Cambridge professor Peter Nolan is one of the world's leading experts on the Chinese economy. He examines the world's leading modern corporations and compares them with China's biggest SOEs, concluding that a new type of highly efficient and technically advanced "system integrating enterprises" constitutes the new “commanding heights” of the economy. This is an important issue for a country like China – whose constitution stipulates that the commanding heights must be in public ownership.

According to Nolan, China's state-owned giants have failed to emulate the success of their competitors in advanced capitalist countries. He backs this argument up with powerful evidence concerning the huge gap between the influence of multinationals from advanced capitalist countries and China's SOEs in R&D investment, technical prowess, global influence and sales.

However, Nolan has not examined China's internet giants, which have come of age in the last five years. The emergence of Alibaba, Baidu, Tencent, etc. created the basis for Chinese internet companies to proliferate and win hundreds of millions of customers and thereby help reshape China's economic dynamics. Furthermore, it was only because the Chinese government consciously put barriers and restrictions on U.S.-based companies, that China's internet wasn't colonized by Google, Facebook, YouTube, Amazon etc. These apparently innocuous internet companies pose a very real danger to China's ability to plan its socio-economic development in ways that benefit its people.

In 2010, Google effectively withdrew from China citing cyber hacking as an excuse. But rather than capitulate to Google, as most countries did, the Chinese government launched a state-owned search-engine called Jike. Although Jike failed to conquer the market and was merged with other state-owned internet companies, the process still revealed the ambitious visions of the CPC leadership in relation to the internet. Indeed, this decision was prescient, as confirmed by Edward Snowden's revelations about global spying by the U.S. National Security Agency (NSA). Snowden produced irrefutable evidence that U.S.-based internet giants directly collaborated with the NSA to spy on the world's population. Indeed, the NSA even spied on the mobile phones of world leaders attending sensitive trade and diplomatic events.

The U.S. government's internet strategy was developed in the 1990s under President Bill Clinton. At that time the U.S. intelligence budget included “economic security,” a euphemism for corporate spying. Since then, paranoia about China's rise has been amplified because of the pain inflicted by the Great Recession of 2008-9 on the middle and working classes in the U.S. and Europe.

In the first decade of the 21s century, a frenzied process of commercial colonization of the internet developed into a battle to monopolize access to people's eyes and brains. Private internet giants sought to interlink core services that people might need for leisure or work activities and make them indispensable to everyday life. Luckily for China these U.S.-based internet companies were halted at China's electronic gateways. You only have to look at India, Brazil and Europe, where the internet is completely dominated by U.S. multinationals to see why this was important.

As a consequence China has its own unique internet landscape. For example, when Alibaba was founded in 1999 its development relied on massive and rapid government investment in the requisite infrastructure.

Alibaba holds a dominant position in e-commerce in China and is shaping its development in a number of countries. It has also expanded into a huge range of fields: Alibaba.com is a business to business platform; Taobao is an electronic street market, like Ebay; and Alipay processes payments and thereby helps to create trust relationships in the market.

Some 9 million people now sell on Taobao, and Alibaba has established a tremendous tool to help integrate China's market for producers and consumers, in ways that slash marketing costs and drive the development of logistics forward. Today, over 60 percent of all parcels delivered in China come from Alibaba sales.

In the modern economy, technologies revolving around the internet penetrate society and facilitate its dynamic development. So, the primacy of state ownership of the “pipes” – the communications infrastructure that constitutes the basic foundation of China's internet economy – is absolutely essential. As a more mature economic structure emerges between consumers and producers, it will be important to promote cooperative relations between small businesses in order to limit the negative side effects that fiercely competitive markets produce. By combining state ownership of the essential infrastructure of communications with the dynamic development of the national market, China's government-industry relationship can continue to be steered towards serving the socio-economic development of society as a whole.

Heiko Khoo is a columnist with China.org.cn. For more information please visit:

http://china.org.cn/opinion/heikokhoo.htm

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