Ker Gibbs says information isolation benefits few, whether in scientific and manufacturing innovation or trade, and the country’s developmental goals call for a reassessment of the barrier mentality
This Op-Ed piece was first published in the South China Morning Post on August 31st and written by AmCham Shanghai Chairman Ker Gibbs.
China’s hosting of the G20 summit allows it to help set the agenda for global financial cooperation over the next year or two. China is also demonstrating leadership in other areas. On climate change, its commitment to clean energy shows foresight that many Western nations would do well to emulate. But, as China’s economy continues to develop, the government’s internet doctrine puts it at odds with many of its G20 counterparts.
Over the course of history, trade has flourished on the back of a free flow of information. It allows sellers and buyers to make informed decisions, financiers to better comprehend risk. Today, it helps scientists learn from the failures and successes of peers elsewhere. Basic research in the UK leads to a drug made in the US that saves lives in China – it’s a modern but already proven path. Yet just as China transitions from a manufacturing-led economy to one centered on information and innovation, the government is shuttering China from the rest of the world.
Last year, 81 per cent of respondents to AmCham’s China Business Report survey said internet restrictions make it difficult to do business in China. And whether it is “secure and controllable” technology, data localization or internet blocking, those barriers are multiplying. China’s isolation will have consequences, not just for foreign businesses, but for Chinese ones as well.
Take China’s ambition for Shanghai to be a world-class financial center by 2020. A cursory glance at other global financial centers – London, Tokyo and New York – throws up a number of qualities, including rule of law and regulatory transparency. What they also share is unrestricted access to information. Whether it is a trader’s ability to access Bloomberg or Reuters or a CEO’s to read the Wall Street Journal, these news sources are a click away in London or New York. Not so in Shanghai. In China’s universities, scientists are handicapped by their inability to access world-class research. Yet having access to databases or the latest available research may be crucial to their own endeavors to create the next life-saving cancer drug.
Many large foreign companies in China utilize trunk lines that bypass the “Great Firewall”. But, in an innovation-led economy, it is often the research done in universities or by cash-strapped small start-ups that leads to clinical or industrial breakthroughs. These are the very same advances that are patented and commercialized, and then translate into thousands of jobs, as the US innovation experience clearly shows.
Among Beijing’s most recent policy proclamations is “Manufacturing 2025”, a state-led drive to push China up the manufacturing value chain to create the kinds of products at which countries such as America and Germany excel. Part of this push includes buying best-in-class foreign expertise, as the acquisition of the German robot manufacturer Kuka illustrates.
But the Chinese government evidently hopes that some of this type of innovation will occur domestically. For that to take place, and for China to reach its development goals, the government needs to reassess its approach to information.
We recently released a report on the internet which explains why requirements for use of “secure and controllable” technologies, data localisation and internet blocking are bad for China, and recommends specific policy changes. Our reasoning was based on several factors, including the belief that forcing foreign companies to buy domestically manufactured hardware does little to improve security. We also believe that China’s data localisation requirements will force international companies to adopt standards that hinder efficiency, which seems at odds with the government’s aims to innovate. One suggestion we made was for the government to unblock internet access in Shanghai’s Free Trade Zone so it can measure its benefits in a controlled environment before doing so for the rest of the country.
These changes, if adopted, are consistent with China’s economic development goals and will lead to a more prosperous economy. Information isolation benefits few. It certainly doesn’t benefit foreign companies operating in China, but more important, it will stand in the way of China’s own progress towards its development goals.
Mr. Gibbs is the chairman of the American Chamber of Commerce in Shanghai.