I published this post on another (now defunct) blog two years ago at about the time Google fell out with the Chinese government. I’m not sure I would now agree with my prediction that indigenous innovation would suffer, but certainly the climate for internet services doesn’t seem very much better.
————————–

I was in Shanghai last week when the disagreement between Google and the Chinese Government stepped up a gear and Google pointed local traffic to unsensored results in Hong Kong. The immediate effect was very erratic services for many Google services as the Chinese Government worked out what to do. Google has started providing its own update of the state of its various services and you can see the continuing fall out.
Facebook and Twitter were also blocked last week – but that is now normal.
Some commentators are arguing that Google should reconsider and get back into the market in mainland China as the market is too big and fast-growing to ignore. Whatever the merits of that argument, the current policy the Chinese Government is pursuing is more likely to hurt China than help it, I think.
True, there are now very vibrant Chinese companies serving the same functions as the global giants – Baidu for search for instance, or Qzone for social networking – but without competition from global players innovation is likely to stagnate. And a China cut off from the network effects of the global internet economy will be a poorer place in the long run.