Getting tough with China? Good luck.

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If you thought Apple’s recent confrontation with the FBI over phone hacking was fun, you’ll love the sequel taking place in China.

The People’s Republic of China does not have, shall we say, the regard for freedom of access that we in the United States have. According to a recent article in The New York Times, Chinese authorities demand more than the international norm when it comes to prying behind encrypted doors. Nor does China let high tech corporate leaders answer its questions via electronic communication. Executives are required to show up in person. 

And then there’s the matter of government-run Internet censorship in China, which has earned itself the nickname “Great Firewall of China.” It keeps Chinese citizens from accessing what authorities don’t want them accessing. Obviously the Firewall defies market demand. There would have been no need for it were not Chinese citizens accessing, aka creating demand for, now-verboten material.

We’re a little spoiled in the United States. Yeah, I know, we endure our fair share of onerous regulations, especially in financial services, but we still operate in a fairly market-driven economy. It’s tempting to assume that that’s how the world works: Meet market demand and you’ll prosper; don’t and you’d better adapt or go out of business. So it might be tempting for Apple, Google, et al to sit back and smugly wait for Chinese market forces to change the government’s mind.

Just one problem. Well, actually, 700 million problems, all of them living in China and using the Internet. In a reversal that not a few Libertarians should find disturbing, China’s Internet has experienced record growth. The Washington Post reports that China’s 700 million users account for nearly 25 percent of the world market. That’s a slice big enough to make it financially unwise for even the smuggest company to take its ball and go home. The Post also reports:

China is the world’s leader in e-commerce, with digital retail sales volume double that of the United States and accounting for a staggering 40 percent of the global total, according to digital business research company eMarketer. Last year, it also boasted four of the top 10 Internet companies in the world ranked by market capitalization …

Apple, not terribly fond of letting governments into iPhones and iPads, tried getting tough with China. It ended up taking one for the team: China out-toughed them by shutting down iTunes Movies and iBooks. Between China and Apple, guess whose stock took the hit.

The fun has only just begun. Not long ago, Russia’s Safe Internet League, which is a euphemism for “censorship committee” and is at best only nominally a non-government entity, took an admiring look at the Great Firewall and said, “Cool.” Last month, the League met with China’s chief of cybersecurity and Internet policy, presumably to seek advice.

China and Russia. Ideology aside, that’s a lot of users to leave to a competing high tech company willing to play ball with censors.

Oddly enough, all of this is market forces at work. It’s just that you have governments controlling the market forces that control the capitalist tech companies. It’s not supposed to work that way. Is it?

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