U.S. companies want to play China’s game. They just can’t win it.

Washington Post illustration; iStock

U.S. companies want to play China’s game. They just can’t win it.
The Washington Post, December 22, 2016
World: Asia & Pacific
By Emily Rauhala and Elizabeth Dwoskin

“BEHIND THE FIREWALL: How China tamed the Internet | This is part 6 of 6 of a series examining the impact of China’s Great Firewall, a mechanism of Internet censorship and surveillance that affects nearly 700 million users.”


“For some highflying U.S. Internet businesses, the China dream is fading; for others, it looks radically different from what they had hoped.”


BEIJING — Netflix has a nifty new China strategy: Skip it.


In January 2016, the video-streaming service announced an ambitious global expansion. The goal was to beam American hits such as “House of Cards” around the world including, eventually, in China.


“Today you are witnessing the birth of a new global Internet TV network,” said chief executive Reed Hastings at a large tech conference.


Sending racy American content into a country that censors almost everything may have seemed like a leap, but Netflix was confident. The China plan, Hastings said, was on a “slow and steady path.”


Less than a year later, having launched just about everywhere else, Netflix shelved the streaming project. It opted instead to license some content to Chinese providers for “modest” revenue, according to a quarterly letter. (Representatives of the company declined to comment.)


For some highflying U.S. Internet businesses, the China dream is fading; for others, it looks radically different from what they had hoped. California’s Internet companies once dreamed of liberating China with technology, thinking that the system of censorship known as the Great Firewall would inevitably crumble like the Berlin Wall, paving the way for their advance in the world’s most populous nation.


But President Xi Jinping has tightened, rather than loosened, control of the Internet and increased restrictions on foreign companies. Six years after Google retreated from China’s search-engine business over censorship and hacking concerns, U.S. firms seem more willing than ever to play the Communist Party’s game — they just can’t win it.


Even if they can gain a foothold, which is hard enough, there is practically no way they will be able to overtake the Chinese companies that have comfortably established themselves.


Facebook’s China charm offensive, which included Mark Zuckerberg studying Mandarin, has yielded little. Google’s search business and Twitter remain blocked. LinkedIn and Microsoft censor — and still, neither is a major player in China’s online space. Amazon.com is sputtering along against the Chinese e-commerce giant Alibaba. After great initial success, Apple is being overtaken by local upstarts. [Amazon chief executive Jeffrey P. Bezos owns The Washington Post.]


Still, tech companies are pushing, and they are looking to the incoming Trump administration for help breaking in.


When executives from the major U.S. technology companies met with President-elect Donald Trump on Dec. 14 at Trump Tower, they complained about a Chinese proposal that would require foreign technology companies to deposit the source code for their software with the government, according to a person who was familiar with the discussions.


Bill Bishop, a tech consultant who writes Sinocism, an influential China newsletter, said he has seen waves of confident California firms humbled by efforts to crack the China market.


“Each generation believes they can find a way, but the Chinese Communist Party has upped their game in terms of censorship, and these companies that nobody has heard about 10 years ago — now they are the biggest companies in the world,” he said, referring to corporate behemoths such as Alibaba, Tencent, Xiaomi and Baidu, sometimes called the Amazon, Facebook, Apple and Google of China.

“U.S. companies are going to make a Chinese play, but not the way they imagined.”

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About the Authors:

Emily Rauhala writes about foreign affairs for The Washington Post. She spent a decade as an editor and correspondent in Asia, first for Time magazine and later, from 2015 to 2018, as China correspondent in Beijing for The Post. In 2017, she shared an Overseas Press Club award for a series about the Internet in China.

Lizza Dwoskin joined The Washington Post as Silicon Valley correspondent in 2016, becoming the paper’s eyes and ears in the region. She focuses on social media and the power of the tech industry in a democratic society. Before that, she was the Wall Street Journal’s first full-time beat reporter covering AI and the impact of algorithms on people’s lives.