But control isn’t the only goal. China’s leaders and its companies are banking on technological innovation and commercial applications to help fuel the next decade of growth in China.
The engines that powered China’s three-decade economic boom—cheap exports, rapid urbanization, and a massive infrastructure build-out—are sputtering. Rising wages are undermining China’s export powerhouse, and a spending splurge on basic infrastructure and housing has reached saturation. If China hopes to pole-vault into the ranks of developed countries, it needs dynamic new sources of growth to spur domestic consumption and bump it up the production value chain.
For that, China’s leaders are banking in large part on a flourishing tech sector. China’s technology juggernauts are the grease in the wheels of the country’s new consumer economy. The companies themselves continue to post astonishing profits, but their importance goes far beyond that. The auxiliary jobs they create in logistics, sales, and services are providing a major boost for an economy struggling to wean itself off heavy industry.
Alibaba—the Chinese online shopping juggernaut—is fanning the flames of consumption by placing the world’s largest shopping mall in the palm of people’s hands. That shopping is also fueling a logistics revolution that employs millions of drivers in trucks, in cars, and on three-wheel trikes. Baidu and Tencent, the Chinese internet juggernaut behind WeChat, are opening whole new on-demand O2O (online-to-offline) service industries: nail technicians that show up at your door, grandmas who’ll cook you an extra meal for cash, and live-streaming stars who sing for money from fans. China’s rapid rise in the field of artificial intelligence could reenergize China’s manufacturing sector with robots and unsnarl traffic in China’s cities with autonomous vehicles.
Accessing all those material benefits, while keeping its grip on power, has required the Chinese government to perform a tricky balancing act: absorbing ideas and talent from Silicon Valley while also ensuring that any company operating in China is squarely under the Party’s control.
For their part, American technology companies looking to enter China face ethical and financial dilemmas. Silicon Valley is both an industry and an ideology. Its juggernauts rake in massive profits but declare themselves to be mission- and value-driven. Google long used the straightforward “Don’t be evil” as its ethical ethos and made it the company’s mission “to organize the world’s information and make it universally accessible and useful.” Facebook, meanwhile, wants to “give people the power to share” and “make the world more open and connected.”
By acting as the gatekeeper to the country’s billion-plus consumers, the CCP possesses tremendous power to demand concessions in exchange for access. For American and European automakers, those concessions have included forming joint ventures and sharing technology with local companies. For information technology companies, that means agreeing to strict censorship requirements and granting the Chinese government access to source code and data on Chinese users.
Those onerous government demands would be laughed at in many smaller markets, but the allure of the Chinese consumer base is simply too great. Totally abstaining from the market would be analogous to European automakers simply giving up on selling cars in America after World War II.
Even if one ignores the profit motive and takes these companies’ mission statements seriously, the dilemmas are no less thorny. When Google’s search engine provides Chinese users with censored search results—including top-notch English-language sources that aren’t found on Baidu—is it helping to make information more universally accessible, or lending legitimacy to powers that seek to control it? If Chinese Facebook users can’t share political opinions on the platform, but they can find and communicate with friends overseas, is the world a more open and connected place?
It’s a classic dilemma in dealing with unscrupulous or authoritarian governments: should you opt for messy engagement or take the moral high ground? Do you refuse to engage with people and companies in that country, hoping that your abstention sends a message and leads to fundamental change down the road? Or do you continue to work within the rules set up, pushing for change where you can and hoping that greater engagement and exposure contributes to incremental progress?
This dilemma—messy engagement versus moral high ground—confronts not only technology companies, but also American universities that want to open campuses in China, film studios that want their movies shown there, and even governments that fear publicly confronting the Party on sensitive issues would mean a break in transnational ties.
And these are not abstract or academic questions. A Chinese journalist spent eight years in prison after Yahoo cooperated with a government investigation into his email account. Cisco has faced a class-action lawsuit in California over the company’s alleged complicity in supplying software tools that could track users and aid the brutal suppression of Falun Gong practitioners.
Beyond the financial bottom lines and ethical breaking points of Silicon Valley companies, the evolution of Chinese cyberspace holds tremendous importance for the future of the internet itself. Technologists and ordinary citizens have long envisioned the internet as a global digital commons, a place where information and ideas flow freely, unburdened by the constraints of the physical world and its outdated political institutions.
But the Chinese government has shown that a combination of cutting-edge censorship technology and old-school authoritarian intimidation can effectively bring the internet to heel. Today, China’s ability to wall off its domestic internet, while also fostering wildly successful technology companies, serves as both a warning for internet freedom advocates and an inspiration for other authoritarian regimes.
China is one of the few institutions with the clout and cohesiveness to shape the evolution of internet governance. The United States used its post–World War II dominance to create a new economic order built around free trade and stable exchange rates. Today, China is deploying its leverage over Silicon Valley to rewrite the rules of the internet, coaxing the world’s most influential technology companies to play along with its conception of “internet sovereignty.”
For years, the question on everyone’s mind was, How will the internet reshape the Chinese government? Today, the question persists, but the subject and object have reversed: How will the Chinese government reshape the internet?
The revenge of internet geopolitics hasn’t been limited to issues of censorship and market access. Trade wars, hacking attacks, and territorial spats have put the national U.S.–China relationship through the wringer, dragging it from the realm of strategic competition to outright rivalry. And as those tensions escalate, technology has taken center stage. Politicians in Washington, D.C., have begun to treat the nation’s technology ecosystem in a way that more closely mirrors their Chinese counterparts: as a core component of geopolitical strength, something to be leveraged, regulated, and protected from rival nations.
That global technological retrenchment is putting heavy strains on the multidimensional ties between China and Silicon Valley, ties that were slowly nurtured by people like Li Zhifei. But can two ecosystems so deeply interwoven really be wrenched apart? And what happens to innovation and national security when the global tech landscape is divided against itself?
HUMBLE BEGINNINGS
When Li Zhifei was born, China was closer to the monomaniacal reign of Mao Zedong than it was to connecting to the global internet. After Mao’s death in 1976, China began taking its first tentative steps toward “reform and opening,” the set of policies that gradually opened up a space for private enterprise amid China’s command-and-control economy. Those policies would put China on the path to being a global technological force, but the country had decades of catching up to do. While Steve Jobs was marketing early Apple computers out of a Cupertino, California, garage, Chinese leaders were still squirming over whether farmers should be allowed to sell vegetables for profit.
It wasn’t