China-Flag2XiaomiTencent and Huawei are all ranked in the World Top 50 according to BCG’s 2014 global innovation survey – They are called National Champions

Alibaba, Tencent, Xiaomi, and Huawei: China’s Internet and telecommunication giants are becoming more and more successful not only within China, but also outside the country. But how did they become that successful and why is the Chinese IT market increasingly challenging for western businesses?

China, Gierow argues in this China Monitor, is resolutely pushing the development of its own IT industry. But it is also isolating itself from international IT technology. By exercising control over major state-run businesses, the PRC is also maintaining its sovereign position in the IT sector.

Furthermore, the Chinese government supports the international expansion and sales endeavors of Chinese IT companies – the so-called ‘national champions’. With their products, they are stepping up competition with Western companies in developing and emerging countries, while on the other hand, companies like Huawei or Lenovo are also frequently alleged to open back doors for Chinese spying in the West.

According to Gierows findings, isolationism and protectionism within China lead to another problem for Chinese IT companies: the obligation to censor the Internet. Not only does censorship affect freedom of speech, but it also impacts the entire economy. 86% of European companies now regard Internet censorship as a major obstacle to doing business in China, a survey quoted in the report finds.

In terms of foreign companies, censorship, cyber attacks, and protectionism in China do not only hurt their businesses but have also become a key location factor for foreign companies. They must comply with ever more stringent regulations in the IT sector, impeding their ability to protect business secrets and hindering international co-operation.

Hauke Gierow concludes that, instead of insistently calling for fundamental changes in Chinese internet policy, the Federal Government of Germany should negotiate specific improvements for German businesses, for example in terms of market access or protection of intellectual property rights.

Source: Cyber Security Intelligence