European Companies Delay Investment in China Due to Country’s Internet Restrictions

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The number of European companies operating in China who are experiencing negative business effects from its Internet restrictions has jumped to 86 percent, according to a European Chamber of Commerce survey. The study was conducted in late January and early February, and shows a 15 percent increase from June in companies hurt by China’s blocking of websites and online tools.

Eighty percent of the respondents from 106 companies said that negative effects on their business from Internet controls had worsened over the past year. The European Chamber calls the controls a de facto corporate Internet tax.

“Restricted access to key Internet tools is not merely an unfortunate inconvenience for individuals – it is an increasingly onerous cost of doing business here that many companies are finding harder to bear,” European Chamber President Jörg Wuttke said in a statement. “It’s obvious that information-based, global-facing businesses will fuel China’s growth in the years ahead, and it is in China’s own interests to ensure that Internet supervision does not hamper legitimate, value-added commercial activity. Remember, this is not just a problem for international business – we know from extensive conversations with the Chinese public and the private sector that many domestic companies are just as frustrated as our members.”

The survey also found that 13 percent of respondents had recently deferred an R&D investment in China or become unwilling to make one due to the tightening of controls in early 2015. The European Chamber notes that having encouraged European companies to expand to China and invest in the fast-growing market, it is disappointed with recent developments.

Those measures include a man-in-the-middle attack on Microsoft Outlook, blocking Gmail access via third-party applications, a crackdown on VPNs, and even forcing ISPs to monitor parody accounts.

While heavy censorship is the only internet governance practice China has ever had, it has scaled up on occasions, such as the 25th anniversary of the Tiananmen Square massacre. Even as China temporarily took down the Great Firewall in one city for a world Internet conference last year, censorship was ramping up.

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