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Will China's attempt to control the Internet scare off investors?

If your company has invested in China's Internet, recent news of Chinese regulations designed to control content on the Internet was anything but comforting. Here's a look at some of the risks and potential rewards of investing in China.


If the Chinese market is a current investment concern for your company, you’ve probably been following recent announcements from the Chinese government concerning increased control over the country’s emerging Internet industry.

Recent headlines aside, China has been receiving much interest in its potentially enormous online population and Internet market. To see how this new investment arena is constructed, check out “China and the Internet: A foreign investment gamble?” In this article, we took a look at who is using the Internet in China, what future gain investors see in the market, and who has already invested. We also touched on the hurdles China faces before its accession to the World Trade Organization, which is expected later this year.

But this emerging market might have already hit a control-centered snag. The new rules that Beijing unveiled have made some investors wary, and with good reason. For example, one requirement maintains that companies must receive approval from the government before publishing information on the Web.

More alarming are regulations requiring companies to register the software they use to encrypt sensitive data. The Chinese government will also require companies to submit serial numbers as well as the names of people using the software.

Because of the broad reach of these Internet rules, some are questioning whether Beijing’s attempt at control is realistic. The New York Times , for example, carried an article that asked whether China can enforce such regulations.
How realistic are China’s plans to tighten the reins on the Internet? How could such rules hinder foreign investment? Will companies, as some have done, set up offices in other countries in an effort to get around China’s rules? Post a comment below or send us an e-mail.

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