How Censorship Hurts Chinese Internet Companies
Beijing's block of Facebook, YouTube, and Twitter has allowed domestic equivalents to grow. But by shunning global markets, their long-term outlook is uncertain.
Alibaba, Baidu, Sina and Tencent: China is full of successful, homegrown Internet companies, many of which are worth billions of dollars. Yet of these, only one, Alibaba, is a global trader -- and then only to offer Chinese products. Most of these companies do not bother to offer a version of their website in any language other than Chinese. Even when listing their stock on the New York Stock Exchange, they seem to reveal only an ambition to conquer China, not the world. Baidu tells us that it is "the leading Chinese language Internet search provider," while Tencent describes itself as "a leading provider of Internet and mobile and telecommunications value-added services in China." Compare this language with that from companies in Silicon Valley. Google describes itself as "a global technology leader" and Facebook declares its mission "to make the world more open and connected."
This difference in ambition begs the question: Why has China, the world champion of the outsourcing of goods, not translated its success into exporting services? China may be the world's factory, but India stands poised to become the world's back office, and Silicon Valley remains its information intermediary.
This is especially puzzling given China's three natural advantages: one, a large domestic market that should permit Chinese companies to develop economies of scale without braving foreign waters; two, a large labor pool of trained engineers; and three, a large diaspora in the United States, which would help connect Chinese companies to American companies.
But despite these advantages, China runs a huge deficit in trade in services; in 2012, the country exported $190 billion of commercial services while importing $281 billion, a deficit of $91 billion. In other words, Americans, Europeans and others export far more services to China than China exports to the rest of the world. What's keeping Chinese companies from accomplishing in services what it did with manufacturing?