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China May Allow Facebook and Twitter in Shanghai Free-Trade Zone

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In Shanghai's free trade zone, bans will be lifted on globally popular social and news websites. Will the rest of the country follow?

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This morning, the South China Morning Post reported that officials in Beijing have decided to lift a ban on politically sensitive foreign websites, including Facebook (NASDAQ:FB), Twitter, and The New York Times, but only within the Shanghai free-trade zone. Moreover, the zone will welcome bids from foreign telecom companies to begin licensing and providing Internet services to businesses and consumers within the region.

According to the report, China's big three telecom companies, China Mobile (NYSE:CHL), China Unicom (NYSE:CHU), and China Telecom (NYSE:CHA), all state-owned, are not raising complaints as the decision was endorsed by several top leaders in China's government, including Premier Li Keqiang. Premier Keqiang is interested in utilizing the Shanghai Free-trade Zone as a proving ground for further economic reform in mainland China.

Another government source, who declined to be named, told the Morning Post:

In order to welcome foreign companies to invest and to let foreigners live and work happily in the free-trade zone, we must think about how we can make them feel like at home. If they can't get onto Facebook or read The New York Times, they may naturally wonder how special the free-trade zone is compared with the rest of China.

The measures by the government to open a small section of Shanghai to the Internet are aimed less at the Chinese public than at international business executives. The Shanghai free-trade zone, which spans 28.78 square kilometers of the city's Pudong area, includes Shanghai Pudong International Airport and the surrounding area, the Waigaoqiao duty-free zone, and the Yangshan port. Additionally, the Morning Post reported last month that Chinese authorities are lifting firewall controls on Western websites in Beijing's most exclusive establishments, like 5-star hotels that cater to corporate clients from around the globe.

Still, the move is a step forward: It will make a small portion of Shanghai more like Hong Kong. Moreover, Facebook and Twitter have been banned on the mainland since 2009. In that time period, the heads of the social media giants, as well as those from other heavy-hitting Internet companies, have been lobbying Beijing to lift the bans. Perhaps the government is beginning to see how such thriving social media companies can benefit the Chinese economy. Earlier this month, Facebook's Sheryl Sandberg met with the head of the State Council Information Office in Beijing, Cai Mingzhao, ostensibly to discuss her book Lean In, but likely to also have a chat about Facebook use in China.

Shanghai is the first free-trade zone on the mainland to allow an open Internet, but there are other special economic zones across the country, in cities like Shenzen, Zhuhai, and Shantou. In fact, the entire province of Hainan is considered a special economic zone. Positive results from the shift in policy for Shanghai may encourage the establishment of additional such open-Internet zones across mainland China, and perhaps not just for traveling business people.

Earlier this month at a major Asian business convention, Premier Li Keqiang said in a speech:

We are implementing the innovation-driven development strategy at a faster pace, aggressively promoting technological innovation and deep integration of science and technology with the economy, and are building a social environment friendly to innovation and business start-up activities.

If progressive politicians like Premier Li Keqiang have their way -- and actually mean what they say -- Facebook and Twitter may be only the beginning.

Follow me on Twitter: @JoshWolonick and @Minyanville
No positions in stocks mentioned.
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