On paper, China seems to be an Internet powerhouse: It has a large population, plenty of young people, a growing economy, and the largest number of Internet users in the world –- more than 500 million as of the first quarter of this year, twice as many as the next runner-up, the United States. China also dominates manufacturing.
But the PRC is barely making a dent when it comes to enterprise IT, even as nearby India flourishes. Language differences is one reason, certainly. But a bigger reason why China isn't much of a threat in IT is its politics, evident in measures taken to restrict communication inside and outside the country.
Internet censorship
There is the well-known “Great Firewall of China,” or the “Net Nanny” -- a system that keeps Chinese users from accessing certain foreign sites. But that's just the beginning. Domestically, Websites have to be registered with the government. And the government can step in at any point and ask sites to take down certain materials, censor search keywords, or shut down discussions of particular topics.
Companies with offices in China typically use virtual, private networks to keep the Chinese government from reading their email. But the government has begun cracking down on some of these as well.
Foreign social media sites are regular targets. Twitter and Facebook are blocked, and even LinkedIn access has been restricted, so Chinese users can't participate in discussions on these platforms.
Travel restrictions
US citizens don't need to get a visa if they travel to Canada, Europe, or Hong Kong, unless they plan to stay there for work. China requires Visas. I understand that there's a certain degree of reciprocity here –- the US requires Chinese visitors to get visas, so China does the same to us.
When I was based in China between 2004 and 2009, I not only had to get a visa to enter the country, but I also had to register my home address with local authorities, and a police officer would occasionally stop by to make sure I was living where I said I was.
Ease of travel doesn't always attract foreign business to a country, but it certainly doesn't hurt.
Currency controls
Everybody knows that China keeps its currency propped up to make production there cheaper compared to the rest of the world. What's less known is that this is done, in part, by requiring companies to get government permission before sending big chunks of money in or out of the country.
If you want to invest in a publicly-traded Chinese company, for example, you'll need to find a broker that has a license for bringing money in -- and hope that their quota isn't all used up.
This situation is improving. however. China raised foreign investment quotas from $30 billion to $80 billion earlier this year, and small transfers aren't affected. You can wire money to friends in China, and when you’re there you can withdraw cash from your US bank account at most ATMs.
Education
My kids went to public, Chinese elementary schools. They were tough: lots of homework, lots of memorization. I had to get special dispensation from the schools to allow my kids to attend, including paying extra fees and allowing my kids to skip the state exams so as to avoid dragging class averages down.
The plus side is that now I have kids who can speak, read, and write Chinese and for whom American schools are a piece of cake by comparison. But when it came time for high school, I brought my kids back to the US.
The highly regimented Chinese system is focused on a very limited number of outcomes, and often forces students into majors that they don't want. When I lived in China, I routinely hired writers with educational backgrounds in finance, the life sciences, or other technical subjects who did not want to work in those fields but were stuck with those majors.
This is slowly starting to change, with private schools and colleges appearing in many cities, and offering a variety of majors, not just the official government curriculum. But it will take a while before the country sees a significant, large-scale impact.
It feels a little trite to write this, but it all comes down to freedom. Without freedom to use the Internet, to travel, to invest, and to obtain the necessary education and training, China will continue to lag in the enterprise IT market.
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— Maria Korolov is president of Trombly International, an editorial services company that provides coverage of emerging technologies and markets. She has been a journalist for more than 20 years.
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