China Internet
China Internet

HONG KONG - The Chinese government has proposed taking part ownership of the country's biggest Internet companies, and is subjecting American technology companies to mandatory reviews.Both moves are raising fears the government is attempting to exert even more control over web and tech firms in China.

Increased scrutiny

Ben Cavendar, a principal at China Market Research, said China’s fears of social instability are driving recent moves to increase control of American and Chinese companies, surveillance of consumers and the information they publish over the web. 

“The government still does care very much about stability and security, and are placing a lot more scrutiny on tech firms than in the past to understand how their apps or services are coded so that they can get data if they need to,” said Cavendar.

FILE - A man looks at his smartphone next to Chinese policemen and a paramilitary policeman standing guard near a giant electronic screen showing a Chinese government propaganda message reading "Dream road ahead, People's Communist party" on Tiananmen Square in Beijing, China on May 28, 2014.

Earlier this year, the government floated a proposal that it take a one percent stake in Chinese Internet companies such as Baidu, Tencent and Netease.Some companies would be required to issue special management shares to the government and a seat on their board. 

American companies are also reporting closer scrutiny from China’s government.The New York Times has reported companies have been required to meet with officials over whether their technology products present security threats to China. These reviews have involved questions over data encryption and storage. 

Censorship of online content?

Professor Doug Young of Shanghai’s Fudan University, said China’s recent measures are an attempt by the government to reassert its historical control over information in a relatively new era of private enterprise. 

Young said, “China was traditionally state-run, and so when it was like that, government officials essentially had a free hand to go in any time they wanted, and order companies to do whatever they want, give them access to whatever they want. There was no real distinction between the government and business. Now fast forward to the present where there are a lot of private companies, especially in the new media and technology sectors.”

Diagrams from a Harvard academic study showing a t
Diagrams from a Harvard academic study showing a time series of social media posts at left and a network structure of leaked email correspondents at right are shown on computer screens in Beijing, China, May 20, 2016.

The reviews of American technology companies, and the proposal for government ownership of Chinese Internet firms have come from China’s Cyberspace Administration.

American companies say they fear giving information on data or encryption to the Chinese government would leave their users more vulnerable to hacking attacks, and might involve handing over valuable trade secrets to China that could benefit their Chinese competitors. Paul Haswell, a partner with the international law firm Pinsent Masons, said disclosing information on data to the Chinese government would also damage trust among customers. 

Haswell said, “For all of them actually, for Facebook, for Apple, for the vast majority of Internet companies that operate in the West, the moment they hand over encryption tools, which allow for any state, not just China, any state, to actively spy on their users and on their content it will lead to a massive fall in sales and a massive fall in consumer confidence.”

The moves by the Chinese government are part of a widespread crackdown on the web. During the past three years, China has shut down websites and social media accounts of some users, and stepped up censorship of online content.