The Internet Entrepreneurs and the Emergence of Civil Society in China: Rhetoric Or Reality
The Internet Entrepreneurs and the Emergence of Civil Society in China: Rhetoric or Reality
Chin-fu Hung PhD Candidate Department of Politics and International Studies University of Warwick, UK
Draft—No Quotation without Permission
Copyright © 2004 [Political Studies Association] Abstract:
The discourse of structural theory sees that the rise of an entrepreneurial elites as crucial to the extension of societal autonomy from state domination, and the change of “structure of power” (state versus entrepreneurs) will lead toward liberalization and eventually democratization. It suggests, in other words, that the appearance of the Internet entrepreneurs may suggest the possibility that its associates and their impact are unlikely to be merely “transmission belts” of the Leninist state but rather, harbingers of a fresh pattern of state-business relations in the Twenty-first century China. A hybrid pattern of relation—clientelist-corporatist argument, is provided to explain current relationship between the Internet entrepreneurs and the Chinese state. It concludes that the emergence of civil society in the wake of Internet entrepreneurs seems unrealistic and rhetorical for the time being. There are indeed no solid evidence at the moment to support such assertions.
Introduction
One of the most far-reaching changes brought about by the economic reform in China has been the emergence of a new business elite in the non-state sectors. Private entrepreneurs are now not only officially recognized as its importance to the powerhouse of the national economy, but also are acknowledged as a new “stratum” in the post-Mao sociological settings in China.1 Indeed, the emergence of private entrepreneurs in China is striking because it helps unleash a dynamic and rapid economic transformations in contemporary China, with transitions being made and spilling over possibly into the socio-political arena. It is also a noticeable change when the private economy was initially limited to very small scale operations and was met with deep suspicion by society, it is genuinely the private sector that mostly drive the economic growth in China.
Among China’s fast growing private economy, the Information Technology (IT) industry stands particularly salient in boosting the overall national economy particularly in the past few years. Internet entrepreneurs as an outgrowth of information technology take-off in the mid-1990s are actually a new social component in Chinese society. The indigenous entrepreneurship in developing countries are often believed to have the potentials to lead to the invigoration of an autonomous private sector out of the reach of the state. The very appearance of the Internet entrepreneurs may suggest the possibility that its associates
1 According to a collaborative work conducted by a few sociologists from the Chinese Academy of Social Sciences, it marked off “ten strata,” namely (1) strata of national and social management; (2) managers; (3) private enterprise-owners; (4) professional technicians; (5) clerks; (6) industrial and commercial individuals; (7) business service staffs; (8) industrial workers; (9) agricultural laborers and (10) city unemployed, laid-off and half laid-off vagrants in urban areas. See Lu Xueyi (ed.), Dangdai Zhongguo Shehui Jieceng Yanjiu Baogao, (Research Report on Social Strata in Contemporary China) (Beijing: Shehui Kexue Wenxian, 2002). The work is, however, arguably served as specific sociopolitical purpose and is under the acquiescence and auspices from the Chinese authorities. For example, Joseph Fewsmith argues that the book is apparently written in part to support the Jiang Zemin’s efforts to dampen notions of class struggle and to broaden the social basis of the Chinese Communist Party (CCP) rule. See Joseph Fewsmith, “Social Issues Move to Center Stage,” China Leader Monitor, No. 3, Summer 2002, available online at
1 Copyright © 2004 [Political Studies Association] and their impact are unlikely to be merely “transmission belts”2 of the Leninist state but rather, harbingers of a fresh pattern of state-business relations in the Twenty-first century China. In other words, are the newly emerged Internet entrepreneurs in China poising themselves to employ their economic favored position to play a role in China’s political affairs or even drive the democratization process?
The conventional wisdom about the role of entrepreneurs basically follows the discourse of structural theory that it sees the rise of an entrepreneurial elites as crucial to the extension of societal autonomy from state domination, and the change of “structure of power” (state versus entrepreneurs) will lead toward liberalization and eventually democratization.3 In other words, the growth of entrepreneurs and civil society out of capitalist development will forge the counterweight to the state apparatus, and as long as the structure is changed/shifted, sooner or later the democratization process is taking place. Nonetheless it is generally regarded as a long-term process of change. In contrast with the structural approach, the more recent argument which is more case-oriented has suggested that the (Internet) entrepreneurs in authoritarian regime like China have opted for co-operating rather than confronting the state. A representative argument raised by Shanthi Kalathi puts that the Internet entrepreneurs, domestic or foreign, like all investors in China, are keen to make money in China’s confusingly regulated but opportunity-laden markets. Together with a series of stringent regulations imposed on their operations and the business licenses, she sees the relationship-dependent business practices laden in the Internet sector and accordingly she suggests the Internet entrepreneurs are playing a rather limited role in promoting political liberalization.4
This paper will take both arguments aforementioned as a working hypothesis, and verify them with empirical evidence and primary/secondary sources. While acknowledging the insights both approaches have contributed, a hybrid approach, clientelist-corporatist argument, may be more plausible to explain current relationship between the Internet entrepreneurs and the Chinese state. It is primarily because both arguments seem to have gone into the extreme end of the spectrum with regards to the case of China: the structural approach appears to be technological determinism that suggests all changes in society and wider political structure inevitably occur as a result of new social actors emerging from new technologies being developed; the case-oriented approach seems too
2 A political party that strictly follows Marxist and Leninist ideals in a socialist system functions in an almost entirely different way than its counterparts in western democracies. Within the traditional Leninist states, virtually all sort of institutions, including media and (business) associations are dominated by the party and mostly function as a sort of “transmission belt” for implementing the party policies. See Tony Saich, “Negotiating the State: The Development of Social Organizations in China,” The China Quarterly, No. 161, March 2000, pp. 124-141. For a classic explanation, see Carl J. Friedrich and Zbigniew K. Brzezinski, Totalitarian Dictatorship and Autocracy (New York: Praeger, 1966), second edition. 3 See, for example, Joseph A. Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle (Oxford: Oxford University Press, 1961); Joseph A. Schumpeter, Capitalism, Socialism and Democracy (London: Allen & Unwin, 1943); Barrington Moore, Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World (Boston: Beacon Press, 1966); Dietrich Rueschemeyer, Evelyne Huber Stephens and John D. Stephens, Capitalist Development and Democracy (Cambridge: Polity, 1992). 4 Shanthi Kalathil and Taylor C. Boas, Open Networks, Closed Regimes: The Impact of the Internet on Authoritarian Rule (Washington, D.C.: Carnegie Endowment for International Peace, 2003), chapter 2.
2 Copyright © 2004 [Political Studies Association] pessimistic and ignores the changing nature of the actors. The principal guiding research questions pose: what is the relationship between the Internet entrepreneurs and central/local authorities? Is the civil society composed of Internet entrepreneurs real or simply rhetorical? Subsequently, how and to what extent the Chinese Internet entrepreneurs act and respond to the political pressures from the governments at all levels and the commercial pressures in the growingly market-driven competition? Is it going to be confrontation or reconciliation? How can the Internet entrepreneurs survive? These are research questions this paper endeavor to answer.
It should be conceded that the Chinese Internet entrepreneurs could not be easily reached when I conducted my field work two times in China during July-August 2002 and September-October 2003. I compiled a great deal of materials, references and data on this and other topics from China’s official statistics and publications, but a critical and analytic readings of them would ideally entail a potent empirical evidence. But the initial plan to collect the first-hand information about the Internet entrepreneurs’ role and its impact in the China’s overall development in general, and political transformation in particular, was significantly held back. Such a method to interview the Internet entrepreneurs proved far more difficult when particularly the interviewer came from a foreign country, for they tended to be rather cautious to respond to the interviews through official channels. I decide to rely heavily on the secondary sources that, for example, the interviews conducted by some China official media journalists, to proceed with this topic, and a few more informal and private communications with Internet entrepreneurs are supplemented when appropriate and necessary.
The scheme of the paper begins with a short development history of the post-Mao economic development evolving around the private sector and then moves on to the rise of the Information Technology sector after more than two decades of the industrial as well as technology policies. By way of reviewing the backgrounds of general development of the private economy and in particular the IT sector can we understand with depth the overall environment in which the Internet entrepreneurs are operating. An empirical evidence form one of the three biggest Internet portals in China is presented to highlight the general operational practices of commercial Internet media under the so-called “socialist economy.” It has also contributed to the foundation of the discussions that comes next section on the attempt to generalize the state-business relations in the current Internet sector in China. The ideal-type analytical framework of the state-business relations are to help examine one of the main research questions that some policy makers as well as political commentators have longed for the implications of the Internet elites for a civil society. Some concluding remarks are provided both to echo the beginning introductions and strengthen the main arguments the paper has presented.
A Brief History of the Evolvement of the Private Economy
China’s first private businesses were officially sanctioned by the central government as late as in 1978 after the Third Plenum of the Chinese Communist Party’s (CCP) 11th
3 Copyright © 2004 [Political Studies Association] Central Committee.5 The origins of China’s post-1978 reforms lie partially in the economy’s disappointing growth record—the agricultural sector since the end of the First Five-Year-Plan (1953-57), and in the structural problems stemming from the Maoist economic system—highly centralized bureaucratic apparatus. 6 Since the advent of economic reform, the private economy has evolved into economies of individuals (getihu) and of self-employed people, which specifically ranges from a single industrial and commercial proprietor (gongshang getihu), to small family enterprises (jiating qiye), private enterprises (siying quye), collectively owned (jiti suoyou) enterprises, and overseas-invested (haiwai touzi) enterprises. Because getihu business as well as jiating qiye are owned by private individuals or households, they are not in practice treated as enterprises, and are excluded from the official definition of private enterprises.7
The “Decision on Reform of the Economic System” adopted in October 1984 by the Third Plenum of the Twelfth Central Committee embarked on a novel strategy that relied heavily upon the comprehensive development of state-owned, collective-owned and individual-owned enterprises.8 The Chinese government later allowed private enterprises to be existed in 1988 under the “Tentative Stipulations on Private Enterprises.” It was until in 1999 that China passed a constitutional amendment, giving formal and full recognition to the country’s rising and flourishing private sector.9 The CCP has even conceded to recruit the capitalist or entrepreneurs into the Party in the occasion of the Fifteen National Party Congress in November 2002. It is embodied in Jiang Zemin’s incarnation of the soc-called “Three Represents.” In Jiang’s groundbreaking speech delivered to the CCP’s 80th anniversary on July 1, 2001, he officially advocated the accession of the private entrepreneurs/capitalists into the party, since the party represented the fundamental interests of the vast majority of the people. In other words, the Party is not only the vanguard of the working class, but the representative of the basic interests of the majority of the people as well.10 The thoughts of the Three Represents
5 It should be pointed out that there still a tiny portion of private business existed during Mao’s reign, given there were relatively small in scale and were mainly individual or commercial households in ownership mode. The private business was significantly constrained for sure because China was then pervasive and heavily embedded in the Marxist theory that any private work unit which employed more than seven workers would be thought to constitute capitalist exploitation over the working class (proletariat). The situation climaxed during the Cultural Revolution between 1966 to 1976. 6 Peter Nolan and Robert F. Ash, “China’s Economy on the Eve of Reform,” in Andrew G. Walder (ed.), China’s Transitional Economy (Oxford and New York: Oxford University Press, 1996), pp. 18-22. 7 Asian Development Bank, The Development of Private Enterprise in the People’s Republic of China, p. 63. 8 Robert F. Dernberger, “China’s Transition to a Market Economy: Back to the Future, Mired in the Present, or through the Looking Glass to the Market Economy?” in Joint Economic Committee, Congress of the United States (ed.), China’s Economic Future: Challenging to U.S. Policy (New York: M. E. Sharpe, 1997), pp. 63-65. 9 “Zhonghua Renmin Gongheguo Xianfa Xiuzhengan, Dijiujie Quanguo Renmin Daibiao Dahui Dierci Huiyi Tongguo,” (The draft amendments to the Constitution of the People’s Republic of China has been approved by the presidium of the Second Plenum of the 9th National People’s Congress on March 15, 1999), Renmin Ribao, March 17, 1999, p. 1. 10 The notion of the “Three Represents” also indicates that the communist Party represents the advanced productive forces, and the advanced culture. See Jiang Zemin, Speech at the Rally in Celebration of the 80th Anniversary of the Founding of the Communist party of China, (July 1, 2001) (Beijing: New Star Publishers, 2001).
4 Copyright © 2004 [Political Studies Association] was later enshrined in the Party’s constitution as an amendment at the 16th Party Congress in November 2002,11 and was written into China’s constitution, along with the amendments to safeguard the ownership of private property, in March 2004 during the second plenum of the 10th National People’s Congress.12 The profound Party policy of co-opting successful private business elites into the Party has been suggested to be the transition of the CCP’s adaptation to the changing empirical reality with corresponding gradual institutional and ideological renewal.13 Such a preemptive strategy to recruit private entrepreneurs is expected from the CCP’s perspective to win over their political support for the regime and ensure its continued dominance over the Chinese society.14 In a word, the thought of the “Three Represents” is one of the state’s delicate strategies to reflect the changing relations between the state and private business interactions in China. There will be more discussions in the following sections.
The Industrial/Technology Policy and the Rise of the IT Sector
Unlike the approach towards industrial reform/policies that were adopted in the Former Soviet Union (FSU) and Eastern and Central Europe (ECE) in which more attentions were given to privatize large state-owned enterprises, and the introduction of market forces,15 the Chinese state has instead opted for a heterodox path opposite to its communist predecessor,16 by actively intervening the market and promoting a wide array of industrial policies to support, for example, the growth of a “national team” of large firms that can compete with the world’s leading corporations and eventually share the state’s nation-building project.17 The State Economics and Trade Commission (SSTC)
11 “Full Text of Resolution on Amendment to CPC Constitution,“ People’s Daily Online, November 15, 2002, available online at
5 Copyright © 2004 [Political Studies Association] (re-named into the Ministry of Science and Technology in March 1998), positioned in the central level, tried to act like the Ministry of International Trade and Industry (MITI) in Japan, the Economic Planning Board (EPB) in South Korea, or the Council for Economic Planning and Development (CEPD) in Taiwan, to initiate and coordinate industrial and technology policies. China is in this respect appealing to a similar approach adopted by its neighbors Japan and the Newly Industrializing Countries, particularly Japan and South Korea, and to a lesser degree Taiwan. 18 The rationale underlying the East Asia development approach is characterized by active and pervasive state intervention in almost all segments of the economy, resulting in closer state-business relations. 19 Basically the East Asian states have during their industrialization process selected specific sectors in accordance with their national planning and comparative advantage by aggressively directing state’s fund to and providing subsidy for the preferential sectors in order to boost national economy in general and to catch up with the early industrialized countries in particular. In other words, the systematic attempts from the government at all levels to channel national resources into certain sectors deemed as pillar industries for future national economy remain committed to a national “industrial policy.”20
The developmental state approach discussed above offers fundamental insights into the crucial role the state actors play. One of the direct consequences is a series polices initiated to create the organizational space for entrepreneurial activities. China, like Japan and Newly Industrializing Economies (NIEs), has become more like an industrial policy-based regime. Still, it should be noted that while China patterns itself more but not precisely to the East Asian development model, the existing international economic environment in which China operates is rather different from the environment existed in the first few decades after the Second World War when Japan and NIEs conceived their
nurturance and support from the government. See Peter Nolan, China and the Global Business Revolution (New York: Palgrave, 2001), chapter 3 , pp. 67-139. Additionally, a good example from the China national team within the private commercial Information and Communication Technology (ICT) sector is the Lenovo Group Ltd. (Lian-Xiang Jituan, formerly Legend Computer), the largest and most profitable personal computer manufactory. See Li Tao, Zhongguo Lianxiang (China Legend) (Taipei: Jiuding Guoji, 2002); Wang Yang and Kang Yiren, Lianxiang Wuxian (Legend Infinity) (Taipei: Kuangbang Wenhua, 2003). 18 Such claim is supported by some scholars, including those who are based in mainland China. In general, they consider that the development approach undertaken by the four Little Dragons may be applied to large socialist countries like China. See, for example, Justin Yifu Lin, Fang Cai and Zhou Li, The China Miracle: Development Strategy and Economic Reform (Hong Kong: The Chinese University Press, 2003) (revised edition), chapter 6 (pp. 183-201). 19 It is usually claimed that those countries with statist perspectives on national development are called developmental states, in that they believe critical role of the state leading to the success of industrialization and economic development. See, for example, Chalmers A. Johnson, MITI and the Japanese Miracle: the Growth of Industrial Policy, 1925-1975 (Stanford: Stanford University Press, 1982); Chalmers A. Johnson, “Political Institutions and Economic Performance: The Government- Business Relationship in Japan, South Korea, and Taiwan,” in Deyo C. Frederic (ed.), The Political Economy of the New Asian Industrialism (Ithaca and London: Cornell University Press, 1987), pp. 136-64; Meredith Woo-Cumings (ed.), The Developmental State (Ithaca and London: Cornell University Press, 1999); Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton: Princeton University Press, 1990). 20 Barry Naughton, “The Pattern and Logic of China’s Economic Reform,” in Joint Economic Committee, Congress of the United States (ed.), China’s Economic Future: Challenging to U.S. Policy, p. 2.
6 Copyright © 2004 [Political Studies Association] industrial/technology policies. It is especially true in the aftermath of the Asian financial crisis in the late 1990s. As Barry Naughton and Adam Segal have argued, the financial crisis deeply affectes Chinese policy makers’ opinion by revealing the limitations and weakness of the Korean-style model of large-enterprises-led, chaebol-dominated industrialization during the Crisis and the keirestsu-based corporate power, a prolonged stagnation of the Japanese economy since the end of the Cold War.21 The old Chinese technology policy has been shifted and a new one adopted by the central government in August 1999, following a more favorable political atmosphere towards the private enterprises since the 15th Party Congress in September 1997, and the exponential growth of the Information and Communication Technologies (ICTs) from the late 1990s.22
Compared with the previous decisions made in 1985 and 1995, as well as the “China Torch Program” in 1988, 23 the 1999 Decision has exhibited more concrete and practicable initiatives aiming at the boost of technological innovation, high-tech development and industrialization of new and high technologies. 24 The Chinese
21 The “national team/champion” had usually shown great enthusiasm to duplicate the Korean model. In addition, proposals to develop one hundred or more “enterprises groups” out of the stronger state firms have circulated for years. See Barry Naughton and Adam Segal, “China in Search of a Workable Model: Technology Development in the New Millennium,” in William W. Keller and Richard J. Samuels (eds.), Crisis and Innovation in Asian Technology (Cambridge: Cambridge University Press, 2003), p. 176. Regarding the assessments of the unsuccessful national team/champion program, see Tomoo Marukawa, “WTO, Industrial Policy and China’s Industrial Development,” in Ippei Yamazawa and Ken-ichi Imai (eds.), China Enters WTO: Pursuing Symbiosis with the Global Economy (Chiba, Japan: Institute of Developing Economies, 2001), chapter 3, pp. 110-142. 22 Ibid., p. 177. The 1999 Decision, Zhonggong Zhongyang Guowuyuan Guanyu Jiaqiang Jishu Chuangxin Fazhan Gaokeji Shixian Chanyehua de Jueding (The Decision of the Central Committee of the Chinese Communist Party and the State Council on technological innovation, high-tech development and industrialization of new and high technologies), was released on August 20, 1999. The full text appeared on the Renmin Ribao, August 25, 1999, p. 1. Available online at
7 Copyright © 2004 [Political Studies Association] government at all levels have aggressively rewarded those Chinese who are trained overseas with IT-related knowledge and entrepreneurial skills to lure home because shortage of talents are currently in urgent needs.25 Chinese officials seem to be well aware of the fact that such brain drain problem has also plagued Taiwan in the 1970s, and it is until many America-trained overseas students who returned and brought the know-how necessary to thrust the subsequent take-off of the high-tech industry in Taiwan in the 1980s and 1990s.
Specifically, China’s industrial and technology policies are usually characterized as favoring certain sectors at the expense of others. For instance, the government has classified three catalogs for foreign-funded projects: encouraged, restricted and prohibited. Projects beyond the three catalogs are regarded as allowed category.26 In general, sectoral discrimination is often accompanied by unequal treatment of foreign and domestic firms. That is part of the wider strategies employed by the Chinese government as Zhang and Long have argued. There are principally six patterns of industrial policies used, each one interweaving another: central government financing and planning; empowering key industries with direct financing; preferential interest and tax rates and favorable financing for target industries; infant industry (trade) protection; pricing policies; and administrative means.27 Ding Lu has further considered two more additional expenditures for software development and manufacturing companies; (7) Complete VAT exemption and subsidized credit for high-tech exports; (8) Preferential tax treatment for imports of cutting-edge technologies and equipment not available in China and (9) Listing new high-tech companies on the Shanghai and Shenzhen stock exchanges. The points above are cited in Barry Naughton, “The Information Technology Industry and Economic Interactions among China, Taiwan and Hong Kong,” paper presented to the CERI International Conference, New Information Technologies and the Reshaping of Power Relations: An Approach to Greater China’s Political Economy, Paris, on 16-17 December 2002. 25 The China’s State Councilor Chen Zhili in an interview revealed that hi-tech talents and high-level managerial personnel were in short supply and constrained the current Chinese development. See “Erecting Pillars of the Future,” Beijing Review, Vol. 46, No. 42, October 16, 2003, pp. 11-14. Apart from the supportive and preferential measures declared in the 1999 Decision, there are a few more additional friendly initiatives and provisions for those who are willing to return home, such as the creation of Silicon Valley-like science and technology industrial parks, enterprises clusters, funds, the housing and social benefits. See, for example, the recent rewarding measures for the overseas high-tech personnel by the Xiamen City Council, Fujian Province, available online at
8 Copyright © 2004 [Political Studies Association] important measures undertook by the Chinese government: the systematic guidelines to channel foreign direct investment into desired industries, and the various restrictions imposed on foreign ownership, including business content and geographic scope of foreign-funded enterprises.28
A series of polices as well as initiatives have resulted in the transformation of industrial structure which is shown in Table 1. In fact, it generally accords with the worldwide industrialization process: the decreasing of the primary industry and the increasing of the tertiary (service) industry. While the proportion of the primary industry dropped from 28.1% in 1978 to 15.4% in 2002, the secondary and tertiary industries increased from 48.2% and 23.7% in 1978 to 51.1% and 33.5%, respectively. In the meantime, given the second and tertiary industries are a mainstay of the national economy which accumulates up to 84.6 % in 2002, the primary industry employs a larger proportion of national work force of about 50% in 2002, dropping from 70.5% in 1978, which is still starkly disproportional to its output. It is partially because the IT sector, mainly the Internet industry, serves as one of the most preferential sectors in present-day China. By and large, it reflects the ongoing strategy in China, that is, to promote the industrialization with informatization. Such envision makes China’s development process even more salient and unique. They leapfrog the industrialization process which most western advanced countries have gone through for more than a century into the informatization process. For example, Zeng Peiyan, minister of the State Development Planning Commission, accentuates the “Tenth Five-Year Plan (2001-05)”, claiming that the State would during this period give top priority to the development of the IT, with a slogan of “driving industrialization with informatization.”29 Indeed, the new leap-forward strategy has been sustained by the impressive economic performance from the IT sector during the “Ninth Five-Year Plan (1996-2000)” period since such industry had been during which this period seen a 31.4 percent annual growth rate on average, and it had taken about 2 percent of Gross Domestic Product (GDP), making its contribution to the overall GDP growth rise from 5.2 percent to 12.4 percent.30
Table 1 China’s Industrial Structure31 (1978-2002; Unit: %)
“Revamping the Industrial Policies,” in Shang-Jin Wei, Guanzhong James Wen and Huizhong Zhou (eds.), The Globalization of the Chinese Economy (Cheltenham: Edward Elgar, 2002), p. 19. 28 Ding Lu, “Industrial Policy and Resource Allocation: Implications on China’s Participation in Globalization,” China Economic Review, Vol. 11, No. 4, Winter 2001, p. 346. 29 This concept was first explicitly proposed in the Fifth Plenary Session of the 15th Congress of the Communist party of China held in October 2000. See Lu Xinkui (ed.), Zhongguo Xinxihua (China Informatization) (Beijing: Electronics Industry Publisher, 2002), chapter 4, pp. 51-83. “State to Launch Specific Information Industry Unit,” People’s Daily Online, September 26, 2001, available online at < http://fpeng.peopledaily.com.cn/200109/26/eng20010926_81100.html>, accessed on 15 March 2002. For more details, see Ministry of Information Industry (MII), Tenth Five-Year Plan (2001-2005)—Information Industry. The English translation is provided by the Telecommunications Research Project of Asian Studies at the University of Hong Kong, available online at
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Primary Industry Secondary Industry Tertiary Industry Employment Proportion of Employment Proportion of Employment Proportion of the GDP the GDP the GDP 1978 70.5 28.1 17.3 48.2 12.2 23.7 1980 68.7 30.1 18.3 48.5 13.0 21.4 1985 62.4 28.4 20.8 43.1 16.8 28.5 1989 60.1 25.0 21.6 43.0 18.3 32.0 1990 60.1 27.1 21.4 41.6 18.5 31.3 1995 52.2 20.5 23.0 48.8 24.8 30.7 1996 50.5 20.2 23.5 49.0 26.0 30.8 1997 49.9 19.1 23.7 50.0 26.4 30.9 1998 49.8 18.4 23.5 48.7 26.7 32.9 1999 50.1 17.7 23.0 49.3 26.9 33.0 2000 50.0 15.9 22.5 50.9 27.5 33.2 2001 50.0 15.2 22.3 51.1 27.7 33.6 2002 50.0 15.4 21.4 51.1 28.6 33.5 Source: Zhongguo Tongji Nianjian (China Statistics Yearbook) (Internet version), National Bureau of Statistics of China, various years, available on-line at
The Emergence of the Internet Entrepreneurs and their Operational Environment
Entrepreneurship is crucial to the good functioning of market economy, particularly when transition economies have to make a wrenching shift from state-led central planning towards a market-led one. The words “entrepreneur,” “entrepreneurial,” and “entrepreneurship” have been throughout history associated with many different specific settings of economic, and socio-political roles and phenomena.32 The concepts have not been conceived until the aftermath of the Second World War. It was basically the commitment principally resulting from the United States of America to foster capitalist industrialization in less developed countries; those policy makers and development scholars stress the significance on the role of individuals that they can bear the burden of setting up and managing new and/or indigenous enterprises.33 The Organization for
National Bureau of Statistics of China on May 14, 2003, in which the primary industry includes farming, animal husbandry and fishery, the secondary industry includes mining, manufacturing, electronic power, water supply and construction, and lastly the tertiary industry are those which are excluded in the primary and secondary industries, including transportation, post and telecommunications, information industry, financing and services, ...etc. See
10 Copyright © 2004 [Political Studies Association] Economic and Co-operation and Development (OECD), for example, has consistently pointed to entrepreneurship as a crucial element in creating vibrant market economies.34 It is apparent that we have witnessed the absence or relative weakness of entrepreneurial skills/spirits associated with western capitalist practices in the immediate aftermath of communist collapse in the FSU and ECE. One of the lessons learned from the post-Communist transition economies experience is that, those who manage to return to the path of sustainable growth are both to focus on de-nationalization of the state assets, and to the development of venture entrepreneurship.35
The Internet entrepreneurs did not mushroom in China. The situation in the early 1990s was that the indigenous private IT managers did not possess adequate know-how and entrepreneurial skills for the operation and governing of IT-related businesses. The shortage of the Internet elites were later supplemented by transnational corporations, overseas-trained Chinese and Chinese diaspora when the IT industry were ready to take off in the mid-1990s.36 One survey indicates that many high-tech ventures in China have started with “foreign-educated Chinese” (hai gui, sea turtles in Chinese) who have had contacts and received funding commitments before and after returning and luring back to China.37 Zhang Chaoyang (Charles Zhang), for instance, chairman and CEO of Sohu, is an MIT-trained (Massachusetts Institute of Technology) PhD. He befriended lots of scholars and businessmen in the US and got them to ante up for his Internet entrepreneurial career.38 Similarly, the incumbent Sina’s CEO, Wang Yan, has also earned Bachelors degree in Law from University of Paris. And the former Sina’s CEO, Mao Daolin, completed his Master degree from Stanford University. All of them are relatively young in their age of 30-40 and were trained overseas before.
Since they are one of the few pioneering Internet entrepreneurs who grasp the abundant opportunities lying ahead during the Internet boom in China, many of them have become tycoons in recent years. Quarterly financial reports of major Internet portals have revealed that their operating profits are principally deriving from online advertising business, wireless value-added services, corporate network services, online gaming
34 The OECD has illustrated a variety of reasons why pro-entrepreneurship policies have been heartily embraced by many governments, including the increase of economic growth and diversity, the assurance of competitive markets, job creation, poverty reduction, …and so forth. See, for example, OECD, Science, Technology and Industry Outlook: Drivers of Growth—Information Technology, Innovation and Entrepreneurship (special Edition) (Paris: OECD, 2001), available online at
11 Copyright © 2004 [Political Studies Association] market and mobile phone short messaging service (SMS).39 The results of the 2003 Forbes China Rich List have further confirmed their economic achievements. As Tim Ferguson, editor of Forbes Global, commented, “This year [2003], particularly, we are seeing the development of a new type of Chinese businesses from high-tech sectors, especially the Internet industry.”40 While Charles Zhang, CEO of Sohu.com, ranked No. 20 with $270 million, Ding Lei (William Ding), founder and chief architect of NetEase.com, topped the Rich List, with the wealth as high as US$1 billion.41 As a consequence, the Internet entrepreneurs have become economically influential role model, if not comprehensively, in China and in particular among the younger Internet generations. As such, it is the Internet that has made their economic success possible.42 One of the implications is that socio-economic change both abets and is abetted by the new Internet entrepreneurs. As a consequence, whether the political preferences and its influence of the emerging Internet entrepreneurs may be favorable or opposed to the existing regime is a critical question for the Chinese government and those who concern about China’s (political) future. It is equally important to consider the dimension that the socio-economic impact of the Internet presents in a developing and authoritarian country like China.
Institutionally speaking, the Internet industry did not flourish in China until the mid-1990s. It was until in September 2000 that the State Council classifies the telecom business into two categories in the China Telecom Regulations: basic telecom service and valued-added telecom business. While the basic telecom service includes fixed-line and mobile phone, paging, data and satellite communications, the valued-added telecom business encompass Internet content providers (ICPs), Internet service providers (ISPs), Internet, Internet data centers and application service providers. 43 Sohu.com and Sina.com were among the first group of Internet companies to be awarded an official mandate of ICP license by the MII in early 2001, which is renewable on a yearly basis.
In practice, the recent development of China’s “Internet media,” also known as new
39 Vanessa Hua, “Portals Hit Pay Dirt: 3 Net Companies Set up Lucrative Deals in China,” San Francisco Chronicle, July 7, 2003, available online at
12 Copyright © 2004 [Political Studies Association] media or the fourth media, can be classified into three major categories: (1) websites operated by traditional official media, such as the People’s Daily, Xinhua News Agency, China Central Television (CCTV), China Daily; (2) websites supported mainly by the provincial/local news media and government (news) organizations, such as CYCNET (China Youth Computer Information Network), QiangLong Net, Eastday (Dong Fang Wang), Enorth Net (Bei Fang Wang), Southcn (Nan Fang Wang); (3) Commercial Internet media websites, domestic and foreign, including Sina, Sohu, Netease, Tom, Chinese Yahoo, China.com (Zhongguo Wang). The Internet entrepreneurs in a broad sense may encompass any managerial elites that govern and operate websites. However, in contrast with traditional media websites (category 1) and those provincial/local quasi-official ones (category 2), that both to a varying degree receive government fund and subsidy for their regular operation and are subject to official directives, the commercial Internet websites have instead born full responsibility for their Internet company’s survival. 44 In other words, the websites sponsored by traditional and provincial/local media have shown the nature associated with official or quasi-official features, and more importantly the propaganda-orientation characteristics.45 Moreover, the commercial websites are indeed non-state sector and fall into the min-ying (civilian-managed) enterprises, also known as siying (private) enterprises.46 In this regard, I have adopted a narrower but practical definition towards what I mean by the “Internet entrepreneurs,” that is to focus mainly on the private and commercial Internet websites that fall wholly in the category 3.
The environment in which the private Internet entrepreneurs operate demonstrate at least some notable phenomena. Firstly, the commercial websites are significantly constrained from legally publishing (fa bu) their own news report, and reprinting off-shore news sources; they can only reprint (zhuan zai) news from those websites sanctioned
44 Guo Letian, “2003: Zhongguo de Xinwen Wangzhan Hechuqu,” (2003: Where do Chinese News Media go?) Chuanmei Guancha, February 19, 2003, available online at
13 Copyright © 2004 [Political Studies Association] officially.47 As a consequence, the main news sources for commercial media websites are supposed to come solely from those monopolized news channels—central and provincial traditional media outlet. By and large, the commercial Internet portals have signed cooperative agreements with authorized news outlets and carried news from them. The immediate result can be partially examined in the recent figure presented by Chen Tong, editor-in-chief of Sina.com., from which it showed that the total online news hits were shared principally by the four national websites, Sina, Sohu, Xinhua, and the People’s Daily, at 35%, 20%, 20%, and 20%, respectively. But when it came to the comparison with general website visiting, there existed stark differences between commercial and traditional websites. Sina had more than 27% share of total visiting, while the Sohu, Xinhua and the People’s Daily occupied 19%, 2%, 2%, respectively.48
Secondly, ISPs, ICPs and Internet café owners are all held responsible to report any of their patrons by whom violate relevant laws and regulation stipulated. On the part of ISPs, they are required to store all user’s detailed personal information and keep a record of user’s online activities, including web sites visited, for at least sixty days and render them to public security officials when requested.49 In a similar vein, those ICPs are obligated to stock contributions to any Internet chat rooms, discussion boards and disclosed to authorities on requested.50 And similarly the Internet bar owner must retain a record of each user's identification and Internet usage records for at least sixty days for examination upon request by the authorities.51 Many Chinese officials believe that
47 Hulian Wangzhan Congshi Dengzai Xinwen Yewu Guanli Zhanxing Guiding (Provisional Regulations on Governance of Internet-based News Providers Registration of News Websites), jointly issued by the Information Office of the State Council and the Ministry of Information Industry (MII) on November 7, 2000, available online at < http://www.isc.org.cn/20020417/ca42718.htm>, accessed on 21 February, 2004. Key stipulations related to commercial websites include: (1) If commercial portal sites run by non-news organizations wish to carry news, they may do so only after obtaining permission. After gaining approval, they may only publish news provided by officially approved news organizations; (2) Commercial portals may not carry any news items based on their own interviews or from other sources. Other commercial sites run by non-news organizations are not allowed to carry news of any kind; (3) No China-based Web sites will be allowed to link to overseas news websites or carry news from overseas news media or websites, without separate approval by the State Council Information Office and (4) Commercial websites that wish to carry news must first sign cooperative agreements with authorized news outlets. 48 “Shangye Wangzhan yu Guanfang Wangzhan zai Hezuo zhong gong Fazhan” (Commercial and official websites develop through co-operation), People’s Daily Online, September 26, 2003, available online at
14 Copyright © 2004 [Political Studies Association] controlling the online activities are virtually effective and attainable since they can infringe upon Internet users’ rights of privacy and freedom of expression through its administrative measures. According to the Measures for Managing the Internet Information Services Regulation, nine categories of information are identified to be forbidden in creating, replicating, retrieving, and transmitting:
1. Materials that opposes the basic principles established by the Constitution; 2. Materials that jeopardizes national security, reveals state secrets, subverts state power, or undermines national unity; 3. Materials that harms the prosperity and interests of the state; 4. Materials that arouses ethic animosities, ethic discrimination, or undermines ethic solidarity; 5. Materials that undermines state religious policies, or promotes cults and feudal superstitions; 6. Materials that spreads rumors, disturbs social order, or undermines social stability; 7. Materials that spreads obscenities, pornography, gambling, violence, murder, terror, or instigates crime; 8. Materials that insults or slanders others or violates the legal rights and interests of others; 9. Materials that has other contents prohibited by laws or administrative regulations.52
The stringent and vague regulations have profound impact upon Internet entrepreneurs; they would promote self-censorship and set up their own monitors, known as Big Mama, to censor the chatrooms, bulletin boards and Internet café lest they may incur sever penalties for content violations by third parties on their network, cybercafé, site, or server.53 In so doing, they may keep in line with the laws which are broadly decreed. Given these constrains on Internet operators, they have publicly committed on several occasions to adhere to media control put forward by the CCP on the one hand, and continues to utilize the leeway provided to Internet-based commercial portals unavailable to other media on the other hand. There will be more discussions in the ensuing sections about their pragmatic approaches. In this respect, Internet has emerged as an alternative to the traditional media to acquire, exchange, and disseminate information in the wired world. In fact, compared with websites affiliated to traditional media such as the People’s Daily Online or Xinhua Net, news channels on Internet portals have advantages in a more flexible style palatable to a broader readership. That is partly because the Internet portals can also acquire much more news report than any single medium by means of extensive cooperation and purchasing stories. And they have also provided a wide array of contents online. At times, “news” is indistinguishable from “information” because there seems no
March 15, 2004. 52 Hulianwang Xinxi Fuwu Guanli Banfa (Measures for Managing the Internet Information Services) was promulgated on October 1, 2000 by the State Council, Article 14 and 15. For full text, see
15 Copyright © 2004 [Political Studies Association] clear-cut between them, when especially news and information are carefully edited. As Jiang Yaping, head of the online version of the People’s Daily, acknowledged, “The unique feature of the Internet is exhibited in its ambiguity between news and information, and between the news publishing and reprinting. They are all interweaved and thus have resulted in the truth that it is but a step from news to information.”54
A Case Study of the Internet Portal—Sohu.com
The Internet, according to Charles Zhang, CEO of the Sohu.com, was not treated as a media when it was set up in 1996. It was until in 1998 that the Internet began to play a role similar to the traditional media. When there are tremendous online traffic of some 200 million hits daily on the Sohu.com, the popular Internet media outlet is confirmed and strengthened.55 Mostly foreign-funded ownership structure and partly western-style management, Sohu pioneered the process of interconnecting the Chinese people and the Internet as early as in 1996 when Charles Zhang returned from the USA with foreign fund to establish the corporation.56 It was at a time when China was greatly unwired with only tens of thousands Internet users. By the time Sohu went public on New York’s NASDAQ exchange in July 2000, the Internet users in China had reached 16.9 million, a couple of folds increase.57 The Internet user has now exponentially grown up to 79.5 million in January 2004.58
Sohu has proclaimed its Internet editorial policy as “social responsibility, media credibility and humanitarian care”59 The policy share what the newly issued Regulation with regard to the administration of Internet culture in China. In comparison with previous Internet-related rules, the current Regulation further specifies the roles that the Internet media should play in enhancing social responsibility and facilitating social conscience. Above all, the Internet media ought to shoulder the obligation to serve people, state and socialism.60 Under the present news constrains, Sohu.com has like other Internet
54 Jiang Yaping, “Zhongguo Wangluo Meiti Xianzhuang Fenxi he Zhanwang,” (Analysis and Outlook of Current China Internet Media) People’s Daily Online, July 4, 2002, available online at
16 Copyright © 2004 [Political Studies Association] portals presented more softer online contents,61 featuring less political sensitive arena, such as social disasters, entertainment, environmental protection, gender and ethic issues, violence, corruption, AIDS,…and so on. Despite their politics-free materials in form, these reports are usually have something to do with political implications in nature. Furthermore, the coverage from Sohu and other commercial Internet portals have indeed widen the public debates and displayed the plurality of public opinion. By way of deliberative editing news and information, comprehensive categorizing, and webpage designing, Sohu has achieved recognition as a predominant Internet news platform with its swift, up-to-date, and all-round coverage of the news/information with searchable database and multimedia. The results have been far-reaching: the commercial Internet websites like Sohu have demonstrated themselves as influential mainstream media that attempts to shape and direct public opinion and debates.62 Chinese people in the past were limited to virtually official source of news and information, such as the evening news at seven o’clock P.M. at China Central Television (CCTV, xinwen lianbo) and/or the People’s Daily (Renmin Ribao), have now found themselves equipped with relatively multiple source of news and information once they get on-line.
It should be always born in mind that a commercial Internet company like Sohu has strived hard to maximize their profits from the fledgling Internet market. One of the consequences is that on-line chat room featuring its anonymity, convenience and interactiveness has fallen victim of pornographic and sexually seductive messages/ contents.63 It is allegedly that in order to boost their cyber traffic and popularity, the Internet portals have formed “marketing alliances” with illegal pornography Web sites, after they fail in former marketing strategy on online advertising.64 Official media, scholars and commentators have then responded to step in by calling for greater attention to the seriousness of such online obscenity.65 In this regard, the private entrepreneurs have provided a platform that serves a wide range of people. In spite of its negative impact upon society, it is undeniable that a more pluralized society full of different interests and needs can now converge in Chinese cyberspace. And this online space is often loosely monitored and regulated since the authorities have usually concerned more
Culture), article 5. It was promulgated by the Ministry of Culture of the PRC on May 10, 2003. For full text, see
17 Copyright © 2004 [Political Studies Association] about the political taboo issues.
Sohu has also fulfilled its corporate social responsibility on the one hand, and maintain a good relationship with the state on the other hand. Take the coverage of the World AIDS Day for example. Sohu covered a lengthy and a wide range of issues for some 40 pieces news on World AIDS day on December 1, 2002 to bring to the public attention on its seriousness. One of the noticeable and controversial events was a HIV-positive woman from inner province of Guizhou marrying her HIV-negative fiancé in Beijing on that day. While the Ministry of Public Health said there was no reason that the couple should not be allowed to marry, the Beijing Municipal Government was not sure if it would permit the marriage to proceed. But the former President Jaing Zemin commented that he did not believe such a weeding should be permitted.66 While the government entities had differed opinion on this matter, their judgment were all appeared in few media besides Sohu.67 Moreover, Sohu has managed to established a closer tie with the authorities and has given concrete support to government and quasi-government societal organization for its own causes. For instance, Sohu was exclusively granted the privilege to cover the World Economic Forum: China Business Submit 2003, in cooperation with the World Trade Organization (WTO) and the China Enterprise Confederation in November 2003.68 Sohu.com has actually used its Internet platform to widely publicize such a high-profile event. On top of the VIP participants consisting of high-ranking officials and foreign/domestic CEOs, China’s Executive Vice-Premier Huang Ju took part in and delivered a keynote speech about China’s growing prospects in the midst of the continuous development.
Both two cases have revealed two significant political meanings. Firstly, Sohu and other commercial Internet portals has played a part in widening public debates, and presented people a much wider horizon. They may have even pushed the bottom line of what the government consider acceptable and created a more relaxed socio-economic environment. As Li Xiguang, a Tsinghua University-based media scholar, notes, with the new communications technologies, Chinese people can now begin to form their own viewpoints by verifying and discounting what they consider biased news/information.69 Secondly, Sohu has not only promoted its non-profit public image for socioeconomic causes, but also broaden the channels to further (business) cooperation with government organizations/agencies and officials in the future. In a word, Sohu can strengthen its
66 See “Aizibing: Guojia Gai Guan Sheme, Bu gai Guan Sheme,” (AIDS: What does the state should intervene and not intervene) available online at
18 Copyright © 2004 [Political Studies Association] brand-name image and most importantly enhance the relationship with the authorities.
Such a business practice has accordingly become something of a mantra for successful entrepreneurs to maintain ties with central/local governments under such intricate guanxi network. Partly guanxi is in this respect seen as filling “institutional hole” created by China’s incomplete and partial reforms; it has its own independent logic.70 All in all, it leads to some commentators to argue that the possibility of being shut down by the government has encouraged self-censorship and disciplined by Internet companies— which in turn has dampened online political communication,71 and there is little reason to expect commercial/foreign Internet operators to risk promoting human rights and democracy. 72 The reality is nevertheless too soon and complicated to jump into conclusion. As a matter of fact, the pragmatic approach adopted by Sohu and other portals alike in dealing with their online contents have proved brilliant, displaying a smooth rider of China’s political winds. When the political climate turns towards nationalism and tighter media censorship during the special (political) events, the Internet portals have apparently asserted their support for the government’s policies and stances. However, in more liberal times, they have shown to be open and liberal Internet platform with tremendous flow of information and news which marked as a reforming China. It can be characterized that the Internet entrepreneurs are adopting a practical approach in dealing with requirements from the government, but in the meantime serves for the own business profits to attract more readership. Such an approach and aptitude bring in the theme that I am to discuss: the clientelist-corporatist relationship between the state and the Internet entrepreneurs.
State-Business relationship in the Internet Sector
In pre-reform China, the state-society relations were sustained and strengthened through state authority and party ideology. The central government exercised its grassroots control by means of local Party meetings that were usually conducted through an individual danwei (work unit) or neighborhood association—village committee (cunweihui) and residents’ committee (juweihui). As a result, the Party was ubiquitous in penetrating into workers’ everyday lives, partly because the danwei based society depended heavily upon the delivery of social welfare and provisions. A superb piece of work is presented by Andrew Walder in his book, Communist Neo-Traditionalism.73 Nevertheless, the centrally mandated practice has withered away dramatically in the
70 See more debates in Thomas Gold, Doug Guthrie, and David Wank (eds.), Social Connections in China: Institutions, Culture, and the Changing Nature of Guanxi (Cambridge: Cambridge University Press, 2002). 71 Shanthi Kalathi, “The Internet and Asia: Broad Band or Broad Bans?” Foreign Service Journal, Vol. 78, No. 2, February 2001. Available online at
19 Copyright © 2004 [Political Studies Association] reform era since 1978. Due to the institutional changes of the economic transition, the economic imperatives prevail complete compliance with directives of the Party and the command economy.74 Meanwhile, the institutional changes have also given rise to some utmost beneficiary groups than for others of redistribution of resources and benefits.75 Private entrepreneurs containing former bureaucrats leaving the Party, government, and SOEs, 76 and newly emerged business elites have also reshaped the pre-existing state-business relationship. The “Three Represents” mirror the state’s proactive measure to cope with the changing relationship. I argue that the state-business nexus in the Internet sector is likely to follow a “clientelist-corporatist” trajectory in the short- and medium-term. Within the clientelism, the state has rewarded resources (license in the case of the Internet sector) to its clients (Internet entrepreneurs) in exchange for their support for ruling legitimacy and political support, as well as social provisions (job creation, tax revenue and national wealth). In the mean time, the state is nonetheless allowing a certain autonomy to be remained in their everyday Internet business operations. The hybrid clientelist-corporatist complex is manifest in one way or another. Some indications have been identified as follow.
Not only the government-sponsored or supported Internet enterprises are effectively under heavy control of its patrons, but also the private Internet companies have to comply with government’s administrative regulations in exchange for limited number of operating licenses. The Internet industry in China is by and large a protected sector given that the IT industry exposes to fiercer competition from global corporations under the concessions and terms made in its entry into the World Trade Organization (WTO). Prior to China’s accession to the WTO, the former minister of MII, Wu Jichuan, spoke publicly in September 1999 that foreign companies would not be allowed to invest nor operate in Chinese Internet-related business, whether content providers or service providers, for both fall into category of value-added telecom services.77 China is still partially opening up the market after entering into the WTO in spite of the terms of IT and basic telecommunications policies agreed.78 One of the direct impact on the industry is that
74 See, for example, Andrew G. Walder, “The Decline of Communist Power: Elements of a Theory of Institutional Change,” Theory and Society, Vol. 23, No. 2, April 1994, pp. 297-323. 75 Xiaobo Hu, “The State and the Private Sector in a New Property Rights Systems,” in Gang Lin and Xiaobo Hu (eds.), China after Jiang (Stanford: Stanford University Press, 2003), pp. 69-89. 76 In Chinese term, it is called “xia hai,” which literally means plunge into the sea. Bruce J. Dickson coins “red capitalists” to describe those entrepreneurs in connection with close personal and political ties to the CCP. See Bruce J. Dickson, Red Capitalists in China: The Party, Private Entrepreneurs, and Prospects for Political Change, pp. 4-5. 77 Hans Lombardo, “China Bans Foreign Investment in Internet Sector,” Internetnews.com, September 14, 1999. Available online at
20 Copyright © 2004 [Political Studies Association] competition is still regulated by issuing a certain number of licenses. And state’s discriminatory policy is manifest in law enforcement. These situations have resulted in unfair and discriminated market competition wherein the Internet entrepreneurs are supposed to well connected to political power in order to enjoy such privilege.
Many Internet entrepreneurs have maintained a closer relations with government officials at all levels. They tend to believe the clientelist approach is a safe and effective strategy to maneuver their way of doing Internet business vis-à-vis the state bureaucracy. It is particularly conspicuous for entrepreneurs running Internet business, cyber café, for example, in medium and small cities since Internet entrepreneurs still quite depend on the local government’s discretionary favoritism for protection and resources.79 In this regard, the Internet entrepreneurs have less autonomy but more dependence. It is s analogous to the concept “embedded autonomy” that Peter Evans has coined. He describes the characteristics of “embedded autonomy” mostly founded in developmental states that “It is an autonomy embedded in a concrete set of social ties that bind the state to society and provide institutionalized channels for the continual negotiation and renegotiation of goals and policies.”80 Given that the Chinese case does not perfectly conform to the definition provided, the Internet entrepreneurs are still increasingly playing a consultation role for the government because many executives have been appointed to government policy panels in the convenience of soliciting visions from Internet industry and maintaining an enhanced cooperative government-business relationship.81
An interviewee of Internet manger has even talked about the role of princeling party (taizidang) in significantly facilitating the business prosperity with government’s support and/or resources. Two renowned IT figures are identified: Jiang Hengmian, son the Jiang Zemin, and Daniel Mao, husband of President Hu Jintao’s daughter. Whereas Jiang Mianheng is chairman of China Netcom, a state-run project to build China’s Internet backbone, and is collaborating with Taiwan tycoon Winston Wong to construct a US$1.63 billion semi-conductor plan in Pudong, Shanghai,82 Deniel Mao is the former CEO of
International Data Group (IDG) has helped a Chinese Internet company named 8848.com to get back to the Internet market in the aftermath of China’s accession into the WTO. As a matter of fact, the IDG Technology Venture Investment has been the first American venture capital investor to enter the Chinese information market that has invested in dotcoms. We can even proclaim that many major Internet ISPs and ICPs, such as Sina.com, Sohu.com, NetEase.com, Tom.com, 3721.com, Baidu.com, …etc., have to a varying degree received foreign investments in different forms. See Tang Yuankai, “Net Profits,” Beijing Review, Vol. 47, No. 4, January 22, 2004, pp. 22-24; Russell Flannery, “Mergers and Acquisitions: China’s Internet M&A Bang Likely to Last,” Forbes.com, December 1, 2003, available online at
21 Copyright © 2004 [Political Studies Association] Sina.com, China’s biggest Internet portal and still remains on the Sina board of director. The state-business relationship in the Internet sector has also provided telling evidence for the co-existence of clientelism and state corporatism.
Autonomous and independent groups of the Internet-related business has been virtually non-existent in China. Take the Internet Society of China (Zhongguo Hulianwang Xiehui, homepage: http://www.isc.org.cn/) for instance. It is one of the few nationwide Internet associations consisting of Internet practitioners and media scholars. It was inaugurated in May 2001 with the governing body of Ministry of Information Industry. It functions as a intermediate role between the government and entrepreneurs, with objectives to propagandize state policies, laws and regulations with regard to the Internet industry, reflect the needs and wants of specific policies from members, help the government enact relevant Internet policies and promote self-regulation among members.83 Indeed, any societal organizations, including trade and labor unions, have to be sanctioned by the state. They are largely organized by the authorities and as a result, their leadership is directed by the government, ensuring the members of the associations conforming to state’s interests, such as overall national informatization process and network economy. Their existence is far from acting contrary to challenging the communist regime and running against the stability of the society. In other words, the Internet Society like many other civic groups is to serve the causes of state, and accordingly formed the state corporatism. Both clientelism and corporatism have effectively prevented an organized and a threatening Internet entrepreneurs association from presence.
As Charles Zhang, CEO and President of Sohu.com, spoke after receiving their ICP license in 2001, that Sohu would “further strengthen the working relationship between the state and private new media enterprises by enhancing their legal status. We will work with the government to create an Internet environment where stability and growth go hand-in-hand for everyone to benefit.”84 While the government fears the Internet as a source of open information, the goal-keeper of the large commercial sites are seen as safely self-censored. But what is also worrisome for the Beijing authority is that these relatively smaller, individual sites are difficult to regulate and even harder to keep track of. One of the interviewees has confirmed, “The sky is high and the emperor is far away. (tian gao huang di yuan) So I can take advantage of the geographical remoteness from center to make profits, [although the online contents displayed are at times not wholly in line with government’s requirements].”85 The situation is not an isolated case, but a widespread phenomenon since law enforcement does exist variations across provinces and regions in China. It is usually referred to the consequence of decentralization reform, in which the central government delegated decision-making authority to local government in the reform era.
family members of political leaders and they usually have easy access to political power when they engage in business. 83 Introduction of the Internet Society of China, available at
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Moreover, many foreign Internet entrepreneurs seem impassionate to press for any political liberalization and reform. Their shrewd attitudes has in turned solidify the clientelist-corporatist relationship between the state and Internet entrepreneurs. They usually turn a blind eye to the calling from human rights organizations for pressuring the Chinese government in relaxing their human rights violations on cyber-activists. The Amnesty International, for example, claimed recently there had been a dramatic rise of 54 people totally detained or sentenced for expressing their online opinions or for disseminating and downloading “unhealthy” information from the Internet. They asserted the foreign corporations indirectly contributed to human rights violations or at the very least, failed to give consideration to the human rights implications of their investments.”86 Specifically, several foreign companies, including Cisco Systems, Microsoft, Nortel Networks, Websense and Sun Microsystems, were allegedly accused to provide technology or software to have been used to censor and control the use of the Internet in China.87 Cisco and Microsoft dismissed the allegations with the defense that “If the government of China wants to monitor the Internet, that’s their business. We are basically politically neutral.”88 We just focused on delivering the best technology to people throughout the world. We cannot control the way it may ultimately be used.” Both responses are actually what most foreign Internet-related entrepreneurs are operating in dealing with Chinese government. All in all, the profit-orientation of the Internet entrepreneurs, home and foreign, has intensified the clientelist-corporatist relationship under current political and business atmosphere.
Implications for Civil Society
Given that the overall party-state capacities have been whittling away since the economic reform and opening to the outside world, the central government has nevertheless laboriously attempted to utilize the Internet and its related infrastructure to improve its administrative control over provincial and local governments. Although the “operational autonomy”89 does put into practice in the increasingly commercialized Internet sector, the outcome has not incurred further political modernization. One the one hand, the party-state is still exceedingly powerful to rein in and alleviate any negative spin-off deriving from economic prosperity. On the other hand, the operational autonomy is by and large confined to the enterprise management. Such distorted autonomy is unlikely for
86 “People’s Republic of China: Controls Tighten as Internet Activism Grows,” Amnesty International, January 28, 2004, available online at
23 Copyright © 2004 [Political Studies Association] the time being to transcend the political domain. As a consequence, there seems no signs from the Internet entrepreneurs community to demand for greater independence and autonomy from the state, or to push forward political democratization. Moreover, the Internet entrepreneurs as outgrowth of the IT’s take-off in the past decade or so do not develop any solid foundation to alienate themselves from the state apparatus. Having said that, because the Internet industry is still a relatively protected sector with mildly open market, many entrepreneurs have prospered as a result of that. It has strengthened their political clientelism proclivity to the authorities. The Beijing government can thus effectively prevent the likelihood that the emergence of a vivacious and potentially dangerous social group to challenge the rule of the communist party.
In addition, China is until now a country that any formal organizations need to be sanctioned and created under government auspices. Any vibrant, autonomous and legal civil associations that are from state power are difficult to find not only in the Internet sector but also throughout the private economy. The circumstances appear similar to what Frolic has addressed “state-led civil society”—social organizations and quasi- administrative units created by the state to help it manage a complex and rapidly expanding economy and changing societies.90 It may also be conceived of as an “Chinese” mode of political development, that is, an outcome of such clientelist- corporatist approach of development after more than two decades’ economic reform. It is effortless to exaggerate the potential of the Internet entrepreneurs for an inevitable political transformation with healthy civil society if we simply extrapolate these trends from western experiences and theories into China’s political future. The emergence of civil society in the wake of Internet entrepreneurs seems unrealistic and rhetorical for the time being. There are indeed no solid evidence at the moment to support such assertions.
Conclusion
The expectation that the rise of the Internet entrepreneurs will forge and stimulate civil society seems unlikely to achieve for the time being. Their pragmatic approaches in dealing with the government and Internet readership prove successful. Their influential social status does not however naturally translate into a catalyst to a more liberal political evolution. The structure of the government-Internet entrepreneurs complex, clientelist- corporatist, seems dominant, if not definite. Undeniably, the Internet entrepreneurs are increasingly powering the national economy, and they are accordingly in a way or another being integrated into the communist party and state bureaucracy. For the CCP, in so doing, it can guarantee the continuing communist rule by recruiting the rising private elites into the incumbent regime, lest they may act against the state for demanding for economic and political rights as reform deeply takes root. It is also a preemptive strategy for the state to harness the potential reactionary from the private sector. For Internet entrepreneurs, they are more willingly to cooperate with the government other than push ahead political liberalization and democratization. To them, the success of China’s economic development opened new opportunities to pursue non-political careers and become prosperous. Unlike some Chinese people previously enthusiastic about pursuing
90 B. Michael Frolic, “State-Led Civil Society,” in Timothy Brook and B. Michael Frolic (eds.), Civil Society in China (Armonk, NY and London: M.E. Sharpe, 1997), pp. 46-67.
24 Copyright © 2004 [Political Studies Association] political ideas during the 1989 Tiananmen Square tragedy, (Internet) entrepreneurs become pragmatic towards democratic ideals; they are now more focusing their attentions on economic and other non-political endeavors.91
More importantly, it may not be the Internet entrepreneurs that advance political causes in China, but the Internet users. The government as well as Internet entrepreneurs may not promote and encourage the sociopolitical potentials of the Internet unless the potentials are under guided direction. What in turn make the Internet salient is how it is used by the subjects. As Sohu’ CEO Charles Zhang comments, “With more access to information, people are listening rather than just hearing, are thinking rather than blindly following directions. The Internet empowers the individual.”92 In a word, the Internet has strong potentials to transform the Chinese state, but it ultimately depends upon how the Internet is used.
91 Suisheng Zhao, “Introduction: China’s Democratization Reconsidered,” in Suisheng Zhao (ed.), China and Democracy: The Prospect for a Democratic China (New York and London: Routledge: 2001), p. 2. 92 Lisa Movius, “To Be Young, Chinese and Weiku,” Salon.com, May 30, 2001, available online at
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