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U.S. Tech Companies Follow Google Out of China

Photo: Agence France-PresseBy Christian Fleming

Mar. 26 – GoDaddy, the world’s largest domain name registration company, and Network Solutions, another global leader in the industry, are following Google’s footsteps as they exit the Chinese market, citing “concern for the security of individuals.”

Both companies testified that they have ceased the registration of new Chinese domain names during a U.S. congressional hearing on Wednesday titled, “Google and Internet Control in China: A Nexus between Human Rights and Trade.”

The decision by the U.S. tech companies comes after China’s Ministry of Industry and Information Technology issued new registration requirements for its citizens. According to the laws dated February 8, individuals who wish to register a domain in China need to meet with authorities in person, provide a personal photo, describe the nature of the site and, in cases involving sensitive material, gain advanced and special approval. The ministry has said that it will shut down existing domains that have not been registered with the government by the end of September.

“We were immediately concerned about the motives behind the increased level of registrant verification being required,” Christine Jones, GoDaddy’s executive vice-president, said at the congressional hearing. “The intent of the procedures appeared, to us, to be based on a desire by the Chinese authorities to exercise increased control over the subject matter of domain name registrations by Chinese nationals.”

Ms. Jones went on to say that although GoDaddy will not offer new domain registrations in China, they will continue to support domains which have already been registered through their company, despite the Chinese government’s “chilling” new restrictions.

After unsuccessfully negotiating a compromise with Chinese officials on the topic of censorship, Google rerouted all traffic from its Google.cn site earlier this week to their Hong Kong based server Google.com.hk.

While new developments come as Google’s fight with China dominates headlines, the companies involved maintain that the decision to leave the Chinese market has been months in the making.

“With all due respect, this has nothing to do with Google,” Ms. Jones said. “We decided we didn’t want to be agents of China.”

GoDaddy’s decision to stop offering new domain registration services appears to be recent, but Network Solutions actually stopped processing new .cn domains back in December, citing “intrusive” government policies.

It is not only domain registration companies and Google that are looking beyond China. Dell Inc.’s founder, Michael Dell, met with Indian Prime Minister Manmohan Singh earlier this week to discuss the possibility of Dell, the world’s third largest computer seller, moving a significant portion of their business from China to India.

“A very important point has been raised regarding development of the hardware sector of information technology,” Indian Prime Minister Singh said at the end of a planning commission meeting on Tuesday. “This morning I met the chairman of Dell Corporation. He informed me that they are buying equipment and parts worth US$25 billion from China. They would like to shift to safer environment with climate conducive to enterprise with security of legal system.”

Apparently the tax benefits experienced in India make it a much more desirable alternative to China as a manufacturing hub for Dell’s exports to Africa, Europe, and the Middle East. The computer company recently opened its first PC manufacturing plant in Sriperumbudur, Tamil Nadu with a production capacity of one million computers a year.

When the news broke that the company was quitting China, Dell quickly issued a statement in an attempt to downplay the situation.

“Mr. Dell believes India also has an opportunity of becoming a hardware manufacturing hub, generating employment and adding to the country’s impressive growth. Dell has not made any plans to shift its component spending at this time,” the company spokesman said.

Although many companies like Microsoft see too much to gain from the burgeoning Chinese internet market to question the officials in Beijing, GoDaddy, Network Solutions, and potentially Dell now join Google in putting pressure on the Chinese government to create a friendlier atmosphere for both its own netizens and foreign businesses operating there. China can only defend their historical and political censorship under the pornography façade for so long. Just take a look at the hoops they make their own press jump through.

The pressure is slowly building and the ball is in China’s court; what they decide to do next will be interesting to watch.

Related Reading
Dell Switching PC Exports from China to India

This entry was posted in Politics. Bookmark the permalink.

5 Responses to U.S. Tech Companies Follow Google Out of China

  1. The_Observer says:

    See the article below where Dell denies any such transfer and the Indian PM has withdrawn his remarks.

    http://economictimes.indiatimes.com/infotech/hardware/Dell-denies-talks-on-shifting-sourcing-from-China/articleshow/5725303.cms

    Here in Australia, you cannot register a .au domain unless you are a legitimate business. Domain registrars have to spend more time and effort to register those domains.
    I can understand the Chinese government wanting to make sure they know who is registering .cn domains but for different reasons. On the one hand for the longest time China, after the USA, has been reputed to be one of the biggest sources of spam, viruses, trojans, DoS attacks, etc. Whether such attacks are initiated in China or merely proxies for other countries’ hackers is yet to be determined. These extra registry details for domains will help the Chinese government get a better grip on this problem. This is in addition to the control of pornography which I am actually in favour of. In China, you have children in the cities and schools using the the internet but also you have still a large number of conservative adults as part of Chinese society.
    Domain registrars such as GoDaddy.com (which I use personally) and Network Solutions (which I have used for business) make their money by quick registry of domains over the internet at reasonable costs. What they are expected to do in China and for .cn domains will be costly and time consuming. They would have to set up walk-in offices, hire Chinese speaking staff, maybe photographers. Again for commercial purposes I would expect them to withdraw from the Chinese market. Is this bad for China? Maybe or maybe not. Certainly more work for Chinese domain registrars might lead to higher fees for their service.

  2. Chris Devonshire-Ellis says:

    That’s not entirely true Observer. The PM’s comments have just been removed, that doesn’t mean a retraction. As for Dell, he just doesn’t want the publicity. Or its a clever move to wrangle more concessions from China. But Dell is moving its PC business from China to India as we already reported. Its not deniable, they’re shifting the boxes as we speak.

  3. The_Observer says:

    @Chris

    I know that Dell is shipping computers from their assembly plant in Tamil Nadu. I was referring to the fact that Dell is still sourcing parts and sub-assemblies from China and Taiwan and that Dell has said that there was no change with that. You have another article concerning this specific topic:

    http://www.2point6billion.com/news/2010/03/23/dell-switching-pc-exports-from-china-to-india-4706.html

    Here I was trying to point out that different countries have different requirements for domain registration and that the loss of Godaddy.com and Network Solutions is not that great a loss to China as the technology is not rocket science.

    Nevertheless, since I’m here I would agree that the Chinese authorities would indeed be very concerned if Dell should source the more lucrative parts and sub-assemblies elsewhere.

  4. Chris Devonshire-Ellis says:

    You can cover up a lot of problems by blaming politics. As has been wisely mentioned elsewhere on these forums, it may be convenient to blame China for issues that are actually to do with business failures or inadequately planned investments. The issue with Go-Daddy may fall into that category. As for Dell, they will move their China business if it proves economically sensible to do so. That is mainly a tax based question. As it happens, India is getting significantly aggressive in that area and is and will continue to compete for those investment and manufacturing dollars. It is now cheaper to manufacture in India than China, and if labor pools and infrastructure issues start to fade (which I believe they are and will) then you’ll see some migration of businesses away from China and to other areas that offer better economic trading conditions. India is poised to be such a destination. – Thanks Chris

  5. Jordan says:

    I wonder how many other foreign companies aside from US companies would follow this trend considering that other countries look US as superior than them.
    I believe this problem won’t not just end here. It will create more problems between the two countries later on.

Comments are closed.



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