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China: The Land of the InterNot

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Censorship abroad foils US tech companies.

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You'd think that China, with its more than 1.3 billion potential consumers, would be a great place for US companies to do business.

You might also think that China, home to more wired citizens than anywhere else on the planet, would look particularly delicious to tech companies like Microsoft (MSFT), Yahoo (YHOO), and Apple (AAPL).

But the Chinese government has proved you wrong.

Starting July 1, PC manufacturers wishing to sell computers in China will be required to preinstall software that will block all "vulgar" sites. The program, called Green Dam, would block users from viewing pornography, information about Tibet, articles about the history of pro-democratic protests, and pretty much anything else the government doesn't like.

Last year, 40 million PCs were sold in China. For computer manufacturers, the task of installing chips in such a large quantity of machines has been described as next to impossible.

In addition to this latest swipe at freedom of speech, the Chinese government already censors hundreds of websites, many of which are flagship brands for US companies. Google's (GOOG) YouTube has long clamored outside the Great Firewall of China. Last week, Flickr, Hotmail and Twitter all went dark on the sixtieth anniversary of the Tiananmen Square massacre.

US companies may naturally feel deterred from doing business in such a compromised market. But then again, China's got 1.3 billion reasons to convince those companies otherwise.

Join Hoofy and Boo for a closer look at the challenge of doing business in the land of the InterNot.

No positions in stocks mentioned.

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