THE IN­TER­NET IS SPLIT­TING INTO TWO AMID US-CHINA SPAT

Business Standard - - FRONT PAGE - BLOOMBERG

Western big­wigs were a noshow at China’s big­gest web con­fer­ence. But in their ab­sence, the lo­cal over­seers of the na­tion’s tech­nol­ogy in­dus­try were only too happy to plug their unique vision for the global in­ter­net.

Un­like 2017, when Tim Cook and Sun­dar Pichai graced the World In­ter­net Con­fer­ence in Wuzhen, this year’s gather­ing was a de­cid­edly do­mes­tic af­fair, presided over by the likes of Ten­cent Hold­ings Chair­man Ma Hu­ateng. Given the floor, they again pushed the con­cept of a rigidly po­liced medium that — none­the­less — is a well­spring of in­no­va­tion to rev­o­lu­tion­ize busi­nesses and mod­ernise the Chi­nese econ­omy.

That first part flies in the face of the fa­mil­iar US-led model, yet has pro­duced two of the world’s 10 most valu­able com­pa­nies: Alibaba Group Hold­ing and Ten­cent. That rapid as­cen­dancy prompted for­mer Google hon­cho Eric Sch­midt to de­clare the in­ter­net will split down the mid­dle within the next decade, as au­thor­i­tar­ian gov­ern­ments adopt China’s all-en­com­pass­ing con­trols.

On one side is a cy­berspace arena that es­pouses open com­mu­ni­ca­tion while the other is a walled-off, thor­oughly scrubbed world where many are ea­ger to sign away their data in ex­change for ser­vices. At China’s most im­por­tant tech in­dus­try con­fab this week, Ma and a clutch of govern­ment of­fi­cials stressed it’s the coun­try’s des­tiny to be­come an in­ter­net power, and called for more bal­anced gov­er­nance of cy­berspace.

China’s reg­u­la­tors have trum­peted its con­cept of “cyber-sovereignty” since the in­au­gu­ral con­fer­ence in 2014. But the dichotomy be­tween the Amer­i­can and Chi­nese tech in­dus­tries has never at­tracted as much scru­tiny as to­day, when the world’s two rich­est coun­tries are butting heads in a con­flict that may shape a new world or­der. As US icons like Google and Face­book come un­der fire for pri­vacy vi­o­la­tions and en­abling hate speech, their Chi­nese counterparts are tout­ing theirs as the su­pe­rior model: one geared to­ward the in­ter­ests of the state.

“The Chi­nese econ­omy is a vast ocean. Storms can­not dis­rupt it,” Ma, who is also known as Pony, told del­e­gates. “This ocean holds mas­sive mar­ket po­ten­tial and also great room for in­no­va­tion. I be­lieve, this isn’t just a de­vel­op­ment op­por­tu­nity for the in­ter­net in­dus­try, but for all sec­tors. It’s not just an op­por­tu­nity for China, but for the en­tire world.” Re­marks from Chi­nese Pres­i­dent Xi Jin­ping read out at the start of the con­fer­ence called for “mu­tual re­spect” in cy­berspace be­tween the two na­tions. The cur­rent rift in their ap­proaches how­ever has pro­found im­pli­ca­tions and may bar the likes of Face­book and Al­pha­bet from any mean­ing­ful pres­ence in the world’s largest in­ter­net and mo­bile arena. It’s an­other man­i­fes­ta­tion of what for­mer US Trea­sury Sec­re­tary Hank Paul­son called an “eco­nomic iron cur­tain” di­vid­ing the world if the two na­tions fail to re­solve their dif­fer­ences.

Un­like the rel­a­tively hand­soff Amer­i­can model, the Chi­nese ap­proach is geared to­ward one over-arch­ing im­per­a­tive — pro­pel­ling and safe­guard­ing the rul­ing Com­mu­nist Party. Any­thing deemed to un­der­mine that ob­jec­tive, from pornog­ra­phy and ad­dic­tive games to pock­ets of dis­sent, is ruth­lessly rooted out when dis­cov­ered. To wit, China has the low­est level of in­ter­net free­dom among 65 coun­tries polled by Free­dom House.

Crit­ics of the model say play­ers like Alibaba and Ten­cent thrive be­cause Bei­jing damp­ens com­pe­ti­tion by mak­ing it nighim­pos­si­ble for global play­ers such as Face­book to op­er­ate. They say the govern­ment’s heavy hand and un­pre­dictabil­ity is counter-pro­duc­tive. Ex­hibit A: a months-long crack­down on gaming that helped wipe out more than $200 bil­lion of Ten­cent’s mar­ket value this year. That cul­ti­vates a per­va­sive cli­mate of fear, said Gary Ri­eschel, found­ing part­ner at Qim­ing Venture Part­ners.

“Every time you see one of th­ese vast losses, you can see the Chi­nese govern­ment,” he said.

The walled-gar­den ar­gu­ment fails to take into ac­count a level of com­pe­ti­tion that puts the Amer­i­can in­dus­try to shame. De­spite per­va­sive cen­sor­ship, the Chi­nese in­ter­net has evolved into one of the most vi­brant town halls the world’s ever seen — it’s tough to truly rein in a bil­lion peo­ple — as an army of mil­lenials live-stream in the mil­lions and su­per apps thrive with more users than there are Amer­i­cans.

Un­like 2017, when Tim Cook and Sun­dar Pichai at­tended the con­fer­ence, this year’s gather­ing was a de­cid­edly do­mes­tic af­fair

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