The Shanghai Free Trade Zone is now open for business. But how open is the FTZ's Internet access?

There were rumors that Facebook, Twitter, and the Web site of the New York Times would be unblocked within the FTZ. That would contrast against other provinces in China--the BBC reported earlier this month that "Chinese officials have issued new guidelines that could see internet users jailed for writing posts that spread rumours online [according to] state media."

"Internet users who make defamatory comments which are visited by 5,000 users or reposted more than 500 times could face up to three years in prison," said the BBC. Just what constitutes a "defamatory comment" remains unclear.

Legally protected speech

Freedom-of-speech is never absolute. The maxim about yelling "FIRE!" in a crowded indoor venue remains a prime example. Laws defining and proscribing libel and slander vary by region and country, but in territories with the rule of law, the limits of speech are defined in legal terms.

Legally protected speech on the Net is more complex. Take, for example, the case of 16-year-old Yang Hui from Zhangjiachuan. Bloomberg reports that on September 17: "the teen was summoned from his afternoon math class by his junior high school's vice-principal, according to an account the student provided to the state-owned Beijing News newspaper. Three plainclothes and a uniformed police officer were waiting in the principal's office. They asked for his phone, interrogated him, conveyed him to the police station for further questioning and then locked him up in a local detention center."

His apparent crime? He was re-tweeted. The story's complex and illuminating, and I refer you to the Adam Minter article on Bloomberg for the tale of Yang. It ends with this: "Zhangjiachuan is a small, unimportant locality far from Beijing. Punishing its officials--and freeing its junior-high students--means almost nothing to national leaders who have spent the last two months tightening their control of the Internet."

Net restrictions = business restrictions

The Internet is the most powerful new business tool of the current century. It will continue to evolve and create new business models. Case-in-point: 3D-printing technology that can create anything from bicycle parts to custom-designed casts for broken limbs. Open-source CAD files online can be downloaded, modified, and printed locally using plastic resin.

But for such business opportunities to flourish, the Net must be free and open. And there seems little evidence that the Chinese authorities are prepared to accept that--within or without the Shanghai FTZ.

A September 26 article in the state-run Global Times http://www.globaltimes.cn/content/814044.shtml spells it out. "No special access to banned websites at free trade zone in Shanghai," reads the headline. The article begins with: "The management measures over the Internet at the China (Shanghai) Pilot Free Trade Zone will be consistent with the rest of the country's, official sources were quoted by the news portal people.com.cn as saying."

Macau territory, or China?

China's economic growth rates over the past two decades are the envy of the world. And as the economy matures, new schemes like the Shanghai FTZ are needed.

Then there's the Hengqin New Area, nominally in Zhuhai but just west of Macau's Cotai Strip--the University of Macau has built an extension there, with power from Macau's electricity provider CEM and Internet access is provided by CTM--Macau's dominant telco and ISP.

"Hengqin is part of Zhuhai City," said a Macau-based source. "The Zhuhai SEZ covers just part of the city. Only the 1 sq km UM campus is under Macau's temporary jurisdiction, a kind of exclave if Macau were an independent country, at least until December 20, 2049, when the Macau SAR comes to an end."

Hengqin Island is part of the Zhuhai SEZ. But approximately one square kilometer is under Macau administration. This means that University of Macau students won't be hauled out of class and confronted with police for their tweets, as happened to Yang Hui.

International business needs a free Internet

But restricting the Internet mean restricting ideas and collaboration. Some in Hong Kong fear that the Shanghai FTZ will affect Hong Kong adversely. With greater convertibility for the yuan and similar measures, Shanghai will become a more prominent financial center than it is now.

But not all multinationals are impressed by the ability to read the NYT online. Most need access to all their data, they need file-transfer capabilities in bulk and 24/7 connections with offices worldwide. New areas of growth like healthcare-tech depend on unfettered Internet access.

Don't expect it. According to a CNN story http://edition.cnn.com/2013/10/04/tech/opendoor-app-apple-china/index.html "Apple has been accused of kowtowing to the Chinese government by pulling from its China App Store a product enabling users to circumvent firewalls and access restricted sites."

"OpenDoor, a free app that provides users a randomized IP address to keep their browsing habits anonymous and shielded from censors, was removed after the tech giant deemed it contained 'illegal content,' the app's lead developer told CNN. It remains available in App Stores outside China."

Double-edged sword

The Chinese authorities can't have it both ways. They can't provide a truncated Internet and expect every type of multinational to sign up for office space in the Shanghai FTZ.

By restricting Net access, they are de facto restricting the types of businesses that will set up shop in the new zone. Technology is changing business at an unprecedented pace. Many businesses will examine their Net shackles and decide to locate elsewhere.

Does the Shanghai FTZ want to cut itself off from the future? Many of China's businesses are world-class, despite having only a few decades to build brand-awareness. But brand-equity is now supported by tools like Twitter, Facebook, and websites that can link to whoever they please.

And that's today--once technologies like 3D printing become mainstream, the business picture will change once again.