions to innovate. In other words, the current policies in Chinese internet industries tend to maintain a copycat culture, rather than encourage an innovation culture. References Creemers Rogier (2014) The Privilege of Speech and New Media, in Goldstein, Avery et al. (eds.), The Internet, Social Media, and a Changing China, Philadelphia, University of Pennsylvania Press Ding Sheng (2009) Informing the masses and heeding public opinion: China s new internet-related policy initiatives to deal with its governance crisis, Journal of Information Technology & Politics, vol.6: Daily Mail, 20 May 2013

12 Fu King-wa, Chan Chung-hong and Chau Michael (2013) Assessing censorship on microblogs in China: discriminatory keyword analysis and the real-name registration policy, IEEE Computer Society, May/June: Lee Jyh-An, Liu Ching-Yi and Li Weiping (2013) Searching for internet freedom in China: a case study on Google s China experience, Cardozo Arts & Entertainment, vol.31: Liu Yangyue (2012) The rise of China and global internet governance, China Media Research, vol.8(2): Mbaku John Mukum & Yu Zhuolin (2013) Information communication technologies, transparency and governance in China, International Journal on World Peace, vol.1: 9-59 Ross, A Fast boat to China: high-tech outsourcing and the consequences of free trade: lessons from Shanghai. New York: Vintage Books Saleem Omar (2012) China s internet policies within the global community, Journal of Technology Law & Policy, vol.(17): Websites: CCTV to broadcast The Big Bang Theory, People s Daily, 30 th April 2014, China to investigate law violation in Tencent-Qihoo 360 spat, China daily, 22 nd November 2010, US TV shows removed from popular streaming websites, Global Times, 28 th April 2014,