China Issues New Rules on Internet Content

China published new regulations on Internet companies that would limit foreign investment, require strict surveillance against “subversive” content and threaten to close down any unlicensed firms.

The rules, passed by China’s cabinet two weeks ago and published Monday in the official Xinhua Daily Telegraph, are the government’s latest declared effort to restrict the Internet while still reaping its benefits.

China last year announced a ban on foreign capital in Internet content providers. But because so many are heavily funded by overseas investors, Beijing has refrained from enforcing the ban, and has pledged to allow 49% foreign stakes in content providers when it joins the World Trade Organization, which could be this year.

The rules published Monday hold companies responsible for blocking vast categories of illegal content on their Web sites and chat rooms. They ban any content that subverts state power, supports cults, “harms the reputation” of China or hurts reunification efforts with Taiwan, to name just some.

Internet content and service providers must keep records of all content on their Web sites and all the users who dial on to their servers for 60 days, and hand the records to police on demand. If enforced, the rules could impose heavy costs on Internet start-ups, such as extra computers to store data and personnel to monitor content, said Duncan Clark, managing partner of Beijing-based Internet consultancy BDA China.

“This creates a system that would require such a scale of enforcement that it could potentially occupy the whole efforts of ICPs,” Clark said.

“Technology will respond. It will give rise to a whole new generation of encryption techniques.”