THE CHINESE INTERNET: A Censored Tool or a Closed Market for Western Companies ?

Many of my clients, small luxury companies from France and Switzerland, look at the buzz about Baidu or Weibo, and rub their hands in anticipation : « At last, an inexpensive way to communicate with the Chinese halfway around the world, in what is today the most promising market for luxury products ! All we need is a Chinese intern to set up an affordable website  and even animate weibos ! » Needless to say, a Chinese intern is not necessarily the best solution to do this job – but it still a good start for smaller companies. Indeed, for many small players, most of the effort goes into production and inventory of luxury products rather than in communication and advertising.

Not everyone can be Louis Vuitton, and luxury often starts as local craftsmanship, as can be seen in the French wine industry, in the Swiss watch-making (outside of the major brands), in small jewelry… Alas, they realize quickly that a Chinese version of their site will only be referenced in Google, which covers just 15% of the trafic. That if they want to be found on Baidu, the huge, leading Chinese search engine, they will preferably need the help of a Chinese communications agency ; worse, that they cannot buy their brand’s adwords from Baidu without demonstrating their legal, Chinese ownership of the website – which means that they must have at least some representation in China. Ditto for weibos – in order to be certified as true information in the Sina Weibo, they must show their Chinese business license. Sohu request their business license upon registratiion, while Tencent, which is more open, is only really effective in rural areas where their luxury products are not distributed. To make a long story short, a presence on the Chinese internet requires a good communication agency in China and either blind faith in the distributor who will become the legal owner of their sites in the eyes of Chinese law, or the costly establishment of a representative office. This results in significant costs and complexity, all for a weibo…

Some would argue that the Chinese web is a web for the Chinese and that any foreign presence is censored, controlled, and that human rights are lacking and that is why the web is so closed. Personally, I have heard these arguments before, but I think the Chinese State is mostly concerned about protecting itself against the dissent of its own citizens, expressed through local blogs and weibos. I am moreover convinced that the Chinese web is what one might call a closed loop, a market that is closed for the non-Chinese. In short, this is exactly what is known in legal language as a “non-tariff barrier to trade”, an important impediment to the free trade promoted by the World Trade Organization.

Indeed, for non Chinese to be present on the Chinese web, they must pay a significant entry fee (which everyone cannot afford) and work with Chinese intermediaries such as agencies that have strong positions in China. In many ways, including through the Internet, access to luxury clients in China requires the payment of an significant entry fee, and a cost which is comparable to what exists in the western economies. And while China may still be an eldorado, and the yuan may still be a »weak » currency, it remains an expensive market to do business in, and does not suffer an amateurish or lighthearted approach.

By Nathalie Omori