Why Beijing is making a mistake with Google.

Innovation, the Internet, gadgets, and more.
Jan. 16 2010 7:12 AM

China's Silicon Ceiling

The Beijing/Google skirmish is a reminder that free markets require free minds.

(Continued from Page 1)

Qian ticked off the impressive numbers—China had 338 million netizens as of June 2009, 700 million mobile subscribers, and 180 million blogs. That's certainly enough users to build businesses around, with or without Google.

Can China continue to grow without allowing Google—and the next Googles of the world—free rein in China? It's worked out well so far. But there are a few caveats.

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First, China still has a long way to go before it's considered rich. And some sympathetic analysts argue that it's not fair to hold China's civic development to American standards. The United States had China's present-day economic profile—per-capita GDP of about $5,000, 40 percent of the work force in agriculture, 30 years of industrialization and urbanization—in 1900, a time when there were no direct elections for Senate, women couldn't vote, and segregation reigned in the south.

Second, much of China's extraordinary development has been based on moving peasants into manufacturing. The key to future job growth, says Stephen Green, chief economist at Standard Chartered Bank in Shanghai, will lie in the services sector. And the largest components of the services sector—financial services, entertainment, media—remain firmly in the grip of the state. Going forward, it will become more difficult for a services-based economy to prosper with restraints on communication and expression. China faces a fundamental paradox, says Damien Ma, an analyst at the Eurasia Group. "It needs to have fairly closed information flow for political stability purposes, but doing so stifles innovation."

And that's the rub. Any type of political system can produce excellent hardware. The Soviet Union, which ruled Russia when Google co-founder Sergey Brin was born there in 1973, managed to produce nuclear weapons and satellites. Likewise, China has built truly impressive hardware: some 67 bridges now spanning the Yangtze River, a superfast supercomputer assembled entirely from parts made in China, high-speed trains. But in the 21st century, a country needs great software in order to thrive. It has to have a culture that facilitates the flow of information, not just goods.

Newsweek's Nick Summers contributed to this story.

Slate and the New America Foundation will host a talk about China, Google, and Internet freedom on Jan. 20 in Washington, D.C. Click here for details.

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