For years, Beijing has played a cat-and-mouse game with anyone trying to breach its Great Firewall of internet censorship. Recently, however, it has switched gears from high-tech censorship to old-fashioned shakedown, as the Ministry of Industry and Information Technology forces Chinese and foreign companies to use expensive Chinese software to conduct their internal business.
At issue is the use of virtual private networks, or VPNs, software that can encrypt internet traffic, allowing computers to connect remotely and securely to closed networks. VPNs allow people to work from home but access office servers. Outside China, they are a matter for privacy advocates, online music pirates and the tech directors who maintain internal corporate networks. Within China, VPNs are familiar to practically every foreign resident and millions of Chinese who just want to know what is going on in the world.
China has tried to maintain control over the internet with regulations ensuring that any traffic in the country moves through channels licensed by Beijing. That has affected corporations using VPNs to access servers outside China. For instance, a VPN is needed to access services provided by Google — blocked in China— including the email used by many companies.
The ministry’s solution is to ordain that companies switch to approved Chinese VPN software, which is subject to censorship blocks, or pay for expensive leased lines helpfully provided by its cash-strapped telecoms companies. In case anyone missed the memo, it has begun closing some of the ports used by corporate VPN software to get through the firewall, throwing companies and even a few embassies into disarray.
Censorship aside, the move is a classic case of rent-seeking by a regulator eager for the licence fees that come from forcing everyone to use favoured companies — in this case the telecoms triopoly and the dozen or so companies authorised to sell VPNs.
Similar revenue grabs have happened before, notably the Xinhua news agency’s attempts to claim a share of foreign newswires’ sales by arguing it was “safeguarding state sovereignty”. Xinhua withdrew its attempts before the cases reached the World Trade Organization.
The WTO recognises China’s right to censor information to its own people. But the WTO does not recognise member states’ right to block commercial access to foreign or private companies while favouring domestic state-owned companies doing the identical business.
China’s concept of “internet sovereignty” takes the right to censor one step further by creating protected businesses for tech companies sheltered by the Great Firewall, while raising costs for citizens or businesses trying to access the global internet.
As part of its Belt and Road initiative, Beijing is offering to help other countries construct an internet architecture similar to its Great Firewall, extending this rent-seeking opportunity to new markets. Call it Belt and Router.
The Great Firewall, and the latest lockdown on ways to get through it, hurt China’s own businesses. For instance, Chinese companies use Facebook to reach international customers. Cutting off foreign sites such as Facebook, or else charging a high premium to maintain access, is essentially a tariff on, for example, Chinese oil services companies attempting to market themselves overseas.
Unfortunately for multinationals doing business in China, the Trump administration is unlikely to take China to the WTO on this. And there is no unilateral retaliation possible on internet access, since Washington does not control Chinese companies’ use of the web.
Chinese companies have fought off similar land grabs before, for instance when Chinese banks successfully stopped regulators from forcing them to use inferior “indigenous” encryption technology. Without a rearguard action by China Inc to preserve its access to global customers, “internet sovereignty” will give China’s telecoms giants a lock on the world inside the Great Firewall.
This article has been amended to reflect that Xinhua withdrew its cases before they reached the World Trade Organization
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