The last twelve months have been ambitious ones for both Chinese Internet and technology companies and the Chinese government’s Internet governance agenda. And as ambition translates to success, China is in an increasing position to shape the future of online business.
Skyrocketing Business in China
Having staged the world’s largest IPO (at $25 billion) at the New York Stock Exchange in September 2014, e-commerce giant Alibaba showed the world the capacity and energy of an indigenous Chinese ecommerce company. Alibaba has empowered millions of Chinese and foreign small and medium businesses to succeed in ecommerce, connecting them with China’s massive consumer base. In the past year, it’s absorbed huge amounts of capital and gained an impressive reputation abroad, attracting the trust of global investors despite a seemingly risky corporate structure and criticism by the Chinese government.
Another star Chinese business, Xiaomi, smartphone and hardware maker, announced a doubling of its revenue in 2014, making it the world’s third largest smartphone maker after reigning tech giants Samsung and Apple. The company sold over 61 million phones in 2014 — a whopping 227% increase over its 2013 sales. Xiaomi is also currently embarking on a “going out” strategy: It is looking to expand its investments in India and also plans to start selling in Brazil in year. At the same time, having expanded its server infrastructure globally in 2014 in order to improve its smartphone services in places like India, Malaysia, Philippines, Indonesia and Taiwan, the hardware maker has tried to assure its customers that their data is securely stored. Considering the fact that the company was founded only in April 2010, its rapid development and global expansion is especially impressive.
Speaking Up on the World Stage: A Beijing Model for Internet Governance
As China’s financial stake in ecommerce has grown, the Chinese government has been seeking a more prominent voice in global Internet policy discussions. This past year, we saw the Chinese government loudly advocating its Internet governance philosophy on the world stage.
In November 2014, Beijing held its inaugural World Internet Conference in Wuzhen, China. With the purpose of showcasing and celebrating its Internet governance model, the conference’s theme was “an interconnected world shared and governed by all.”
China used the conference to reject the dominance of American companies and the US government’s Internet governance agenda and policies. At the conference, Lu Wei, China’s new “Internet czar” urged: “join us in building up a peaceful, safe, open and co-operative cyberspace,” eagerly promoting China’s own domestic Internet rules as a model for global Internet regulations to an audience including representatives of home-grown and multinational tech giants like Baidu, Alibaba, Tencent, Apple, Microsoft and Google, and international Internet organizations, like ICANN and ITU.
Right after Wuzhen, Lu Wei made his way to the U.S. At the U.S.-China Internet Industry Forum held in Washington, DC on December 2, Lu Wei made an even bolder claim that there’s not much distinction between U.S. and Chinese models of Internet governance. He tried to blur the line between the U.S.-backed multi-stakeholder model and the Chinese-backed multilateral approach to Internet governance.* “Without ‘multilateral’ there would be no ‘multi-stakeholders’,” said Lu Wei, arguing that national sovereignty should be paramount and the notion that nations should be left to regulate cyberspace within their borders as they see fit.
Internet governance and “informatization”** have been in the spotlight during President Xi Jinping’s tenure and will continue to dominate the Party’s agenda in coming years. President Xi Jinping established the Central Internet Security and Informatization Leading Group in February last year, emphasizing to the group that “[n]o Internet safety means no national security, and no informatization means no modernization.” The Group, directed by Lu Wei, is designed to lead and coordinate Internet security and “informatization” work among different sectors, as well as draft national strategies, development plans and major policies in the field, including a mix of technical cybersecurity defenses and trade-related moves.
Why Global Brands Should Follow Internet Trends in China
A nation’s approach to business and Internet policy – such as China’s push for “multilateral” Internet governance, when there is strong support in the West for a “multistakeholder” approach – can impact a business’ strategy and its bottom line.
For the past decade, Western states as well as the technical and business community and civil society have been working to ensure an inclusive and just form of decision-making in the Internet world. For example, ICANN has been working religiously to protect the integrity of its multistakeholder model. The ongoing discussion on IANA’s stewardship transition is a solid proof of this process.
In January this year, China, teaming with Russia and with the support of several other countries, submitted a revision of the International Code of Conduct for Information Security to the UN General Assembly. In the Code of Conduct proposal, this was the freshly and explicitly added language: “all States must play the same role in, and carry equal responsibility for, international governance of the Internet, its security, continuity and stability of operation, and its development in a way which promotes the establishment of multilateral, transparent and democratic international Internet governance mechanisms which ensure an equitable distribution of resources, facilitate access for all and ensure the stable and secure functioning of the Internet.”
While it’s often difficult to parse governments’ language for its true intent, the proposal with words like “equal responsibility”, “multilateral” and “democratic international Internet governance mechanisms” heavily indicates that these two UN Security Council member states aim to continue increasing their influence in Internet governance.
Knowing how governments are attempting to mold the Internet according to their own interests is key to planning your online business strategy accordingly – especially a nation as impactful as China. If a government successfully gains influence in the Internet ecosystem, its own regulatory rules and culture will impact how everyone else does business online.
As the Internet landscape continues to shift due to changes in business practices and policy, brands must remain informed, adaptable – and able to help chart the course of the future of ecommerce rather than simply react.
We will be keeping a close eye on Chinese Internet policy and business developments – stay tuned for upcoming posts on these topics.
* “Multi-stakeholder” here refers to a mix of civil society, corporate, and government actors participating in the Internet’s governance on an equal footing, while “multilateral” is more state-centric, with states governing the Internet domestically on the basis of sovereign concerns.
** “Informatization” here refers to an emphasis on information technology as a force multiplier, and the term has been commonly used by the Chines government when discussing modernization and development strategies in various industries.