I was surprised when I first learned via this video about the gay pageant event taking place. I was not surprised to learn a little while ago it was closed down right before it was set to start.

Police shut down what would have been China’s first gay pageant on Friday an hour before it was set to begin, highlighting the enduring sensitivity surrounding homosexuality and the struggle by gays to find mainstream acceptance.

Organizers said they were not surprised when eight police officers turned up at the upscale club in central Beijing where the pageant, featuring a fashion show and a host in drag, was set to take place.

”They said the content, meaning homosexuality, there’s nothing wrong with that, but you did not do things according to procedures,” Ben Zhang said. Police told him he needed official approval for events that included performances, in this case a stage show.

”I kind of saw that coming,” Zhang said.

Chinese police frequently cite procedural reasons for closing down gatherings that are deemed to be politically sensitive. Though the pageant did not have any overt political agenda, similar events in the past — such as a parade during the Shanghai Pride Festival last year — have been blocked by authorities.

”It totally has to do with moral standards and culture,” said contestant Emilio Liu, 26. ”If most people can’t accept it, then the government won’t let it happen.”

This is really too bad. China has made incredible strides in becoming more tolerant, and most Westerners would be shocked to learn just how open-minded many Chinese people in the big cities can be about this issue – as long as it’s not their son or daughter. The gay weddings a year ago in Tananmen Square were allowed to take place and China Daily did a wonderful job covering them (I wrote about it briefly here). So this is certainly a disappointment. Looking at the video I referenced, I can guess that it crossed a perceived moral line (maybe too much skin?). A shame.

This is a contributed article from my friend in Taiwan Bill Stimson. It does not necessarily reflect the opinions of The Peking Duck.

China Can Outgoogle Google

by William R. Stimson

What if they gave a dictatorship and nobody came? This is what we’re seeing happen in Iran now, and with Google it’s apparently also beginning in China.

The Chinese authorities dangle profit in front of the greedy eyes of Western firms but then as those firms rush in and struggle to establish themselves in the very different (so-called) “business” climate of China, these same authorities keep changing the rules, demanding a little bit more every few years, altering the structure of the business environment and changing the rules some more, until they themselves are firmly in control of the firms and own the technologies. To China’s leaders it must seem like such a winning game that already they can’t help strutting and posturing about their own superiority as a race, a nation, and a system of “government” that, unlike the liberal democracies of the West, works against the recession.

Only, like the populace of Iran, Google looked the big boys in the face, decided it wasn’t worth playing their cheating game, turned around, and walked out on their party. This is the opposite of the Americans going into Iraq for its oil. This is America coming of age. The greatness of America, whatever superiority it may have, as it turns out, isn’t what so many in the West, or even in China, might suspect. Rather it’s the simple freedom to innovate and to try to be real – it’s the “tangle and bother” freedom that the Chinese leaders now deride for its slow and stumbling economic recovery.

America has what China can’t steal. It can finally produce a company that is true, that places human values above dollars – a company that can win our hearts and so, of course, earn our dollars in a big way.

Google does right to step out of China because by doing so it is preserving its one priceless asset. This is not the secret computer codes the Chinese want to steal. It’s something the Chinese cannot steal from Google or any other company. Legitimate authenticity, genuineness, call it what you will – this is the commodity that will be selling in the marketplace of the future, and that not just America but Taiwan and so many free countries around the world are now perfecting. This is the commodity that will end the destruction of ecosystems, the exploitation of labor forces, the extinction of species, the stealing from future generations, and, yes, that will end poverty too; and overpopulation. A genuine company is one that gives away for free far more than it ever even attempts to sell, it is a company that spins a fortune out of thin air, and it is a company that the China we know today will never understand because it is a company that “does no evil.”

China can have all Google’s secrets, yes. But to get them it’ll have to set free its captive 1.3 billion, let them read and think and write what they want – and let them self-organize as they wish. Only then will the greatness of the Chinese culture and the superiority of its many peoples and inner nations rise up and show the world what can outgoogle Google.

This is certainly outspoken, not to mention cynical.

Here is my very crude and cynical (Eastern European) reading of the situation: Google was in need of some positive PR to correct its worsening image (especially in Europe, where concerns about privacy are mounting on a daily basis). Google.cn is the goat that would be sacrificed, for it will generate most positive headlines and may not result in devastating losses to Google’s business (Google.cn holds roughly 30 percent of the Chinese market).

All the talk about cybersecurity breaches seems epiphenomenal to this plan; it may simply be the easiest way to frame Google’s decision without triggering too many “why, oh why?” questions. Besides, there is no better candy for U.S. media and politicians than the threat of an all-out cyber-Armageddon initiated by Chinese hackers. I can assure everyone that at least a half of all discussions that Google’s move would spur would be about the need to make America more secure from cyberattacks. No better timing to throw more terrorism-related meat to the U.S. public (“what if they read Obama’s email?”).

Now, if you believe that Google was wrong to censor the Web in China in the first place, I doubt you’ll suddenly become a fan of their work — they still don’t seem to recognize that censoring the Web in China may have been wrong for ethical reasons and frame it simply as a business decision (based on new security threats). You’ll probably think that they are now doing the right thing for the wrong reasons.

If, on the other hand, you believe that they did the right thing in China by offering their limited service (rather than no service at all), I don’t see how this move could make you feel good either: all it took to get Google to shut down their “public service” was to launch a bunch of cyberattacks (so, should we expect that, instead of direct censorship, authoritarian governments would now simply launch cyberattacks on their targets and force them to leave under psychological pressure?). Thus, you’ll probably think that they are now doing the wrong thing for the wrong reasons.

Could Google be this cynical, in direct definace of their Don’t Be Evil mantra? If so, if this guy is right, it just may be working. After all, the Web was saturated today with columns and posts congratulating Google for its moral fortitude and asking, “What took them so long to do the right thing?”

But I remain cautiously skeptical. They weren’t “winning” in China but they still had more than 20 percent market share; most US companies would be thrilled if they could fail that miserably in China. I can easily imagine that they had a big blow-up with the government and found they had irreconcilable differences, and the cyber-attacks were the last straw. I actually find that more than believable. I don’t believe they’d just pick up and leave China because Baidu was ahead and leaving makes them look good in Europe. I guess the truth will come out at some point. It usually does.

Oh no, here we go again! Is China about to soar or plummet? We are literally up to our eyeballs in punditry about the fate and future of China. Friedman, the only columnist I know to have a metric named after him, has to get into the act, of course. In this instance, I admit, I tend to agree with him.

Reading The Herald Tribune over breakfast in Hong Kong harbor last week, my eye went to the front-page story about how James Chanos — reportedly one of America’s most successful short-sellers, the man who bet that Enron was a fraud and made a fortune when that proved true and its stock collapsed — is now warning that China is “Dubai times 1,000 — or worse” and looking for ways to short that country’s economy before its bubbles burst.

China’s markets may be full of bubbles ripe for a short-seller, and if Mr. Chanos can find a way to make money shorting them, God bless him. But after visiting Hong Kong and Taiwan this past week and talking to many people who work and invest their own money in China, I’d offer Mr. Chanos two notes of caution.

First, a simple rule of investing that has always served me well: Never short a country with $2 trillion in foreign currency reserves.

Second, it is easy to look at China today and see its enormous problems and things that it is not getting right. For instance, low interest rates, easy credit, an undervalued currency and hot money flowing in from abroad have led to what the Chinese government Sunday called “excessively rising house prices” in major cities, or what some might call a speculative bubble ripe for the shorting. In the last few days, though, China’s central bank has started edging up interest rates and raising the proportion of deposits that banks must set aside as reserves — precisely to head off inflation and take some air out of any asset bubbles.

And that’s the point. I am reluctant to sell China short, not because I think it has no problems or corruption or bubbles, but because I think it has all those problems in spades — and some will blow up along the way (the most dangerous being pollution). But it also has a political class focused on addressing its real problems, as well as a mountain of savings with which to do so (unlike us).

He goes on to mildly ridicule Chanos (who can’t be all bad, since a recent article about him in Politico actually linked to one of my posts!). And I have to say I think Friedman is right. We’ll see some deflating of the asset bubble and some serious pain. But nothing is about to collapse. Not China. Not the US.

We are being deluged with bad news about China, and yesterday’s Google story only made China look worse. “Bubbles” and “house of cards” and “built on sand” are among the metaphors that seem to be co-joined to so many discussions of China. Yesterday, I found myself so convinced that I actually went and bought a few hundred shares of a stock, FXP, that shorts the Xinhua index. So many bad vibes being sent out by so many pundits! Surely China has got to come careening downward.

I was lucky and made a profit (about enough to buy me a meal at Bellagio). But this morning I sold my shares and am long China again. I stepped back and realized I was getting sucked into the hype that’s building. And whenever there’s a common perception of inevitability, usually exactly the opposite happens. And it’s just as easy to get sucked into the counter-hype – the euphoric predictions of an economically invincible China assuming the mantle of world leadership. So hard to see what the real situation is amid all the clutter and noise.

I know, we’ve talked this to death. We don’t need to have another long food fight about it. So then why do I keep posting these kinds of articles from both sides after so many interminable threads? Because I like to know what the influencers are saying (even questionable ones like Friedman), I like to know both sides, I like to compare opinions and expose dumb arguments and applaud smart ones. This one is probably on the smart side. Take it or leave it. Time will tell.

This is a great post.

Is she being self-deprecating and funny? I sure hope so.

If this is accurate, it is quite a story. A sophisticated, large-scale cyber-attack from within China is causing Google to overhaul its Chinese operations and possibly stop censoring the search results on google.cn. The story has everything – human rights, censorship, America’s leading brand, cybercrime, intrigue and an unprecedentedly open statement from Google.

You can read a good summary of the breaking story over here.

Google is releasing information about a “highly sophisticated and targeted attack” on their corporate infrastructure that occurred last month. The attack originated in China and resulted in the “theft of intellectual property from Google.” In light of the attack Google is making sweeping changes to its Chinese operations.

Google is releasing some information about these attacks to the public. The company says that a minimal amount of user information was compromised, but has come to the alarming conclusion that the attacks were targeting the information of Chinese human rights activists. Google found that these attacks were not just going after Google’s data, but were also targeting at least twenty other major companies spanning sectors including Internet, finance, chemicals, and more. Google has also discovered that phishing attacks have been used to compromise the Gmail accounts of Chinese human rights activists around the world.

In light of the attacks, and after attempts by the Chinese government to further restrict free speech on the web, Google has decided it will deploy a fully uncensored version of its search engine in China.

At first I didn’t believe it. Then I saw it from the horse’s mouth, Google’s own blog:

We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.”

These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.

The decision to review our business operations in China has been incredibly hard, and we know that it will have potentially far-reaching consequences. We want to make clear that this move was driven by our executives in the United States, without the knowledge or involvement of our employees in China who have worked incredibly hard to make Google.cn the success it is today. We are committed to working responsibly to resolve the very difficult issues raised.

This is kind of slapdash; I wasn’t supposed to be blogging today as I’m on deadline. But this story is totally unbelievable, off the charts.

Thanks to the reader who alerted me to this.

Update – From the NYT

Google threatened late Tuesday to pull out of its operations in China after it said it had uncovered a massive cyber attack on its computers that originated there….

Google said that a primary goal of the attackers was accessing the Gmail accounts of Chinese human right activists, but that the attack also targeted 20 other large companies in the finance, technology, media and chemical sectors.

In a blog posting by David Drummond, the corporate development and chief legal officer, Google said that it had found a “highly sophisticated and targeted attack on our corporate infrastructure originating from China.”

“These attacks and the surveillance they have uncovered — combined with the attempts over the past year to further limit free speech on the web — have led us to conclude that we should review the feasibility of our business operations in China,” Mr. Drummond wrote in a blog post.

He wrote that Google was no longer willing to censor results on its Chinese-language search engine and would discuss with Chinese authorities whether it could operate an uncensored search engine in that country.

“We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China,” Mr. Drummond wrote, adding that the decision was being driven by executives in the United States, “without the knowledge or involvement of our employees in China.”

Yeah, a very big story. I’m waiting for the conspiracy theorists who claim this is google’s creative strategy for exiting China, where things never went quite the way they expected, while making them look like the victim instead of the loser. (And no, I don’t necessarily believe that. I just know how the minds of some of my more strident commenters work. Being a PR guy, it was the first thing that crossed my mind when I heard the story – I couldn’t help it.)

Update 2: The Wall Street Journal is featuring this as their top story today, and they state:

Much of the data stolen from Google was its “core source code,” Mr. Mulvenon [director of a national security firm] said. “If you have the source code, you can potentially figure out how to do Google hacks that get all kinds of interesting data.” Among the data, would be the information needed to identify security flaws in Google’s systems, he said.

The attackers used at least seven different types of attack code to identify and steal data from Google, said Rafal Rohozinski, a principal at the SecDev Group, a Canadian security consulting firm that discovered a major Chinese spying operation on the Dalai Lama last year.

I bring this up because it calls to mind a comment I left in the earlier thread:

[D]on’t fool yourself about google. They may let you download a song for free. Would they hand you the source code for their search algorithm? No, because then they wouldn’t be Google anymore. They’d just be one of a trillions of other companies offering the same thing.

This was in response to a commenter praising Google for not caring about intellectual property and being a proponent of open-source technology (you can actually do both – be a proponent of open source and value IP). Obviously Google does care about IP, a lot – as it must. Its core source code is its bread and butter.

Post updated at 8:24pm Arizona time. Is it all a PR stunt?

This is good to know!

“Our country’s Internet situation is unique. Compared to all kinds of restrictions in foreign countries, China has the most open Internet in the world.”

«我国互联网形态有特殊性。相对于国外的各种限制，中国的互联网是全世界最开放的。»
– Zhou Xisheng (周锡生) Deputy Chief of Xinhua News Agency, Director-General of Xinhua News Net.

From notes taken at the ninth session of the 2009 SCIO Internet News Work Training Session.

Now that that’s settled, please use this as an open thread. That includes those of you who need a proxy to access this site over in the world’s most open Internet.

Well, I’d give the demolition crew an E for Effort. Go watch the video and see the other photos over here.

I’ve always had mixed feelings about Niall Ferguson, the bad-boy of world history, always trying (often successfully) to pull the rug out from under our conventional belief systems and shatter our sacred illusions. His great history of WWI, The Pity of War, was a wonderful if infuriating read; infuriating because he constantly speculated about “what if,” and even arrived at the conclusion that Germany was meant to have won the war and the world would have been better off if it had. (Who knows? But he certainly makes an elegant argument.) He has especially ruffled feathers for praising colonialism and empire.

At the end of his 2006 history of 20th century wars, Wars of the World, Ferguson states matter-of-factly that the age of Western ascendancy has ended, and that of Eastern ascendancy begun. I read the book in Beijing when it came out during the Bush administration and it made perfect sense – America was caught in an impossible place, bleeding money, choked by debt and snagged in two seemingly endless wars. And I was seeing with my own eyes what China was capable of. Now, nearly three years later, things look considerably worse for America, something that didn’t seem possible in early 2007.

The article by Ferguson that I’m looking at today is absolutely a must-read. I know already who it will infuriate and who it will delight. I hear all the praise and all the objections. Allow me to offer a longer-than-usual snip. (I’m tempted to simply paste the entire thing it’s so interesting.)

Back in 2004 I warned that the US had imperceptibly come to rely on east Asian capital to stabilise its unbalanced current and fiscal accounts. The decline and fall of America’s undeclared empire might therefore be due not to terrorists at the gates nor to the rogue regimes that sponsor them, but to a fiscal crisis at home.

The realisation that the yawning US current account deficit was increasingly being financed by Asian central banks, with the Chinese moving into pole position, was, for me at least, the eureka moment of the decade.

When, in late 2006, Moritz Schularick and I coined the word “Chimerica” to describe what we saw as the dangerously unsustainable relationship between parsimonious China and profligate America, we had identified one of the keys to the coming global financial crisis.

The illusion of American hyperpuissance was shattered not once but twice in the past decade. Nemesis came first in the backstreets of Sadr City and the valleys of Helmand, which revealed not only the limits of American military might but also, more importantly, the naivety of neoconservative visions of a democratic wave in the greater Middle East. And it struck a second time with the escalation of the subprime crisis of 2007 into the credit crunch of 2008 and finally the “great recession” of 2009. After the bankruptcy of Lehman Brothers, the sham verities of the “Washington Consensus” and the “Great Moderation” were consigned forever to oblivion.

And what remained? By the end of the decade the western world could only look admiringly at the speed with which the Chinese government had responded to the breathtaking collapse in exports caused by the US credit crunch, a collapse which might have been expected to devastate Asia.

While the developed world teetered on the verge of a second Great Depression, China suffered little more than a minor growth slow-down, thanks to a highly effective government stimulus programme and massive credit expansion.

It would of course be ingenuous to assume that the next decade will not bring problems for China, too. Running a society of 1.3bn people with the kind of authoritarian planned capitalism hitherto associated with the city-state Singapore (population 4.5m) is fraught with difficulties. But the fact remains that Asia’s latest and biggest industrial revolution scarcely paused to draw breath during the 2007-09 financial crisis.

And what a revolution! Compare a tenfold growth of gross domestic product in the space of 26 years with a fourfold increase in the space of 70. The former has been China’s achievement between 1978 and 2004; the latter was Britain’s between 1830 and 1900. Or consider the fact that US GDP was more than eight times that of China’s at the beginning of this decade. Now it is barely four times larger – and if the projections from Jim O’Neill, Goldman Sachs’ chief economist, prove to be correct, China will overtake America as soon as 2027: in less than two decades.

I am not convinced it’s true that China “scarcely paused to draw breath during the 2007-09 financial crisis.” I think the crisis dealt China a severe blow from which it’s still reeling. But…. I still think Ferguson is essentially right, that the pendulum is swinging in anew direction and the balance of power is shifting faster than anyone would have believed just a decade ago.

China is going to have to deal with unbelievable problems. (And yes, so is America.) China’s key cities are in the middle of a property bubble; its environment is so fragile whole swathes of the ecology may be doomed; corruption is so rampant even the central government recognizes it can undo much of the progress of the past three decades; and there are still some 650 million living in deep poverty.

Predictions of China’s collapse appear in the news every day, as do prediction of America’s. I don’t pay these predictions much heed. Things happen far too slowly, with far too much lethargy, for either China or the US to go down in a blaze. Recessions, unrest, turmoil, misery, strife, bankruptcies, economic upheaval – we may see all those things, but I don’t believe we’re going to see either system collapse. What we will see and are seeing, as Ferguson says, is a tipping of the scale, with China gaining influence as US influence wanes. Where the scales will stop is anyone’s guess. I still can’t imagine China as an economic equal – it simply has too much poverty and lack of spending power – but I do see it creeping upwards, at times imperceptibly. It has been better than the US in making sure it gets what it needs to keep the engines roaring, even if it means coddling some of the world’s most unsavory dictators and rogue regimes. And somehow, for all its impossible headaches, it keeps on going.

Ferguson, after making the case for China’s ascendancy, ends on an ambiguous note.

What gave the west the edge over the east over the past 500 years? My answer is six “killer apps”: the capitalist enterprise, the scientific method, a legal and political system based on private property rights and individual freedom, traditional imperialism, the consumer society and what Weber probably misnamed the “Protestant” ethic of work and capital accumulation as ends in themselves.

Some of those things (numbers one and two) China has clearly replicated. Others it may be in the process of adopting with some “Confucian” modifications (imperialism, consumption and the work ethic). Only number three – the Western way of law and politics – shows little sign of emerging in the one-party state that is the People’s Republic.

But does China need dear old democracy to achieve enduring prosperity?

The next decade may well answer that question. Then again, it may take another 500 years to be certain that there really is a viable alternative to western ascendancy.

I think China has already shown it doesn’t need “dear old democracy,” no matter how apoplectic that may make some of its critics. It will lean more and more in that direction, especially as incomes rise and people realize they are not as dependent on the government as it would like them to believe. But democracy as we know it and rule of law – well, despite many encouraging stories of reform, I’m not going to recommend anyone hold their breath.

All in all, I think Fergie gets it right. Looking at China’s history and its staying power, and at its sheer industriousness and optimism, I have to discount the reports of China’s imminent demise. And America’s too. I just think America will keep drifting lower as China edges higher, with lots of painful stumbles along the way.

Long-time readers know this is a topic that always annoyed me (to put it mildly) – the treatment of hepatitis B carriers as lepers, banning them from certain types of jobs and needlessly stigmatizing them.

If this story is accurate, change is finally in the air:

China is set to issue regulations to remove hepatitis B check from physical examination for school entrance and work, according to the Ministry of Health.

Mao Qunan, a spokesman with the ministry, said here Tuesday that the move was based on related organizations’ thorough demonstration in regard to whether hepatitis B carriers will affect other people’s health.

However, Mao said restrictions will still exist in jobs that may induce hepatitis B virus transmission such as blood sampling.

“The list of these special professions that need restriction will have to go through a series of legal procedures for approval,” said Mao, adding that the upcoming regulations will cover related aspects.

In addition, the results of hepatitis B tests for other medical purposes should be protected as part of examinees’ privacy, and such tests should not be carried out by force.

“As we know more about the hepatitis B virus, our prevention and treatment measures become more specific,” said Xie Rao, a senior liver disease physician with the Beijing Ditan Hospital, adding that the move showed that the country’s understanding of the disease had entered a higher level.

Hepatitis B has been around about as long as humanity itself and has been well understood for many decades. There has been no sudden breakthrough that convinced the Chinese authorities that it was safe to end the ban, and the line that their understanding has now “entered a higher level” is baffling. All they did was catch up with what’s been common knowledge around the world for years: hepatitis B carriers, like those who test positive for AIDS, pose no extraordinary danger to their colleagues.

If this actually happens and the ban is lifted, I give China credit for reversing what was a vile policy. That it took this long, ruining many people’s lives along the way, is a tragedy.

Link via Danwei.