China VPN ban already disrupting international companies

The efforts of the Chinese Communist Party to ban VPN access across the country was widely expected to hit international businesses hard, despite consistent claims by the regime that they would not be affected.

This has now been confirmed in a Financial Times report [£] which cites evidence from international companies and organisation. They have confirmed that their ability to access the internet has been disrupted in recent months and that it is the blocking of their VPNs which has caused this.

The importance of VPNs to businesses in China

As we reported last month, most international companies operating in China use a VPN service to get around the Communist regimes aggressive internet censorship and surveillance programmes. Without a VPN they are unable to communicate securely with their other offices around the world or do even simple things like a Google search online.

The Chinese Communist Party claimed that while VPNs were to be banned, international businesses would be able to register with their ISP for a secure connection. But most businesses will be reluctant to do this given that a registered connection will almost certainly be tapped and monitored, with any confidential information being reported back to the party.

They will also cost international businesses tens of thousands of dollars a month, despite not doing the job they are intended for.

The Financial Times article refers to the CEO of one US tech company, which remained anonymous to avoid spooking its clients, explaining how they can now get online. He said that now they couldn’t access a secure VPN connection, they now have to use roaming mobile SIM cards to get online. It is a very expensive approach and probably not sustainable in the long term.

According to the vice-president of China operations at the US-China Business Council, Jake Parker, told the paper, “American companies have come to us from a range of sectors — finance, technology, hospitality — reporting disruptions to VPNs, email and file-sharing.”

What is the likely long-term effect of such a VPN ban? Well, many international businesses may decide that it’s not worth the effort and pull out of China altogether, as Google did when they were put under pressure to comply with the regime.

Why is China blocking VPNs?

Why would China want to put into force a measure which might drive international businesses out of the country? Well, one reason could be protectionism. China has built many hugely successful businesses off the back of copying the model of an international business that was unable to operate behind the Communist Party’s Great Firewall.

But what seems more likely is the simple determination of the Communist Party to have control over 100% of information that flows in and out of the country at all times.

As Lester Ross, a partner at legal firm WilmerHale in Beijing, told the Financial Times, “China’s intention is to control the flow of information entirely, making people use only government-approved VPNs by making it difficult, if not impossible, to use alternatives.”

Carly Ramsey, an associate director of consultancy Control Risks in Shanghai, added that “The Xi administration has prioritised control over all information flows within China, and in and out of its borders…. In times of ultimate need, such as a global conflict or a brewing mass movement at home, they want to be able to shut down the data border.”

Depressing though it may seem, this whole ludicrous policy is being caused by an insecure authoritarian regime, terrified of being overthrown by the people it oppresses. And they are prepared to accept the collateral damage of a decline in international businesses investment to achieve this.

The potential implications of a VPN ban in China

The long-term implications of corporate withdrawals could be profound. China’s so-called ‘economic miracle’ is already beginning to hit the buffers and the national debt is growing rapidly. Without international investment, the house built on sand could come crashing down and take the Communist Party with it.

But it seems that is a risk they are willing to take and so the ban on VPNs continues to push ahead. But that won’t stop VPN providers from doing everything they can to get around it.

At the time of writing, a number of VPNs continue to be available in China and they and others will be working hard to ensure that continues to be the case. Not only are they determined that Chinese people should continue to enjoy their rights to a free internet, but it is also a huge market for them too.

Sunday Yokubaitis, the CEO of Golden Frog, which operates VyprVPN, told the Financial Times that, “In a society where the government wants to control the flow of communications and information, secure communications and encryption are certainly an ‘enemy.”

He and other VPN providers will be working hard to ensure that continues to be the case.

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