Mon, May 09, 2011 - Page 11 News List

Could Renren be vulnerable in a Chinese crackdown?

Reuters, NEW YORK

In the cases of more serious, or “material” violations, the penalties could include “a revocation of our operating licenses or a suspension or shutdown of our online operations, which would materially and adversely affect our business, results of operations and reputation,” Renren said.

LIABLE

The social networking company said it was liable for all material posted on its Web sites, from advertisements — some of which must be vetted by government officials before being posted — to individual communications between users.

With that much responsibility, Renren said it may not always know what content could cause problems and may only find out about the violation after it has already happened.

Renren’s structure also presents problems.

For example, the fact that Renren is incorporated in the Cayman Islands puts it in danger of being subject to new limitations if foreign investment rules or their interpretation change. Renren’s online gaming operations, which provided 45 percent of the company’s revenue last year, could also be affected by Beijing’s efforts to curb gaming addiction in minors.

All told, Renren used variations of the word “uncertain” nearly 70 times in its prospectus and the word, “regulation” nearly 300 times. By way of comparison, US Internet phone services provider Skype used “uncertain” about 60 times in its prospectus, but only used “regulation” about 170 times.

MURKY RULES

Many risks lie in the uncertain and changing nature of China’s Internet laws, which Renren said are enforced and interpreted in an “evolving” way, are often not published on a timely basis — or at all — and may be applied retroactively.

The Chinese government has been wary of online content that stirs up the population for some time.

In 2007, Chinese government officials struggled with what to do with China Central Television anchor Rui Chenggang’s (芮成鋼) blog call for the Forbidden City Palace Museum to evict Starbucks. It drew 500,000 signatures to an online petition and dozens of domestic newspaper articles, according to a February 2007 diplomatic cable sent from the US embassy in Beijing.

The post was patriotic, but also showed just how a massive protest movement might emerge in the world’s biggest Internet market, according to the cable, which was obtained by Wikileaks and provided to Reuters by a third party.

“Blog content that spurs extremist passions is precisely the kind of material the Government would like to control,” according to an executive at a Chinese Internet company, cited in the cable. “The paramount concern [is] that a mass movement might emerge, born on blogs or through another electronic medium, to reduce the Government’s maneuvering room on a sensitive issue, or challenge Party authority.”

Since that time, though, Beijing has radically stepped up its online information control.

It put a ban on postings containing the word “Egypt” as protesters in Egypt demanded and finally succeeded in bringing down the government of former Egyptian president Hosni Mubarak.

The level of paranoia increased even more when overseas Chinese-language Web site Boxun (博訊網) made an online call for gatherings at various places around the country. Police were sent out and detained and beat foreign journalists who went to see if there were protests in downtown Beijing and Shanghai.

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