WIRED NEWS
China Reacts to Chilly Net Wind 
by Amy Wu 
8:45 a.m. Oct. 3, 2000 PDT 


HONG KONG -- It was National Day in China on Monday, the start of a weeklong
holiday, and the government chose the occasion to lay down the Internet law.


As one content provider put it, the code puts "a chill in the wind." 

"Why are they going back to the dark ages now?" asked a venture capitalist
in Hong Kong, who said he was studying how to restructure the finances of
two of his firm's Chinese websites. 

Most of the big companies in the massive country's burgeoning Internet
industry already knew that the Internet Practice Code would limit overseas
capital and ban politically sensitive content online. 

Essentially, China's Net players were prepared for the worst, and they got
it. 

"We were waiting for something like this to happen," Xianzai.com COO Danny
Levinson said. "It's good it came now rather than later.... We have to work
through some of these issues." 

The code holds websites responsible for blocking vast categories of content,
from pornography and gambling to any kind of political commentary the
Communist Party views as threatening. 

Websites must censor and report illegal content, and they must record
everything that appears on their sites -- including comments in online chat
rooms -- for 60 days. They must open the records to police on demand. 

Firms also have to apply for licenses to run their websites and may be fined
or shut down if they deviate from their stated business plans or fail to
enforce content restrictions. 

Even before the code was signed by Chinese Premier Zhu Rongji and carried by
Xinhua News Agency, the country's official media source, sites of U.S. media
giants such as CNN and The Washington Post were not accessible from the
mainland. 

The announcement of the new code follows a string of incidents in which
dissidents have turned to the Internet to spread their message. In July,
dissident Huang Qi was arrested for running a website and was slapped with
subversion charges. In August the government set up an Internet watchdog
force in 20 provinces to monitor Internet activities in major Chinese
cities. 

Unlike previous warnings, the code says that any Internet service provider
found to violate the regulations would see their websites shut down and face
a fine of up to 1 million yuan (US$125,000). 


The Chinese government said the purpose of the new code is to outlaw the
spread of messages that jeopardize state security, and ban information that
"divulges state secrets," "subverts the state," and assists in "destruction
of national unification." 

The rules forbid everything from information that "harms the reputation" of
China or that hurts reunification efforts with Taiwan, to that which
"advocates cults and feudal superstition" -- a term often invoked to
prosecute members of Falun Gong and other spiritual groups. 

By putting the burden on Web firms to ferret out and report such content,
China has created a powerful tool for tracking down dissidents and a broad
legal justification for dismantling businesses. 

It's not that Beijing doesn't recognize the importance of the medium to the
economy and business. Research firm BDA Asia estimates that the number of
Internet users on the mainland will be 20 million at the end of this year,
and by 2004 the number will rocket to 120 million. 

But for several years, the country has grappled with how and where to draw
the line when it comes to freedom of expression, and access to material from
the outside world. 

The code has the potential to drive away foreign investors, says
Xianzai.com's Levinson. "It drives away investors that are not familiar with
China," Levinson says. "Any type of new law that takes the industry by
surprise sends a hush over everything; it puts the damper on some plans." 

Added BDA Asia's Duncan Clark: "It might make Internet users nervous about
going online. It could drag a lot of content offshore." 

Nevertheless, Levinson and his colleagues at Xianzai.com have no plans to
back out of the market. "If you're going to do business in China, you have
to keep chugging away," he said. 

Eugene Galbraith, the founder and chief executive officer of AsiaWise.com, a
Hong Kong financial information site, said the code is very disturbing.
AsiaWise.com provides content and commentary written in a punchy tone, and
had been thinking about expanding its news coverage in China. 

"It's of concern because for a content site like us it's freedom of
expression that is key to our success. The problem is that you've got a
government that feels its citizens are not politically mature, and need to
be protected.... It's parental," Galbraith said angrily, adding that
AsiaWise.com has no current plans to start an office on the mainland. 

Steve Schwankert, the managing editor at internet.com -- a portal that
closely follows industry developments -- says that sites focusing on
e-commerce will not be affected. 

"The government wants to increase foreign trade, not foreign ideas," he
said. "ISPs have always been under the microscope. Apparently they just
switched to a much higher-power lens." 


Internet content providers such as kpworld.com, another Beijing site, have a
different view. Kpworld.com is one of China's largest entertainment portals.
Jiang Kun, the chief executive officer and founder of the fast-growing site,
shrugs off any concern over the code. "Of course, you need the government
need to emphasize this," Kun said, explaining that it was important that the
government protect consumers from content that was pornographic and
inappropriate. 

"I think this is something very normal. In America the government has talked
about rules and restrictions, and have firewalls and programs to block off
pornographic stuff. This is the Chinese way of doing the same thing," Kun
said. "The government understands and respects the power of the Internet." 

Wang Zhidong, president and CEO of Sina.com, said he was not worried the
rules would hurt his company. 

Sina has already enacted 24-hour supervision of its chat rooms and stores
all the content that appears online, he said. The company keeps in regular
contact with police, but most cases concern hackers or suspected criminal
activity. Inquiries about politically sensitive content are "very rare," he
said. 

"China is not as tense politically as it was 20 or 30 years ago," he said.
The rules "don't really have a negative impact on us." 

Come December, sources say, a new set of regulations and rules will be
released. This set will focus on what will and will not be allowed when it
comes to content, whether it is print advertising or the Internet. 

In the meantime, Jiang Kun of kpworld.com is not concerned that the code
would affect his site; "Of course I'm not worried. I don't focus on news or
politics; mine focuses on entertainment." 

(Reuters contributed to this report.) 





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