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| Investing in China's Internet |
By:
Robert Hsu |
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Anyone who is not yet convinced of the incredible opportunities presented by China's growth need only look at how U.S. Internet companies are caving in to the Chinese government. These companies are so hungry to tap into China's 100 million Internet users (and growing) that they are willing to work with the Chinese government to censor results from Internet searches.
That was the topic of a widely watched hearing on Capitol Hill recently, in which members of Congress expressed concerns that Google, Microsoft, Yahoo and Cisco Systems are "enabling dictatorship" (as Rep. Chris Smith put it) by helping China's censorship efforts. These companies clearly recognize the huge potential in China -- it's currently the world's second-largest Internet market, with a good chance to overtake the U.S. as number-one in the next five years.
It all comes down to principles versus profits, and the allure of China is so great that profits are winning.
It hasn't always been this way. As recently as 2004, Google had been a staunch enemy of the Chinese government's Internet censorship policy. Google actually went so far as to devise a clever technology that let China-based users access sites forbidden by the government -- such as ones related to the Falung Gong cult, Taiwan's independence and the Tiananmen Square massacre. Not to be outdone, the Chinese government built a giant firewall to block Google's Chinese language site and frustrate users.
As China's economic emergence accelerated, Google decided to step up its operations there quickly -- and they've made some enemies in the process. First, Google poached Microsoft's China research head, Dr. Kai-Fu Lee, to be president of its China operations. Microsoft promptly sued Google and Lee after Bill Gates personally warned Lee not to leave, but the lawsuit was eventually settled, and Lee did take over the top spot at Google China.
The next big step was the decision to cooperate with the Chinese government over censorship issues, which Google just agreed to last month. This is still a big deal in China. The censorship department there employs thousands of workers whose sole job is to uncover and block politically sensitive websites on the Net from Chinese users. Government officials say it's to protect their citizens from harmful and immoral content, but it's really an attempt to control information and suppress dissenting views.
A Much Better Play on China's Internet Growth
There's no question that the Chinese society and business have become much more open in the last couple of decades, and that's why entrepreneurs there are enjoying such phenomenal success -- and giving us exciting investment opportunities. But, the government is still a real factor there. Businesses and investors who fail to take this into account are opening themselves up to big risks.
This whole censorship question is a big reason why you have to be very careful when buying search engine companies as China plays right now.
I believe a great way to play China's Internet growth is one that may surprise you a little bit: online gaming. This is a huge business -- call it an obsession -- in China. On my recent trip to China, I visited the Attack Strategy Cybercafé. Every day, kids and grownups alike fill the 60 computer stations to play their favorite online games with other players. Each station is set up in a booth that can comfortably fit two adults, and many gamers bring pillows and blankets to prepare themselves for marathon sessions that last up to 24 hours.
To get more information on investing in China, please click here http://investorplace.com/order/?pc=8VC109. |
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