China's Tech Giants Quietly Grow off Beijing's Internet Controls

TAIPEI (TheStreet) -- China's increasingly foolproof campaign to block sensitive Internet content stifles business growth, the usual argument goes.

But who's stifled depends on whose business it is. Some people are growing because of China's Great Firewall.

The firewall has been fortified largely in secret. China's 30,000 Internet police won't come out and say they block news from abroad or shut down Web sites that challenge Communist Party lines.

So it takes some imagination to figure out who might be making money off it.

Basically, think about who might replace banned Web sites that once satisfied restless Chinese teenagers in cybercafes, graduate student researchers or office workers in foreign firms who want to join social networking sites.

First, back to the stifling of business growth: Barriers against foreign social networking sites, such as Facebook (FB) and Twitter, can make it hard for Chinese entrepreneurs or their staffs to do dialogue with would-be partners overseas. There's nothing like a good old Google (GOOG) Internet search, either. But Google servers are based just offshore in Hong Kong, slowing access onshore, and monitoring of user activity by Beijing may further gum up connections.

China's growing list of government agencies that regulate the Internet knew about these risks to business development, however, so they have increased Internet speeds and fostered growth in local alternatives to the blocked foreign sites.

Market research and academic surveys find that most Chinese Net users don't need to look at blocked Web sites anymore and that even many of those who can don't. Just a sliver of the population with the English language skills and computer expertise to jump the Firewall actually cross it. Most are used to getting news or doing research via local Web sites. They e-mail friends abroad instead of socially networking.

That's where the business growth comes in. Chinese blog services, search engines, social networking sites and cloud storage are taking over where the banned foreign sites are kept out of the game.

China's homegrown Sina Weibo (SINA) , Tencent Weibo and Renren (RENN) have replaced banned Web sites that would allow personal spaces or blogs. On the no-go list are Facebook and Twitter and likewise YouTube. ("Weibo," incidentally, is Mandarin Chinese for "microblog.")

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