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.