Is Internet Speed Retarding China’s Economic Growth?

May 29, 2012

The answer is, of course, yes, but the real question is by how much? I honestly do not believe we know the answer to that question.

James Fallows noted this on his blog yesterday:

After another several-month stay in China last year, I came up with one proxy for China’s ability to take this next step: how slow its Internet service is, compared with South Korea’s or Japan’s.

In much of America, the Internet is slow by those standards, but mainly for infrastructure reasons. In China it’s slow because of political control: censorship and the “Great Firewall” bog down everything and make much of the online universe impossible to reach. “What country ever rode to pre-eminence by fighting the reigning technology of the time?” a friend asked while I was in China last year. “Did the Brits ban steam?”

Not a new issue, and critics of China’s Internet regulations use this to argue for liberalization. In other words, there is an economic argument to be made to push back against the content monitoring system.

But how much is China’s GDP suffering because of lower Net speeds? Is that comment about the Brits banning steam fair?

First answer: I don’t really know. I don’t trust the stats I’ve seen on this, because what they usually do is reduce everything down to a man-hour calculation. That does tell us something, but not as much as we might think. And there are a lot of assumptions that must be made about Chinese web habits, what kinds of Net use actually matter when it comes to productivity, and whether domestic alternatives mitigate the problems with access to offshore sites.

Second answer: I have a feeling that the conclusions on this issue are overstated to some degree. When coming from the media on an anecdotal basis (e.g. the Beijing Bureau Chief of Newspaper X writes an article about how slow YouTube is when she uses her VPN), I tend to discount the reports. Surfing habits of these folks bear almost no resemblance to your average Chinese Net user.

Moreover, I don’t really think anyone has figured out what lost man-hours due to Net use really mean anyway. Consider two horny men, Mr. Zhou in Beijing and Mr. Yamashita in Tokyo: Mr. Zhou spends two hours a day surfing ServileJapaneseChicks.com. Mr. Yamashita watches the same video clips of women in French maid costumes playing with farm animals, but due to higher Net speed, it only takes him 1.3 hours (I’m making up these numbers).

But we’re forgetting about human nature. Does Mr. Yamashita get back to work sooner or does he watch another .7 hour’s worth of naughty vids? What do you think? And if Mr. Zhou’s Net speed is really slow, does he go back to work or rather spend his time watching those torrent files he downloaded the day before?

Just one example . . .

My point is that it’s too easy to say that China’s Net speed is slow and therefore its economy is taking a significant hit.

 

9 thoughts on “Is Internet Speed Retarding China’s Economic Growth?

  1. Chip

    I’ve know of software companies that have refused to expand their workforce in China, or even eliminating their work force specifically due to slow internet speeds affecting their ability to derive value from their Chinese venture. So not only can it make work less efficient, it discourages potential investment.

  2. PakG1

    With packet shaping, it’s possible to prioritize the packets that are deemed economically important and sanitized. So the question is whether systems that can contribute value are hampered. I find it hard to think of any system that both contributes economically and is politically sanitized, that would be hampered. If it’s true that no such systems are hampered, then the question becomes whether services deemed politically controversial contribute economic value that corresponding sanitized versions cannot.

    1. Stan Post author

      I think the issue encompasses much more than political content. Think about Google access, for example. If your job happens to involve utilizing resources that you have to find via Google, then the slow/unstable nature of that service might make a difference. That being said, I think we (foreigners) tend to exaggerate how often that actually happens.

      1. PakG1

        I’d point back to the question whether sanitized versions would be unable to deliver the same economic benefit. For example, a sanitized Google (back in the day) or Baidu. It’s an interesting question. Admittedly, Baidu’s search breadth is a penny compared to Google’s, but does it matter, as long as people can find a bare minimum of what they’re looking for? Especially when we seem to be so oversaturated with information that choice can become a hindrance, rather than a benefit?

        1. Stan Post author

          Yep. For your average Zhou, a Baidu search (in Chinese of course) might yield better results than Google anyway.

  3. Tee

    The second question is not fair because the Chinese government is not banning the Internet; it’s just making it slower with unnecessary crap. I agree that it’s simplistic to assume that the slower speed is hurting China economically (given considerations of human nature, as you point out), but I think we can say the slower speed presents an impediment for China in its effort to realise its economic potential to the full in the sense that if all the people in China were fully committed to being economically productive, the slower Internet speed would be one area of deficiency that drags growth down.