U.S. Technology Companies in China: Controversy, Legislation, & Implications For Corporate Diplomacy

Peter Winter also provided research support for this report.

Over the past two years, Cisco, Microsoft, Yahoo, and Google have entered the Chinese Internet market, providing online or information-related products utilized by the Chinese government to enforce Chinese information censorship laws, conduct online surveillance, and restrict access by Chinese citizens to certain internet sites.

Cisco Systems, for instance, sells equipment that enables online surveillance in many markets, one of which is the Chinese police.  The Google product that has generated controversy is Google.cn, its search engine based in mainland China.  Its location on Chinese soil means that Google.cn filters search engine results to abide by Chinese censorship laws, censoring some results for “politically sensitive” terms such as “democracy,”  “Tiananmen,” or “Falun Gong.”  Censored search results are accompanied by a notice alerting the user to the absence of some information on the page.

Microsoft’s China controversy stems from censorship on its Chinese blogging tool.  One well-known blog (by “Michael Anti” ), hosted on servers located on American soil, was removed in response to a request from the Chinese government.  Additionally, searches for “democracy,” “human rights,” and other terms which are considered “politically sensitive” in China are rejected outright by the system. Yahoo also offers blogging services to mainland China internet users, but does so through a Chinese server.  On at least one occasion, Yahoo released to the Chinese police, at their request, identifying information about a dissident blogger using a Yahoo blog.  This blogger, Shi Tao, was later arrested and imprisoned with the aid of this information.

Public outcries against these IT companies first emerged in the blogosphere and among human rights organizations.  Editorial and op-ed pieces in the mainstream news media soon followed, reaching critical mass in the Fall of 2005. 

In response to these criticisms, in February 15, 2006, Representative Christopher Smith (R-NJ) led  a Congressional subcommittee which conducted hearings featuring testimony from all four IT companies defending the conduct of their respective organizations.  One day later, Rep. Smith introduced the HR4780, a bill, still under consideration, which would make many of the current censorship-oriented operations by the four technology giants illegal.  If passed, this bill will, in effect, preclude U.S. IT companies from operating in any countries with internal restrictions.  Proponents of the bill argue that service provision to countries such as China who engage in censorship is not only morally reprehensible for American firms but it should be made legally untenable as well. 

Responses to the issue and the proposed legislation has been fairly uniform.  Some have pointed out that this controversy is bad publicity for China, as it has brought their information management and control practices into the international spotlight.  Others have focused on the negative implications for the American and world economy if GOFA passes.  Most of the discussion, however, has focused on the responsibility of American corporations to represent the moral values of the United States when doing business abroad. 

After recent controversies over the morality of business practices in other areas, such as the Enron scandal, the responsibilities of U.S. based corporations as “responsible corporate citizens” have come to the forefront.  While considerations regarding economic concerns have been mentioned, the dominant theme of discourse in both Western and Asian media outlets has been that American corporations have a moral obligation to uphold certain American values even when operating under foreign law in foreign markets. An echoing cry has been that China has already changed U.S. corporations more than such corporations could ever hope to change China. 

Even if the Global Online Freedom Act does not pass, as many have suggested it will not, the message for corporations is clear: they are expected by both the American government and by private citizens worldwide to represent American values by nature of their own national identity.  Chinese IT companies will experience pressures of a different sort; in the eyes of the world, American companies are held to a different standard and are expected to live up to that standard no matter the market in which they are doing business and despite the pressures of transnational capitalism.