This post originally appeared on Digicha.com, my blog about the Internet and digital media in China.

Rebecca MacKinnon has written a must-read post on the Chinese government’s recently issued White Paper on the Internet in China. She provides the best explanation I have seen of the government’s approach to managing the Chinese Internet–“networked authoritarianism”. As Ms. MacKinnon writes:

China is pioneering what I call “networked authoritarianism.” Compared to classic authoritarianism, networked authoritarianism permits – or shall we say accepts the Internet’s inevitable consequences and adjusts – a lot more give-and-take between government and citizens than in a pre-Internet authoritarian state. While one party remains in control, a wide range of conversations about the country’s problems rage on websites and social networking services. The government follows online chatter, and sometimes people are even able to use the Internet to call attention to social problems or injustices, and even manage to have an impact on government policies. As a result, the average person with Internet or mobile access has a much greater sense of freedom – and may even feel like they have the ability to speak and be heard – in ways that weren’t possible under classic authoritarianism. It also makes most people a lot less likely to join a movement calling for radical political change. In many ways, the regime actually uses the Internet not only to extend its control but also to enhance its legitimacy.

At the same time, in the networked authoritarian state there is no guarantee of individual rights and freedoms. People go to jail when the powers-that-be decide they are too much of a threat – and there’s nothing anybody can do about it. Truly competitive, free and fair elections do not happen. The courts and the legal system are tools of the ruling party

Connecting every citizen in China to the Internet via multiple devices might sound like something the Chinese Communist Party would want to avoid. Several people who contacted me about China’s Internet White Paper were surprised at the Chinese government’s enthusiasm for connectivity. Such enthusiasm does not jive with most American and European notions of how an authoritarian state would be run by a party that calls itself Communist. What’s important to understand is that Chinese authoritarianism in the Internet age is not the same as the crumbling, centrally-planned authoritarianism of the Eastern Bloc, disconnected from the Western capitalist world.

The CCP leadership recognizes that they can’t control everybody all the time if they’re going to be a technologically advanced global economic powerhouse. What’s more, high Internet penetration is necessary if the Chinese government wants to continue high rates of economic growth, which economists agree requires boosting domestic consumer demand as well as pushing Chinese companies to the cutting edge of technological innovation.  China catapulted itself to become the world’s second largest economy by turning itself into the world’s factory. But Chinese labor has grown expensive compared to some other markets in poorer countries. In order to stay competitive and keep growing, China needs to transition from a manufacturing-fueled economy to an economy fueled by domestic consumption at home, while being an innovator for advanced technologies and services that can compete with American and European companies.

She concludes her post with a passage that should trigger warning bells for American insitutional investors in Chinese Internet firms:

Note that many of the big Chinese companies receive American investment dollars or are publicly traded on U.S. stock exchanges, sending a clear message that whatever U.S. elected officials might say about “Internet freedom,” many American investors are quite happy to profit from China’s status quo.

So far no one campaigning for Internet freedom in China has linked investment in Chinese Internet firms to activism. But if someone with the stature and influence of Rebecca MacKinnon starts pushing this idea many institutional funds and their limited partners, which include large pension funds and university endowments, could find themselves in an uncomfortable spotlight.

Please tell me what you think in the comments.

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