Autonomous and his own: the history of China’s struggle against Silicon Valley to create an “independent” Internet

Long before Huawei, victims of the technological war between China and the United States turned out to be Google, Facebook and Uber.

May 19, Google has suspended cooperation with Huawei in the development of equipment and software. This jeopardizes the business of the Chinese brand outside the country and is directly related to the inclusion of the company in the black list of the US Department of Commerce because of the “technological war” with China. Although it seems that the conflict is only heating up, in fact, the roots of the technological opposition of countries go back to the mid-2000s.

At that time, Silicon Valley services, including Google, Apple, and Facebook, were building up strength for the future global “dominance”, and China was to become a springboard to this goal. But in China, they have chosen their own path – the creation of a technological sphere, independent of American services, to which many critics of the United States now look.

Fighting Google as a technological boom

In August 2004, Google was still gaining strength. It entered the first public sale of shares (IPO). Her employees, the owners of the shares did not complain about wages, but did not think that they would soon become millionaires. Revenues from IPOs amounted to 1.67 billion dollars, which brought the company’s market capitalization to 23 billion dollars. Since then, capitalization, and with it the leadership’s confidence in the right path, has only grown .

The next company wanted to conquer China with its rapidly growing Internet audience. In April 2006, the Chinese version of the search engine was successfully launched, having gone through long bureaucratic squabbles and accepted the conditions of the local government. One of them was the censorship of search results shown to Chinese users. This mainly concerned pornography, violence and content, contrary to the views of the Communist Party.

These rules didn’t please the Google management too much, but they relied on the fact that even the censored version of the search engine would put Chinese users in the desire for greater openness on the Internet.

In 2019, such a vision seems naive, but then in Western society the idea of ​​the Internet as the universal bearer of democracy was often transmitted from political and public stands. In 2000, US President Bill Clinton made a speech that the Internet would make China as open and free as the United States.

A bouquet of flowers on the Google logo at the headquarters of the company in China Getty Photo

At first it seemed that Google is coping with this task. When Chinese users entered the search engine, they saw a notice that some of the results were deleted at the request of the authorities. For local people, this was the first sign of the reality of Internet censorship, because Chinese search engines did not report the removal of results.

Google conducted this small notification policy without the permission of the Communist Party, and soon got a response. The Chinese owner of the leading search engine Baidu, like other local search engines, sued Google and received support from the authorities.

So for Google four difficult years of collisions began on the Chinese field. On the one hand, regulators pressured the search engine repeatedly demanding to renew the license for the right to work in the country, and on the other hand, local competitors led by Baidu, who did not hesitate to copy successful ideas of a foreign rival.

Local regulators carefully watched that the issue of Google did not get porn, and if this did happen, the company immediately fell criticism. Stranger things have happened , to verify the authenticity of which after so many years is very difficult.

At times, the Chinese version of Google worked suspiciously slowly or suffered from interruptions. Sometimes users complained about the inability to enter the search engine because their access was blocked, and at times they were transferred from the page of the American search engine to Baidu.

Despite the pressure, by 2009, Google controlled about a third of all requests in China, although Baidu, with its 58% share, was still very far away. However, it was not pressure and censorship of search results that forced her to leave China, but the Operation Aurora hacker attack in June-December 2009.

Peking intruders infiltrated the systems of an American company, stole part of their intellectual property, and identified dissidents who used Google aliases. The management of the American company called this attack the “last straw”.

In January 2010, the search engine stopped censoring requests in the Chinese version, which in fact meant giving up the market. And so it happened – in March, China completely blocked the search engine, although other services, including Gmail and Google Maps, worked in the country for several more years.

Looking back, it becomes clear that 2009 has become extremely important for the development of independent technological China. Then the blockade victim was not only Google, but also YouTube, Twitter and Facebook. The motives for such a political decision – in July 2009, in the autonomous region of Xinjiang Uygur in western China, mass protests of the local population were held. The Communist Party decided that Facebook had become the main communication tool of the rioters, and in fact determined the fate of the social network.

Ten years later, it seems that the pressure on foreign services and their blocking is part of the ideally planned plan of the Chinese government. In fact, no one could confidently say what this would mean. The Communist Party put on its own strength, deciding that it does not need products from Silicon Valley – and this rate has played.

In April 2010, Xiaomi was founded in the country, valued at $ 40 billion. A month earlier, Meituan appeared – a clone of Groupon, an American collective discount service, which in 2017 bypassed Airbnb and SpaceX in evaluating the most highly regarded private companies in the world.

An important part of the startup boom was Chinese IT specialists and entrepreneurs who returned home from the United States, MIT Technology magazine wrote . Giants like Baidu and Alibaba did not lag behind, attracting millions of investments from around the world.

The Chinese authorities played a controversial but significant role in the process. On the one hand, since 2013, they began to struggle strenuously with the freedom of speech on the Internet, especially being hard on political discussions. On the other hand, the authorities organized a full-scale campaign for entrepreneurs and innovative ideas, financing start-up incubators and investing money in IT companies.

In the same years, the WeChat service appeared from the largest investment company in the world – Tencent. The social network took the best from Twitter, WhatsApp and PayPal, presenting it in a convenient form to the Chinese consumer. Eight years after the release, it is still the country’s leading social network.

Tencent Headquarters in Shenzhen City Getty Photo

In the meantime, there was a technological boom in China, Google waited. In 2012, Chairman of the Board of Directors Eric Schmidt said that in the modern world it is impossible to build a developed society with Chinese level of censorship. “Do I think that in a long time such a regime will end?” Absolutely,  he said .

When Google realized that they were no longer waiting for them in China, it was too late. The company, having lost its position, is trying to get into the country in a roundabout way: it cooperates with the Chinese in the field of AI and opens a research center in Beijing. Rumors of a partial return of Google services to China appear in the media since 2015, but every time this information is not confirmed.

In August 2018, The Intercept journalists found out that Google was secretly creating a censored DragonFly search engine for China. According to the newspaper, Google’s management explained to workers the reasons for creating a search engine not only by the desire to earn money, but also by the desire to “learn from China what we don’t know.”

A demonstrator holding a poster hinting at Google and the Chinese government collaboration, January 2019. AFP Photo

Many Google employees have threatened to quit if the company continues to work on DragonFly. In December 2018, the company’s CEO Sundar Pichai announced toCongress that there were no plans to “launch in China,” although he did not rule out a change in the future.

The question is whether China needs it. As MIT Technology wrote , the country managed an unexpected trick: the country expelled the giants of Silicon Valley and appreciated the freedom of speech, while maintaining a sustainable, profitable and innovative technological ecosystem.

Uber compromises

“If you have the opportunity to build both Amazon and Alibaba, is not trying to, you madman,” if you do not try, “- considered the founder and former head of Uber Travis Kalanick. Like any other Silicon Valley native who built a successful business in the United States and Europe, he sought to market a second world economy.

Since 2013, Kalanik and other representatives of the company studied and traveled to China, trying to understand the local intricacies of work. A year later, Uber China was launched in megacities, and by 2015, more than two billion dollars were invested by companies into a separate service.

It may seem that this money is easily enough to consolidate in China, but in fact they were necessary only to oppose themselves to a local competitor, Didi Kuaidi. It occupied 90% of the taxi market and was funded by the country’s two largest companies, Alibaba and Tencent.

Uber founder Travis Kalanick Photos Getty

In May 2015, the company reported that in just a month more than 60 thousand jobs were created in China, but did not specify what funds were required for it . In an attempt to recapture some of the drivers and customers, Uber sometimes paid drivers bonuses that were three times the amount they earned on the road. The locals were also pleased, since on average the price for Uber was 35% lower than the cost of a regular taxi, and employees of the American company more often came by expensive cars.

Unlike other people of Silicon Valley, Kalanik acted much more carefully in China. At the start, Uber sold part of its Baidu shares and entered into an advertising agreement with a search company. The head of the company repeatedly visited China and met with representatives of the Communist Party, thanks to which local IT corporations began to perceive Uber as much more “their” company.

But the partnership with China could not provide Uber circumvention of local laws. In 2015, regulators updated the rules for obtaining a driver’s license, which is why many drivers of an American company (it worked only with private ones) lost the opportunity to work legally. Several times this led to police raids on Uber offices and driver shares. Riots stopped by the authorities.

Entrance to the Chinese office Uber Photo AFP

For Kalanik, Uber China has become a personal project – he wanted to succeed where Facebook, Google and Amazon failed. But in August 2016, the struggle ended with a white flag – Uber China announced a merger with the Chinese Didi, essentially recognizing that the American company cannot independently conquer the Chinese market.

Although Kalanik failed the initial plan, the NYT wrote , this story should not be taken as a loss to Uber. In a two-year battle for the market, the company spent two billion dollars, but received shares worth seven billion dollars from the merger of Uber with Didi. And a great prospect to increase this figure due to the growth of the Chinese market.

“They became the first international Internet company that did not lose,” said William Bao Bean, a partner of two Chinese investment companies, for Uber, about the results for Uber. “They fought for a draw. And for an American Internet company, this is akin to a victory. ”

Apple as an ally and “hostage”

In 2006, when Apple’s secret team led by Steve Jobs worked on the first iPhone, in China the company did not even have its own retailer. But with the arrival of Tim Cook in 2011, the country became one of the most attractive regions for an American company. Strengthening relations against the backdrop of a technological boom, Apple firmly took up opening new outlets and targeting the interests of the Chinese audience – then the company’s products were perceived by the locals as something completely new.

Cook slowly but surely earned a reputation in China. His first modest visit to the country as a general director took place in 2012, which was reported to journalists after the fact. Then the reason for the trip was called a meeting with several officials of China, without specifying the names. It later became clear that for Apple such trips are not just a formality, but an important part of building relationships.

One of the 41 Apple stores in China, where millions of Bloomberg products are sold every year. 

Cook repeatedly attended important political meetings in the country. He was among the small group of American and Chinese representatives who were invited by the head of China, Xi Jinping, to a closed meeting on the subject of innovation and technological reform. At home, the head of the company has repeatedly justified Apple’s presence in China with a desire to help the country change from within. Similar rhetoric was used by Google while working in China and creating the DragonFly search engine.

“Every country in the world passes its laws and its limitations. So what is your choice: do you participate or stand aside and shout about how to do it? ”, Said Cook at an event in China in December 2018.

He supported his words with actions. Since 2009, Apple has been cooperating with the largest mobile operator China Mobile, as well as with a large investor (more than one billion dollars of investments) of the former rival Uber China – Didi. In addition, Apple does not oppose Chinese censorship, at the request of the government deleting VPN services from the App Store to bypass blockages.

However, the trade war that unfolded between the United States and China in 2016 put Apple in a difficult position. For Silicon Valley, it remains the only company that has successfully consolidated its position on the Chinese market and has built reliable links with the Communist Party, but for this, Cook has to play on both sides.

Tim Cook at a meeting with Chinese partners Photo Reuters

With the US decision to add Huawei to the black list ( wrote about this in detail ), Apple has less room for maneuver in China. Back in 2018, an article appeared in the Chinese media on the trade struggle between countries, in which the author hinted at the use of Apple as a “hostage”. This means that, if the crisis continues, the authorities of the People’s Republic of China may prohibit Cook’s companies from working in the country. With a blow to Huawei, the likelihood of retaliatory sanctions against US companies increases.

Apple cannot leave China, as the country remains one of the key markets, or to close production there, which will lead to huge financial losses and a logistical disaster.

It is difficult to say how real the threat is, given that it will cause great damage to China. On May 13, the Communist Party promised to raise tariffs for a part of American goods, and if Apple products are among them (there is no exact confirmation of this), the company will have to raise prices or pay a new tariff at its own expense, which will affect the total price of the shares.

While for sure one thing is clear – for years, Apple has built relationships with the government of the second world economy, stepping over its own ethical and moral foundations. However, the introduction of Huawei in the American black list risks in the future turn for Apple with new and more difficult conditions for doing business in China.

And what this means for locals is difficult to understand. In August 2018, The New York Times released a large article on contemporary Chinese children and teenagers who have never heard of Google, Facebook or Twitter. As the article says, even when teens were given the opportunity to bypass blocking as an experiment, they almost did not use foreign resources, preferring native Baidu, WeChat, Youku (the Chinese equivalent of YouTube) and TikTok.

“I don’t need them,” the young source said, speaking on Google, Facebook, Twitter and Instagram. Others in a conversation with journalists acknowledged that Chinese applications become useless as soon as a person goes abroad, but if they do not, then they do an excellent job with their tasks.

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