The operations of U.S. Internet companies in China are attracting concern in Congress after years of complaints from free speech and human rights advocates about these firms aiding Beijing's ability to censor content. Trade liberalization has sent China's economy booming, making it an attractive—even essential—market for U.S. companies to enter. But China's government has retained tight political controls. China is believed to have the world’s most sophisticated network for monitoring and limiting information online. Combined with Beijing's controls on traditional media, this Internet surveillance program has limited domestic debate on issues such as China’s human rights record, Tibetan independence, or Taiwan.

Experts say China is assisted in its censorship efforts by hardware and software provided by many major U.S. technology companies. Congressional hearings in February 2006 by the House Subcommittee on Global Human Rights marked one of the most prominent U.S. airings yet of the issue, with testimony (PDF) from senior representatives of Cisco, Google, Yahoo, and Microsoft on the agenda. Rep. Chris Smith (R-NJ), the subcommittee chairman, introduced a bill in 2006 after revelations that several Internet companies, including Yahoo, had conformed to restrictions demanded by China. He says these companies need to answer charges they have allowed their companies to become a tool for controlling public opinion.

Experts say the Chinese government deploys at least twelve agencies to enforce a wide array of Internet regulations directed at service and content providers. The effort includes the policing of cyber cafés, as well as government-run computers that constantly monitor for banned content. The government requires Internet service providers to obtain a license from the Ministry of Information Industry and maintain a complete record of customer usage for sixty days, to be surrendered upon government request. In 2005, the government shut down thousands of websites that had not been registered. In 2007, the government pulled the plug on Internet data centers—which host web servers—shutting down thousands of websites before the seventeenth National Congress of the Chinese Communist Party, to clamp down on any political commentary.

China’s Ministry of Public Security reportedly employs tens of thousands of human monitors to screen Internet content. The ministry has also established a system of online reporting centers that encourage citizens to report “harmful” information ranging from sites displaying pornography to banned political activities. Forbidden items include sites giving information on the Falun Gong spiritual movement or the 1989 Tiananmen Square crackdown. Banned sources include the websites of Radio Free Asia, the BBC's Chinese-language service, and the online public encyclopedia, Wikipedia. To avoid penalty, websites in China practice self-censorship by blocking out banned keywords (PDF), of which there are now between four and five hundred, says this October 2007 report. A watchdog organization comprising three academic institutions, the OpenNet Initiative, calls China's filtering system “pervasive, sophisticated, and effective.”

China relied on two U.S. companies—Cisco Systems and Juniper Networks—to help carry out its network upgrade, known as “CN2,” in 2004. This upgrade significantly increased China's ability to monitor Internet usage. Cisco is also due to provide China with routers designed to handle Internet attacks by viruses and worms but equally capable of blocking sensitive content. Derek Bambauer, a fellow at the Berkman Center for Internet and Society at Harvard Law School, told CFR.org that Cisco equipment provides the backbone of China’s Internet support. Cisco has denied charges it has adapted its equipment to help Chinese officials police the Internet.

Yahoo officials have not denied giving Chinese authorities information they used to track down and convict Chinese journalist Shi Tao, who had shared information in 2004 on government restrictions related to the Tiananmen Square anniversary. After facing mounting public criticism for its actions, Yahoo issued a press release affirming its commitment to “open access to information and communication on a global basis.”

Another U.S. technology company, Google, agreed to censor some content on its new Chinese website. In February 2008, Guo Quan, a former Nanjing university professor and democracy activist who launched the Chinese Netizen Party the same month vowed to sue Google for excising his name (FT)  from its local search results.

 The company's senior counsel, Andrew McLaughlin, told a U.S. congressional human rights group in 2006 that problems with Chinese controls can best be solved through establishing a presence in the country. “In deciding how best to approach the Chinese—or any—market, we must balance our commitments to satisfy the interests of users, expand access to information, and respond to local conditions,” McLaughlin said.

Microsoft, the world's largest computer firm, in 2005 shut down the site of a Chinese blogger who had been addressing sensitive political issues. Microsoft Chairman Bill Gates told a conference in 2006 that his company must observe legal requirements in countries where it does business. But Gates added: “The ability to really withhold information no longer exists.”

All four U.S. companies also point out that European, Japanese, or other firms would quickly fill any gap left if American companies withheld their expertise.

However, the notion of “constructive engagement” with China is not shared by all in the U.S. business community. A money-management firm, Boston Common Asset Management, along with Reporters Without Borders, an organization working for greater press freedom, initiated a statement late in 2005 calling on Internet businesses to adopt codes to uphold freedom of expression and to be transparent in their dealings. The website lists thirty-five institutions that have signed the statement so far.

“The way that we view it,” Wolfe tells CFR.org, “is that the Internet, like anything else, is just a tool and it can be used for good purposes like liberation and democratization, and it can also be used as a tool of repression.”

China is believed to have 210 million Internet users, the second-highest number in the world after the United States. However, Internet usage has barely penetrated the potential Chinese audience when compared with U.S. or other industrialized nations, and so enormous future growth is expected as the country's economy continues to expand. Chinese surveys have found the majority of Internet users in China use the web for entertainment purposes. Internet usage is also heavily concentrated in urban areas, particularly in Beijing and the large urban areas around Shanghai and Guandong.

Despite state controls, news is often disseminated via Internet when other Chinese media outlets are censored. This distribution system brought the first news of such issues as an AIDS epidemic in Henan province, the poor safety conditions in Chinese mines, and news of the 2005 poisoning of the Songhua River, which caused a water crisis in the city of Harbin.

U.S. Congressman Smith introduced a bill that would forbid U.S. Internet companies from locating their content servers inside China or other nations seen as human rights abusers. In essence, this puts that content outside of Chinese jurisdiction. The industry fears that, should this become law, it would have a major impact on their search-engine businesses because it could make their search engines unusably slow when accessed from inside China.

The Global Online Freedom Act of 2007 (H.R. 275) was approved by the House Foreign Affairs Committee in October 2007. It would make it illegal for U.S. companies hosting Internet content, such as web pages or e-mail, to give users’ personal information to governments that restrict Internet access.

In addition, the U.S. State Department created the Global Internet Freedom Task Force in February 2006 to seek ways to improve access to the Internet in China and other authoritarian states. Under the 2008 budget for its Bureau of Democracy, Human Rights, and Labor, the State Department also allotted $15 million for developing “anti-censorship tools and services,” which could help Internet users breach electronic firewalls set up by China, Iran and other closed societies.

Many other states limit or even forbid access to the Internet. The OpenNet Initiative says Iran also has a substantial Internet censorship system, using a sophisticated filtering network to counter the rapid growth of writing online in the Farsi language. Saudi Arabia also has tight controls on information available through the Internet, and other Mideast Arab states are following suit.

Harvard’s Bambauer says China's efforts at censorship are being watched closely by other closed societies. ”We think absolutely that China is a model. It's certainly a model for Vietnam, for Central Asian countries like Uzbekistan, especially when you consider that China sells bandwidth to other states, outsourcing censorship.”

The U.S. Broadcasting Board of Governors (BBG) has provided funding to set up proxy servers to help Chinese Internet users get access to prohibited information. The Wall Street Journal reports that among the beneficiaries of BBG aid is a software program known as Freegate, which connects computers in China to servers in the United States that provide banned material. Additionally, media reports from China and the statements of dissidents indicate that many things targeted for censorship do get through government filters.

In January 2007, a group of global technology firms and human rights organizations was formed to discuss the establishment of an international code of ethics on issues related to privacy and censorship. It is aimed at developing a set of best practices that private companies should follow in doing business in countries that have repressive governments or censorship regimes. John G. Palfrey, Jr., executive director of Berkman Center for Internet and Society at Harvard Law School in a CFR.org meeting on digital openness in closed societies said, “It's on the model of the Sullivan Principles, in essence, for cyberspace, if you compare to it the South African regime.” According to him it is “the most promising way to figure out an ethical mode for dealing with this problem in a globalized way.”