The Chinese Government and Innovation

The Carlsburg Lounge
Singapore Changi International Airport
1846 hrs.

Big Ed Flanagan from NBC was in the audience last week when I joined the panel on China’s Internet at AmCham’s Under the Digital Influence event, and he did a nice piece for MSNBC’s “About World” blog on censorship and gaming, where he was kind enough to refer to my framework for understanding how the Chinese government deals with disruptive change, especially at the nexus of technology and media.

The more vocal analysts and global media tend to see the Chinese government as either “loosening up” or “cracking down” on media. That kind of thinking is useful to an extent, but when you step back to look at change over time, it is difficult to understand the reasons for sudden shifts in policy. After a while, the shifts to one end of the spectrum or the other appear random, confused, or inconsistent.

In reality, they are not. In fact, they are methodical, consistent, and are direct, predictable responses to a small number of identifiable factors.

Sensitive Times

First (and most obviously) there are event in the political system that stand apart fro the industry but affect it in largely predictable ways. The upcoming Communist Party Congress is one example, and sensitive anniversaries of politically historic events are another. When you populate your calendar with events from China’s political cycle and build in 2 months before and at least a month after, you can safely assume things will tighten a bit.

Second, there are international events, both planned and otherwise, that will trigger changes. We can pretty well predict that the visit of major international delegations to China will bring a level of openness, as when representatives of the IOC toured through Beijing recently: suddenly, for a few weeks, we had Wikipedia. Sadly, not long after the last delegates had enplaned for home, we were right back where we started. Other events will bring about a period of greater caution in access.

Disruptions in the Information Environment

But the most serious changes come when there is an innovation in the media or Internet that appear as harbingers of radically open information flows that are beyond the control of the government. The innovation can take many forms, either technological, commercial (such as the sudden wider availability of a new service), or procedural (when a new policy has consequences unintended by the makers of that policy)

The government’s first reaction to these changes is ignorance, either willful or accidental. With willful ignorance, government will usually tacitly acknowledge a major new innovation but will take what we call a moren approach – watch it with one eye, but look away with the other. With accidental ignorance, policy makers will often be unaware of an innovation or its import during its first stages of emergence in the market.

The second reaction, fear, takes place when sufficiently senior party and government leaders become officially aware of a disruption and perceive it to be a threat or perceive it to be beyond the ability of the government to control. What happens here is a complete or near-total crackdown on an industry or sector affected by the innovation. If we cannot control it, the government and party consistently say, we are closing it down.

The third reaction is experimentation. In the wake of a complete crackdown, groups within government begin the process of debating the wisdom of a continued crackdown, usually driven by influential domestic stakeholders who have been hurt in the process. As that process takes place, controlled trials using the innovation under a slowly constructed regulatory regime take place. These trials are usually one-step-forward, two-steps-back affairs that see a gradual loosening as the government creates a system that allows the “best” of an innovation to benefit the country, while keeping the worst out.

Once the regulatory barbed-wire is in place, we enter a semi-permanent state of accommodation. The government is comfortable with the system and regulation tends to occur around the edges, but major changes in the system will not take place without significant political change.

The Rogue’s Gallery

In the past decades, we’ve seen the government work through this process with foreign music on the radio (1982) satellite television (1993), the Internet (1996), foreign ownership of local dot-coms (1999), mobile phones with cameras (2002) user-generated content like blogs (2004), and IP telephony (2004). They are working through similar processes (of varying severity) with mobile value-added services, online games, video-game consoles, IPTV, user-driven reference sites like Wikipedia, and user-generated video.

As we watch more of the innovations and mash-ups emerge from the increasingly user-created Internet and from devices that extend media beyond the living room, we can expect more, not less, of this.

But if we understand the process and the concerns that drive it, we can help the government work through the various phases more quickly and effectively, rather than simply caterwauling every time it happens.


About David Wolf

An adviser to corporations and organizations on strategy, communications, and public affairs, David Wolf has been working and living in Beijing since 1995, and now divides his time between China and California. He also serves as a policy and industry analyst focused on innovative and creative industries, a futurist, and an amateur historian.
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