China's 'Wall' Hits Business
Firms Say Censorship Slows Web Connections, Curbs Access to Services
By PAUL MOZUR and CARLOS TEJADA
Wall Street Journal
February 13, 2013, 9:07 p.m. ET
BEIJING—Fredrik Bergman ran into a problem when a client in Sweden tried to transfer files to his firm's headquarters here: Each time, the firm lost its Web connection for an hour or so.
After several weeks of multiple outages a day, he says, the firm solved the puzzle: the files were named for the Swedish town of Falun, where the client was working. Mr. Bergman says his firm thinks the name triggered the filters China's online censors use to block discussion of Falun Gong, a religious group long banned in China.
Once the files were renamed, the transfers went smoothly.
"We had up to a thousand floor plans supposed to be delivered every day," says Mr. Bergman, whose firm, Diakrit, produces virtual tours and three-dimensional models for housing developments. "To have two or three breaks a day for a few weeks...was affecting us a lot."
His Internet-connection woes mounted, however, so Mr. Bergman closed up in 2010 and moved his business to Thailand, where he says his connection is fast and reliable and he has access to popular social-media outlets like Facebook and Twitter. "I can finally use the iPhone as it should be used," he adds. "These kind of small things make a difference for an IT company with staff who love technology."
Experts say the blocks that keep Chinese users from accessing services like Facebook, Twitter and Google Inc.'s online-video unit YouTube, are hurting businesses, slowing their traffic and hindering their use of a new generation of cloud-computing services like those offered by Google.
Akamai Technologies, which provides services to help websites speed up connections, says China's average connection speed ranked 94th globally in last year's third quarter, well behind Asian rivals like Malaysia, at No. 71, and Thailand, at No. 58.
The American Chamber of Commerce in China said last year that nearly three-quarters of about 300 businesses it surveyed said unstable Internet access impedes their efficiency. About 40% said China's censorship efforts have a negative business impact.
China's Ministry of Industry and Information Technology and the State Council Information Office, which regulate China's Internet industry, didn't respond to requests for comment.
Analysts say one of the main problems for business is that the Great Firewall, the nickname for China's Internet-censoring and filtering technology, kicks in every time a computer in China tries to access a website abroad, slowing down the connection.
The government also has failed to build infrastructure that would allow for quicker connections overseas, said David Wolf, a managing partner for the China practice of market consulting firm Allison+Partners.
"What they prefer is that Chinese users decide it is just too much trouble and by default use onshore sites, or sites that are mirrored onshore," he says.
Google, which started routing searches to Hong Kong in 2010 to avoid the mainland's restrictions, remains available in China, but its services here have become increasingly unreliable over the past year, which experts attribute to censorship efforts.
But China's own websites are fast enough that TV shows streamed online by video sites, like those run by Youku Tudou Inc. Sohu.com Inc., can play locally without interruption.
China continues to keep a tight grip on the Internet even as it seeks greater openness with the world in other ways, striking deals to buy foreign brands and developing its own cultural exports, such as movies. The lack of easy access to Internet services like Facebook and Google that the rest of the world takes for granted could reduce China's global competitiveness, experts say, and put it at a disadvantage when competing for top talent.
Discontent has risen in recent months as Chinese authorities appear to have ratcheted up their censorship efforts amid a once-a-decade change of top government leaders. "It is an absolute nightmare," said Shaun Rein, whose consulting firm, China Market Research Group, employs about 20 analysts in the country.
Mr. Rein, who has been doing business from China for 13 of the past 16 years, uses Google's small-business services to store and share documents and for internal communications.
But increasingly unreliable connections to Google in recent months have hindered downloads and sharply reduced the effectiveness of instant-messaging service Google Chat, he said. Unstable connections to Google's Gmail service have forced Mr. Rein to set up a system that forwards his email to multiple services to ensure its delivery.
Google has said it hasn't found any problems with its systems.
"The real question is whether the next administration is going to continue to roll back Internet availability to foreign firms," Mr. Rein said. He said companies are unlikely to pull out of China in any case, but they likely will think twice about moves like shifting their regional headquarters to Beijing from places like Singapore and Hong Kong. "They will still invest in China," he said. "It just depends on what scale."
Stepped-up censorship efforts in recent months include a crackdown on so-called virtual private networks, or VPNs. While companies use commercial VPN services routinely for secure data, foreigners, China's elite and other tech-savvy users can use personal VPNs to leap the Great Firewall to use services like Facebook.
But it is illegal for foreign companies to operate a VPN in China without a local partner, according to lawyers and state-run media, and several VPN services say their access has been blocked increasingly in recent months. In a departure from previous practices, the blockages have continued even after the recent transfer of power to a new generation of Chinese leaders.
Danvers Bailieu, a spokesman for VPN provider Privax Ltd., said the U.K.-based company also has been the target of denial-of-service attacks from China in recent months. He added that the government has been closing ports used by VPNs, and that the company has maintained services by switching to new ports each time an old one is closed.
"We think [the crackdown] is damaging: consumers don't like it," he said, adding that the company provides services to business travelers, university professors and students in China.
In December another VPN company, Astrill Systems Corp., based in the Seychelles, said in a note to customers that blocks were doing "a lot of harm to business in China."
China's censor also have stepped up their scrutiny of foreign media websites following a series of articles last year on a scandal that led to the fall of former Communist Party star Bo Xilai and on ties between business and politics among China's top leaders. The Wall Street Journal's Chinese site has been blocked at times over the past year, while sites run by Bloomberg News and the New York Times remain blocked.
Last month, the government angered China's thriving software industry by blocking GitHub, which offers software developers a site where they can store, write and collaborate on software-coding projects. After an outburst of criticism on the country's popular microblogging service, Sina Corp.'s SINA +2.55%Weibo, the government relented, unblocking the site.
Alex Miller, a China-based entrepreneur who founded a Web-TV startup called Frogo, says he supports the way the Great Firewall has helped keep out Western competitors, allowing Chinese Internet companies to develop. But blocking GitHub, he said, was a step too far.
"This is where all the open-source projects are stored. This is access to the world's source-code knowledge," he said, adding, "By blocking GitHub they're going to stifle a ton of innovation," he said.
Write to Paul Mozur at paul.mozur@dowjones.com and Carlos Tejada at carlos.tejada@wsj.com
A version of this article appeared February 14, 2013, on page B5 in the U.S. edition of The Wall Street Journal, with the headline: China's 'Wall' Hits Business.
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