Josh Chin has a good story in the Wall Street Journal yesterday on China's control of the Internet [China Issues Broad New Rules for Web ] that made me think about businesses trying to operate in China. The last hearings the US-China Economic and Security Review Commission did concerned the barriers China puts up to companies trying to operate in China, and it seemed like they were trying to make it too difficult to continue there. His story just adds to that narrative.
He says, "The new regulations—jointly issued by the ministry of information technology and the publications regulator—ban companies with foreign ownership of any kind from engaging in online publishing, though they allow foreign-invested firms to cooperate with Chinese companies on individual projects, as long as they obtain prior permission from authorities."
The new rules also include a formalization of a 5-year old requirement to store data inside China's borders. That avoids any need for international cooperation in getting access to data.
Remember that this is on top of the onerous rules for providing the government with encryption and source code so no company can hide secrets in computers. I have asked many times why Boards of Directors allow this kind of surrender to Chinese authorities when it means certain loss of trade secret and business information that allows China to get ahead in so many business areas. Can these companies be making that much money? Nothing compensates for the loss of a company's future. In the short term, those profits look huge. In the long run, they mean competition that can put a company out of business. Anyone who takes the money and runs, deserves what they get, but the shareholders should be getting a little more say in whether that is done or not.
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