Imagethief

Tag: Crisis Management

  • What if Yahoo abandoned China?

    If you grew up in the US reading Marvel Comics, like Imagethief, you may remember the old What If? series. In What If? the fates of Marvel superheroes were projected into alternate realities. It made for some pretty good stories as the conventions attached to characters you knew and loved were overturned. I had one issue where Conan the Barbarian was stranded in the 20th century, became leader of a street gang, kicked Captain America’s ass and was ultimately invited to join the Avengers. The classic What if the Hulk had Bruce Banner’s brain? made it into the Best of Marvel Comics anthology. It’s fun to play those kind of conjecture games, knowing that at the end of the day you’ll snap back to reality (or your regular monthly subscription) and everything will be just how you left it.

    I thought it might be fun to play this game with Yahoo, which has paid the worst price in terms of PR and brand damage for its association with China. Yahoo has been repeatedly vilified for its conduct in China, taking it on the chin from New York Times columnistNicholas Kristof (via Peking Duck), power-blogger and Global Voices supremo Rebecca MacKinnon in one of her angriest posts ever, and others. Much of Yahoo’s trouble has stemmed from their implication not only in filtering and censoring their China results, but also in turning over information from e-mail accounts belong to Chinese journalists to the Chinese authorities.

    Like all the major Internet companies who have been caught in this scandal –Google and Microsoft included– Yahoo’s response has been wholly inadequate to the challenge. All of the American companies involved have concentrated on legal defenses and studiously ignored the question of values. That is a mistake that their critics, such as Reporters Sans Frontiers (RSF), are not making. Just last week, RSF administered another slapping with the following announcement (proxy link), based upon a modest research project:

    Yahoo! clear worst offender in censorship tests on search engines

    Reporters Without Borders said it found Yahoo! to be the clear worst offender in censorship tests the organisation carried out on Chinese versions of Internet search engines Yahoo!, Google, MSN as well as their local competitor Baidu.

    The testing threw up significant variations in the level of filtering. While yahoo.cn censors results as strictly as baidu.cn, search engines google.cn and the beta version of msn.cn let through more information from sources that are not authorized by the authorities.

    ***

    The press freedom organisation is particularly shocked by the scale of censorship on yahoo.cn. first because the search results on “subversive” key words are 97% pro-Beijing. It is therefore censoring more than its Chinese competitor Baidu.

    The accompanying spreadsheet can be downloaded from RSF here.

    As a PR practitioner, Imagethief is well acquainted with the PR research study, and RSF is nothing if not masterful at PR. Media love a good study, especially if it smacks of statistical authenticity and touches nicely on a controversial topic. In fact, last week’s issue of the PR industry weekly “The Holmes Report” devoted itself to a condemnation of PR studies, due to the alarming number of shoddy studies and the ease with which statistical illiteracy can be taken advantage of. Naturally, RSF’s study, cursory though it was, has been widely reported upon in the mainstream media, along with RSF’s sharp messages. Wired News carried the following money quotes from Julien Pain, RSF’s “Internet Freedom desk chief”:

    “We simply found out that Yahoo was even worse than its local competitors,” [said Pain]. “Google.cn is censored, but it’s far less than what Yahoo does.”

    ***

    “Yahoo has absolutely no respect for freedom of information,” Pain said.

    Ouch. In fact, that’s probably not true. The guys at Yahoo probably have a lot of respect for freedom of information, and they’re probably wondering how they, a bunch of well-meaning California nerds and one ex-Hollywood mogul, got themselves into this situation and how they can get themselves out of it with minimal damage . However they’re not communicating any of that doubt to the media, who have been resolutely stonewalled in their attempts to secure comment on this report from Yahoo. A scan of Yahoo’s press releases and media information shows no acknowledgment that this report exists at all. For a company that is all about new media, they seem pretty blind to the consequences that not engaging with their plugged-in audience about this issue may have on them. Have a look at the 1300 link cloud for Yahoo+China on Yahoo-owned Delicious.

    Just because the study is cursory and shallow doesn’t necessarily mean it is wrong. Rebecca MacKinnon has done a long and interesting post examining RSF’s results and attempting, with some success, to replicate them. She supports RSF’s overall conclusions, and makes an important point which strikes at the justification that the US Internet companies and even I have wielded in support of their continued presence in China:

    This issue of who is responsible for the loss of service problem, however, does not detract from RSF’s clear and in my view correct point, which is that the Chinese user is probably no better off with Yahoo! being in China than if it ceased operating there.

    If Yahoo! is going to keep on like this, they might as well just change the name of their Chinese service to that of their Chinese partner Alibaba,which now runs Yahoo! China anyway. Then at least they’d be a bit more honest with Chinese users about what they really are.

    More seriously though, the biggest concern is that according to my sources in the industry, Google and MSN are feeling a lot of pressure from Chinese authorities to be just like Yahoo! China. Employees of certain competitors do not hesitate to tattle on Google and MSN in order to gain competitive advantage. So the point is this: Unless companies band together and push back against Chinese government censorship pressure, it’s going to become a very rapid race to the bottom.

    The emphasis above is mine. As compelling as Rebecca’s point is, there is a weakness in suggesting that the main competitive benefit that overseas search engines offer Chinese users is access to controversial information censored by the Chinese government. That is counter to how the vast majority of Chinese surfers will use these services. It also assumes that the search engines are equal in all other respects which, as any user of search engines knows, is simply not the case. A Chinese user who is researching a completely mundane topic may still find that Google’s Chinese service or Yahoo China provides more relevant results than Baidu or Sohu or another Chinese search engine. So far, US Internet companies have been scrupulous in not suggesting that their prime benefit to Chinese users is access to controversial material, a move that would likely be poorly received by the Chinese government. But nor have they done a good job of articulating what benefits theydo bring to Chinese users. Combined with their failure to adequately address the moral conundrum of operating in China –as opposed to the legal conundrum, which has been beaten to death– they have left a nifty vacuum for for their detractors to fill. They do not, nor have they ever, controlled this debate.

    That aside, Rebecca is bang-on in suggesting that Yahoo China might be more honest if they changed their name to Alibaba Search. This cuts to the heart of Yahoo’s problem in China: it doesn’t actually own or control Yahoo China. Rather, it owns 40% of Chinese Internet company Alibaba, which it bought as part of a deal widely interpreted as paying Alibaba to take the failing Yahoo China portal off their hands. Right now that is looking like the worst billion dollars they ever spent.

    Let’s be clear: Alibaba is not evil. It’s a perfectly fine Chinese technology company run by a flamboyant Chinese entrepreneur, Jack Ma. The company does nothing sinister (at least, not that I am aware of). It simply operates the way it has to as a Chinese company subject to Chinese laws. Although it is now based in Hong Kong, it was founded in Hangzhou, Mr. Ma is Chinese and its pedigree remains thoroughly Chinese. Although some aspects of the business are international, including the English language version of its namesake trading portal, most of its services are China oriented and most of its success comes from China.

    The original Yahoo press release announcing the deal with Alibaba makes heartbreaking reading in retrospect. So much optimism. It also suggests why Yahoo Corp will continue to have problems with Yahoo China. Yahoo Corp owns 40% of Alibaba, with 35% voting rights (a minority, it scarce needs be pointed out). Yahoo holds one of four board seats, against two from Alibaba and one from Softbank. Essentially, they’ve surrendered management of their brand in China to an organization over which they have little control, and which has, in turn, little stake in what happens to the Yahoo brand everywhere else in the world. Yahoo China is a bit player in the China portal scene to begin with, and –taking my colleagues as a sample– your average Chinese Internet user is completely inured to outrage over Internet censorship, which is seen as an essentially normal part of government function and a minor inconvenience to be dealt with as best as possible. (This also raises the interesting question of how the role of journalists is perceived in Chinese society, and how that perception differs from the the Western “fourth estate” role that is at the core of RSF’s mission and assumptions. But that’s a topic for another time. For the record, I’m a fan of the “fourth estate” approach.)

    As for Mr. Ma’s personal stake in Yahoo’s PR problems, an acquaintance of mine, a seasoned Chinese PR pro with long experience in the China technology industry, summed up the situation thus: “Jack Ma’s baby is Alibaba. He doesn’t give a shit about Yahoo’s problems in the United States.” It’s hard to know how true that is without being able to peer into Jack Ma’s skull (a privilege I’ve not been afforded), but it’s certainly believable.  But what’s definitely true is that the average western Internet user doesn’t know or care about the ownership and control structure of Yahoo China. For them, as for RSF, the Yahoo brand is monolithic. Yahoo’s transgressions in China are Yahoo’s troubles globally.

    So what is Yahoo to do?

    What if?
    Last week I had lunch with another China PR pro from a competing company. As you do in these situations, when the Diet Coke begin to flow and tongues loosen, we got onto the topic of US Internet companies’ travails in China. We talked a bit about Sergei Brin’srecent woolgathering about whether Google had made the right decision in going with Google.cn. In the course of the discussion my dining companion suggested that Google ought to follow through on Brin’s statement, close Google.cn and tell American and European audiences that it had been a mistake to compromise their principles to enter China. A retreat, yes, but one that might boost their brand significantly overseas at the debatable cost of the business opportunity for them in China. (Like all other US Internet brands in China, Google does not lead its segment. eBay, Yahoo China and MSN China are similarly second best or also-rans in their respective spaces.)

    Let’s transplant that discussion to Yahoo. What if Yahoo simply kissed-off China? I am not a financial expert, I’m a spin doctor, so take all the following with a grain of salt. Yahoo would have to divest themselves completely of their stake in Alibaba, or announce their intentions to do so within the limits of their contractual obligations. Alibaba isn’t publicly traded, so this would mean finding a private equity buyer or buyers willing to spend probably less than what Yahoo paid to take the stake off their hands (they’d smell a distressed sale) . Alibaba already returned Yahoo’s capital to shareholders, so, although Mr. Ma may be the largest shareholder and, thus, the largest beneficiary of that distribution, Alibaba itself might not be able to buy the stake back unless they took on debt to do it. Yahoo’s ability to sell on their Alibaba stake might also be subject to the approval of Alibaba’s majority shareholders, which could complicate things. But an announcement of intent could be the first step.

    Part of the deal would have to be that Alibaba drop the “Yahoo” brand name from the China portal. Since, despite its struggles in the China market, there is perceived value to the Yahoo name they would probably be able to wring some extra concessions from Yahoo. Forget for a moment that Yahoo essentially paid Alibaba to take over Yahoo China — that wouldn’t matter any more. Yes, Yahoo would pay to get in and pay to get out. That’s price of not seeing this coming. Yahoo would officially withdraw from China and close their China rep office, if they still have one. They would maintain Yahoo Hong Kong and a simplified Chinese site hosted offshore and carrying the full contents of Yahoo’s index. If the Chinese government chooses to block it, so be it.

    Yahoo’s management –by which I mean the founders and the CEO– would also have to publicly explain their decision in terms of values, and what role they see for Yahoo in society. They would also have to review their operating policies in less visible cases of censorship around the world (although a quick glance at the map shows few other Yahoo locations likely to be as problematic as China). It would be a hard climb-down, but necessary.

    As part of this, they could create and publicize a clear manifesto of what conditions Yahoo will operate and offer its services under, and what position it takes with regard to Internet censorship. Ideally, these would be clear and uncompromising. I notice that there is nothing of the sort on Yahoo’s “core values” statement.

    What would Yahoo lose? 40% of Alibaba at the cost of a few hundred million. Not chump change, but probably not lethal for a company that has bought Flickr, Delicious and such in in the past year and that had nearly four billion in the bank at the end of Q1. They’d also say goodbye to a China market in which, let’s face it, they were destined to be a bit player for some time to come. Possibly forever.

    What would they gain? An end to these brand-scarring attacks from RSF and other NGOs, a chance to climb back on the moral high horse and to claim to have set an example for other Internet firms. A chance to remind everyone, under the banner of the Yahoo brand, of what is best about the Internet and what it can bring to people. A chance to show that there are limits to the compromises they are willing to make. A chance to take back control of this issue and make Yahoo the visible advocate for an uncensored Internet. So, what is their brand worth to them?

    As further mental exercise, imagine if all the US Internet companies operating in China did the same thing. It would be a shocking public rebuke to a Chinese government that is increasingly image conscious in the run up to their 2008 coming-out party. It would be a reminder that if China really wants to be an enduring International business power, it will have to think about what global integration means in terms of access to information. The Chinese government would not, of course, be expected to make any accommodation for the moral qualms of troublesome foreign Internet firms. But as the Internet becomes an increasingly important tool for doing business it would have to ponder the level of inconvenience it is willing to foist on international businesses that are used to doing business in China much as they would in any other country. (One other thing that my lunch companion and I discussed was the theoretical possibility of Google setting up a paid “premium” service for business customers in China, operating from a separate, private URL and providing full, uncensored access to Google’s services. Think of it as the poor man’s Factiva.)

    Back to reality
    Nothing on the scale of what I have suggested will ever happen. Time to put the comics away and come back to reality. We live in a world of compromise, and businesses are master compromisers. That’s one reason why PR people are seldom out of work. Any company that did what I suggested above could expect to find itself banned from China for the foreseeable future. In Microsoft’s case, this might extend to their bread-and-butter software sales, which are looking up in China after several dismal years. The China market still glitters too much for Internet firms to write it off, and most are willing to bend their principles in the name of grabbing a handful of that glitter.

    But one firm that has found itself back-footed for months, and which has increasingly little to lose and much to gain, might still consider it.

    Disclaimers
    Imagethief does not service any American Internet firms that operate in China.

    Imagethief has generally been a supporter of US Internet firms entering China, even considering the compromises they have to make. His oft-stated belief is that it is better for them to be here than not, and that more choice is always good. On the other hand, he is not averse to reviewing that stand from time to time.

  • The disappointing silence from the top

    It’s been nearly two weeks since representatives of Cisco, Microsoft, Yahoo and Google testified before the House Subcommittee on Human Rights about their various entanglements with China. As expected, after blowing hot in the run-up to the testimony, coverage has cooled a great deal. Unless there is substantial progress with Rep. Chris Smith’s proposed legislation, the issue will probably stay cool until the next crisis moment emerges. But emerge it surely will.

    I read the written testimony submitted by the four companies, although I’ve not read a full transcript of the Q&A. All the companies pretty much responded as expected. They all, without fail, talked about the transformative power of the Internet and the benefits it is bringing to China. They all tried to explain how they’ve weighed the implications of being in China.

    They also all addressed the specifics of their individual cases. Cisco explained that it sells the exact same equipment to China that it sells to anyone else, without special modification, and that the technology that enables content filtering is the same that enables network security. Yahoo addressed the Shi Tao case, and the fact that operational control of Yahoo China lies essentially entirely with Jack Ma’s Alibaba.com (a risk that may haunt them in future, since it may place the brand at risk). Microsoft discussed the Michael Anti case. And Google, of course, discussed the considerations that went into the recent launch of their self-censored google.cn site, as well as the ongoing drop in their market share that they feel is rooted in filtering-based performance issues.

    It was thoughtful, rational and articulate. It was full of motherhood statements about the Internet company values. It was, in short, exactly what you’d expect from three general counsels (Microsoft, Yahoo and Cisco) and a vice president of global communications (Google).

    For instance, here is Microsoft Associate General Counsel, Jack Krumholtz:

    Will the citizens of that country be better off without access to our services, or will their absence just vindicate those who see our presence in the country as threatening to their official or commercial interests?

    And Yahoo General Counsel, Michael Callahan:

    First, our principles. Since our founding in 1995, Yahoo! has been guided by beliefs deeply held by our founders and sustained by our employees. We believe the Internet can positively transform lives, societies, and economies.

    These were all the messages that needed to be delivered. But I see two problems. First, as expected, they lost the war of imagery and emotion. Out of necessity, the companies needed to be defensive and rational. Unlike their interrogators, who are playing to voters only, they are playing to three separate constituencies: the general public who are their customers and advertisers; the shareholders to whom they have fiduciary obligations; and the Chinese government, who was no doubt watching very carefully. Addressing all three of those audiences requires a measured and diplomatic approach. But in the war for general public opinion, they are then left contending with statements like this from Representative Chris Smith:

    Through an approach that monitors, filters, and blocks content with the use of technology and human monitors, the Chinese people have little access to uncensored information about any political or human rights topic, unless of course, Big Brother wants them to see it. Google.cn, China’s search engine, is guaranteed to take you to the virtual land of deceit, disinformation and the big lie.

    But the worst came in an act of confrontational demagoguery from Congressman Tom Lantos, a man who represents Imagethief’s home constituency in the San Francisco Bay Area, who carries the unimpeachable aura of a Holocaust survivor (a fact cited in most articles I read about his participation in the subcommittee) and who has long taken a dim view of China’s government (opposed WTO entry, opposed awarding the Olympics, etc.).  Lantos notoriously called all four company representatives on the carpet, asking each in turn if he was ashamed of the actions of his company. From a longer transcript on CNET:

    Rep. Tom Lantos: Can you say in English that you’re ashamed of what your company and what the other companies have done?

    Google: Congressman, I actually can’t, I don’t think it’s fair for us to say that we’re ashamed.

    Lantos: You have nothing to be ashamed of?

    Google: I am not ashamed of it, and I am not proud of it…We have taken a path, we have begun on a path, we have done a path that…will ultimately benefit all the users in China. If we determined, congressman, as a result of changing circumstances or as a result of the implementation of the Google.cn program that we are not achieving those results then we will assess our performance, our ability to achieve those goals, and whether to remain in the market.

    Yow. Trapped. A seven word question that will stick in everyone’s head, and an eighty-three word response that no one will remember, but precious few better options considering those three different constituencies. Maybe I’m getting conservative in my middle-age (I’m a longtime liberal Democrat), or maybe the CCP is spiking my drinking water, but I didn’t think much of Mr. Lantos’ approach. Here is another statement, from the press release Lantos issued the day before the hearings:

    “The hugely successful businesses that come before Congress tomorrow will have to account for their complicity in China’s culture of repression, and to begin to make amends,” Lantos said. “Government can be expected to do only so much. It is up to these wealthy entrepreneurs to help ensure that the free flow of information from which they have profited is offered worldwide.”

    Well, aside from the fact that the final statement is patently wrong, this does raise a very interesting question that cuts to the heart of my complaint about how the companies dealt with the hearings. While I don’t think the wealthy entrepreneurs have any obligation to ensure that a free flow of information is offered worldwide (that ignores political realities that extend far beyond China and in cases may simply not make business sense), I am a little mystified as to their silence.

    Here is why. The technology industry suffers from an interesting syndrome. It is a time honored practice among tech companies to build founders and CEOs up as evangelical prophets of the transformative power of technology, which is promoted as revolutionary and encompassing in a way that, say, shipping, fast-moving consumer goods, cars, energy, and so on are not. No industry is more susceptible to the CEO/founder cult of personality or mystique, and no industry more flagrantly positions founders and CEOs as “visionaries” than the tech industry does. This is especially important in the Internet generation of companies, all of whom were created in the last fifteen years and are still led by founders. It is only slightly less true for Microsoft.

    The cult of the youthful billionaire genius touches three of the four companies involved in these hearings. Bill Gates of Microsoft may be the pre-eminent technologist of the age. Jerry Yang and David Filo of Yahoo are famous and highly visible, as is CEO Terry Semel, a Hollywood veteran who knows a thing or two about showmanship. And Sergey Brin and Larry Page of Google are in a league all their own. Cisco may suffer from less of this syndrome because, although it is young and CEO John Chambers is well known, it is not first and foremost a consumer oriented firm as the other three are.

    Where were all these Internet visionaries as this storm broke?

    This is an important question because, Cisco aside, these firms are all, for better or for worse, closely associated with the personal values of their highly visible founders. Those values are part of what defines their public images and brands. This is especially true of Google, where the relationship between the founders’ values and the company’s values are formalized in the “Don’t Be Evil” mantra that has become such a millstone during the controversy. On page 211 of David Vise’s book, The Google Story (as unanalytical a bit of hagiography as you will find), it is recalled that:

    Stanford Professor Terry Winograd says that Segey [Brin] has lead the way on three Ps: Policy, Politics and People. (When once asked what the motto Don’t Be Evil meant, CEO Eric Schmidt famously replied that evil is whatever Sergey says is evil.)

    And on page 257 it says.

    [Google’s] very motto, Don’t Be Evil, was a thinly veiled way of letting the technologists of the world know that Larry and Sergey were not just the Google Guys, but the Good Guys, who did the right thing for users and employees and had fun too.

    That’s channeling founders’ values through the company, and using them to build the brand. Michael Callahan of Yahoo does the same thing in his testimony, quoted above. And it makes the silence of all these technology luminaries in the breach seem odd and  somehow discordant.

    One of the most common requests that crosses Imagethief’s desk is for communication plans to help technology executives position themselves as “thought leaders”. Unfortunately, “thought leadership” is an often abused concept in PR, with salesmanship, cheerleading and banality often masquerading in its place. The most interesting proposals are often rejected as too risky. Certainly thought leadership is easier when times are good. But it’s important when controversy arises, such as now. On the table is one of the most important issues of our time: what is the relationship between a commercial Internet and the right to freedom of speech, and should the American companies who are driving the evolution of the Internet be considered international custodians of that right?

    Leadership is about risk (something that these entrepreneurs all know). Thought leadership is about intellectual risk. If it is unlikely to be argued with or shouted down, it’s probably not thought leadership. This was an opportunity for thought leadership if ever there was one. But there was little thought leadership to be had. That is a shame, because I am sure that all of these phenomenally bright and opinionated technologists are thinking deeply about this issue and debating it inside their companies.

    But maybe there was no other choice. As I noted above, the companies are burdened with three different audiences, each of which has a substantially different interest in this situation. Consumers and advertisers want to feel good about the brands of the companies they patronize. Shareholders want growth. China wants foreign firms to toe the line and avoid controversy. Employees may even constitute a fourth important group in this kind of situation. That puts the companies in a supremely delicate position, where every public communication has to be considered from multiple angles if a disaster is to be averted.

    But if you build your brand on the company founders’ values and leadership, and they then remain silent when those values are being questioned and leadership is most necessary, then your brand is at risk. And, in the meantime, people with fewer stakeholders to please will hammer at you from all sides.

  • Congress to grill US net firms on China

    The US government has begun to take note of what American Internet firms are doing in China. A report in CNET’s News.com from technology policy journalist Declan McCullagh (also now picked up by Rebecca MacKinnon, Asiapundit, etc.) says that two congressional committees are planning to hold hearings into American Internet firms’ compliance with Chinese regulations and norms concerning censorship and media management. French advocacy group Reporters Without Borders (RSF) is helping to drive the agenda:

    After hearing reports that American tech giants like Microsoft and Yahoo are abiding by Chinese law mandating Internet censorship, some irritated U.S. politicians are threatening to pass laws restricting such cooperation.

    Rep. Christopher Smith, a New Jersey Republican, said Thursday that the U.S. House of Representatives Subcommittee on Human Rights, which he heads, will hold a hearing in early to mid- February. Smith has invited representatives from the U.S. State Department, Microsoft, Yahoo, Cisco Systems, Google, and the international watchdog group Reporters Without Borders to speak.

    The effort is designed to determine what can be done, either by legislative mandate or on a voluntary basis, to “dissociate a company from working hand-in-glove with a dictatorship,” Smith said in a telephone interview with CNET News.com.

    A similar hearing is planned for Feb. 1 in the Congressional Human Rights Caucus said Ryan Keating, communications director for Rep. Tim Ryan, the Ohio Democrat leading the parallel effort. The caucus, unlike the human rights subcommittee, is an “informal” committee that is overseen by about 30 House members and includes a few hundred others, Smith among them, as supporting members.

    Both Ryan and Smith are in the process of concocting new laws, which will likely take cues from recommendations issued by Reporters Without Borders and the U.S.-China Economic and Security Review Commission, a 12-member, congressionally-selected governmental panel.

    Paris-based Reporters Without Borders this week backed a law banning an American company from hosting an e-mail server in any “repressive” country. It’s also suggested that American corporations come up with a joint plan for how to handle censorship requests from foreign governments, including refusal to censor terms like “democracy” and “human rights.”

    The companies have defended their decisions by saying that, as multinational corporations, they had no choice but to comply with Chinese mandates.

    The highlight in the above quote is added by me because I think that’s the money paragraph. This is attempt to pressure Internet companies into dissociating themselves with China’s regime, and its policies. In fact, that statement is broad enough to encompass any kind of company that does business with the Chinese government, which is to say almost any foreign company in China. The article is substantial, and worth a read.

    I am going to put on my PR black hat, distance myself emotionally from this situation, and look at it from a professional point of view. From where I observe, this issue is gaining momentum, and will become increasingly important for US Internet firms doing business in China. If they handle it poorly they will either find themselves legislated out of the country or, more likely, on receiving end of a growing tide of public opprobrium. Either could cause business problems and damage brand and shareholder vale.

    Back in September, when the Yahoo/Shi Tao affair was emerging, I wrote the following:

    [I] wonder if it will start impacting technology firms internationally. I think back to noisy, well-organized public campaigns against companies doing business in apartheid-era South Africa, or in Myanmar. So far, the calls against tech firms complicit in censorship (and now arrests) in China have been pretty scattered, and confined primarily to the digerati rather than to the great mass of customers. That might change.

    So far, most of the firms confronted have given variations on the “we comply with the laws of our host country” explanation. This is accurate and understandable, but as a PR holding statement it doesn’t do much to diffuse the perception that western tech firms are knuckling under to a repressive government in search of massive bucks. Just the thing to put college students in a righteous snit. Yahoo! hasn’t issued a statement on this situation that I can find, which is also not a great idea because NGOs like Human Rights Watch and Reporters Without Borders are busy filling the silence.

    I can see the dilemma for big, listed Internet companies. Their shareholders will punish them ruthlessly if they aren’t aggressively pursuing the Chinese market. But to do business in China, they have to submit to the Chinese government, in all it’s capriciousness. These are really media companies – the only foreign media companies allowed to do business here – with real influence over Chinese people and a commensurate level of scrutiny from the authorities. But none of them will dare forsake the market on principles, and that leaves them vulnerable to [PR problems].

    In retrospect, I should have said, “put college students and congressmen in a righteous snit”. The comparison with Apartheid-era regulations and public pressure is what has stuck in my mind since this issue started boiling, and I see more and more of that in the growing outcry. The spread of awareness of this situation beyond the digerati and into congressional human-rights committees will drive it further into the mainstream agenda, following already widespread mainstream coverage of the recent MSN/Anti affair. RSF is a well organized and media-savvy pressure group (as one would expect), and will certainly do its utmost to ensure that remains the case. (It’s also worth reading MacKinnon’s critique of RSF’s current, problematic petition on this issue. RSF’s site is, ahem, blocked in China, but the text of their proposal is also on Declan McCullagh’s blog.)

    Just over a week ago, I wrote a post analyzing Microsoft’s motivations for keeping the Chinese government on-side. Its situation is not unique, and most American Internet companies are negotiating a similarly complex web of issues in a staggeringly complex regulatory and governmental environment. In that post, I reiterated that I would like to see US Internet companies taking a much more open approach to communicating around how and why they do business in China, and what policies they follow and will enforce. In response to that, a good friend of mine who works at Cisco (and who’s name will soon appear again in a forthcoming post on crappy automobiles) wrote a rational and thoughtful comment on why most companies, ever conscious of their legal exposure and share price, would be horrified at such an approach. It’s worth reading [note: the comment originally linked to here is no longer online -WM].

    But I think the CNET article above illustrates the countervailing risks of following a strategy of opacity. When you leave space, forces opposed to your interests will likely fill it. And the more this issue penetrates into the mainstream, the more of those forces there will be. I think it’s unlikely –at least in the near future– that the US government will legislate in a way that prevents US Internet companies from doing business in China. Regardless of the outcome of congressional testimony, too many dollars are at stake, and the lobbyists will already be sharpening their policy papers and booking tables at lavish restaurants. But it is possible that legislation could be passed, and that would significantly damage or destroy the China business prospects for US Internet companies by making a huge, potential audience either inaccessible, or far less accessible (since the Chinese will simply block access to the US versions of services they don’t care for). Even if legislation is not passed, consumer pressure, in the form of boycotts or other activism, could damage the reputation and sales of US Internet companies. Third party nations more easily swayed by NGO arguments might apply their own sanctions against US Internet firms, especially if goaded by domestic competition. None of this might come to pass, but these are the risksthat should be considered.

    Three things give this situation legs it might not otherwise have. First, while many US companies do business in many dodgy regimes, none of those regimes is positioned as a major strategic rival to the US. Anti-China sentiment runs high these days. If you need to be refreshed on that, review some articles about CNOOC’s attempted takeover of Unocal last year, the valuation of the yuan or Pentagon appraisals of Chinese military capabilities. As a result, China is visible in the US in a way that very few foreign countries are. Second, running a polluting refinery or setting up sweatshops in third world countries, to pick just a couple of examples, are reprehensible. However neither cuts against the grain of afundamental American value. If you ask random Americans on the street to name a freedom guaranteed by the US Constitution, chances are that “freedom of speech” will be at or near the to of list. Freedom of speech is a pillar of American national self-image, and when American companies are seen to be betraying that pillar you move into very charged and dangerous territory. Combine that with all the baggage around China and you can see where the risk comes from. (This is not, of course, solely an American issue, as VOiP operator Skype is now discovering.)

    I have mixed feelings about this situation. I have used the Internet since 1993 and run my own website or blog for much of that time. My master’s thesis (in a broadcasting program) was written about the Internet in 1995, with a focus on its mass media potential and censorship and popular media issues. I spent several years working as an Internet and e-commerce consultant before moving into technology PR. I am attracted to the Internet for its media aspects far more than its ability to, say, improve supply chains or procurement. I believe that the strongest societies encourage free and open exchanges of ideas. I’m a blogger. Therefore I tend to react with visceral loathing to censorship and media controls. Hence my description of the deleting of Michael Anti’s blog in a previous post as “abhorrent”. In general, I still stand by that assessment.

    Stepping back from that, however, and divorcing my natural inclination to project my Yanqui values onto China from my analysis, I come to the following conclusions:

    1) American Internet firms should not quit or be drummed out of China
    That is pointless for everyone involved. At worst, American Internet firms here operate subject to the same requirements as Chinese ones. At best, they offer a valuable alternative that still functions as a gateway to a wider world, even if parts of it are missing. Drive American Internet firms out and everyone goes to Baidu and Bokee, or their brethren, and you slam the door on the one area of Chinese media that is open to foreigners to any degree at this point. I am not sure how that helps to carry the standard of liberty to Chinese Internet users (assuming this is neccessary – see below), although it does deny business opportunities to American companies. Furthermore, every foreign company that operates in China is somehow in hock to the regime, if even indirectly. Are you prepared to tell Boeing, GM, IBM, Intel, GE and all the other pillars of American industry to get out of China as well? All of these companies engage the Chinese government, seek its custom and pay taxes in China. Were I one of these firms, I would be extremely worried about the precedent that pressure on US Internet companies might set.

    China isn’t Myanmar, North Korea, 1980s South Africa or some other politically inconvenient backwater that can be isolated and forgotten about. It is an emerging great power and an immense US trading partner increasingly bound with America’s economy on a number of fronts. The implications of isolating it, were that even possible, run beyond inconveniencing a few American corporations and extend deep into the realms of foreign policy, economics and Asian security.

    2) There are shades of gray in this situation
    We see the Internet companies as different because we see freedom of speech as different — as a universal human right. But, as an intellectual exercise, let me pose the following: even in the US has limitations on freedom of speech. No libel; no obscenity; no yelling fire in a crowded theater. All of these limitations are predicated on mitigating harm (libel, false advertising) or respecting established social boundaries (obscenity). One might, then, concede that different countries and societies might set the boundaries of permissible free speech in different places based on those same criteria. Now, if you are China, and obsessed with maintaining social harmony in a fractious country of 1.3 billion, the vast majority of whom are shockingly poor, you might interpret the role of free speech in society somewhat different than developed, Western countries. Now, this doesn’t excuse locking up journalists or arbitrary censorship of politically inconvenient opinions. And it certainly doesn’t excuse cloaking regime-preservation in the trappings of respect for social boundaries. But it does serve as a warning to beware of letting ethnocentric value-creep color your arguments. China is not the US or Western Europe and it never will be.

    There are also shades of gray in the prosecution of restrictions on speech. Removing blogs and filtering websites and keywords is a shame, but I will entertain a defense of it (note that this is different than agreeing with it) in the interest of keeping your business in China. Thought it might be antithetical to our values, it’s hard, without verging into philosophy, to argue that anyone is being directly harmed. However, supporting arbitrary prosecutions and application of the notoriously malleable “state secrets” law and jailing of inconvenient journalists and activists for long periods is hard to defend. Where, then, is the line of complicity that American Internet firms should not cross? When is it OK to surrender information to the authorities? Dare an American firm question when a Chinese prosecution is justified and when it is not? Probably not. As ESWN has pointed out in a post worth reading, if a foreign company operating in China is served with a legal warrant by the authorities, it probably has no choice but to comply. The PR risk in this situation –beyond the obvious– is that companies desperate to protect their interests in China may take a liberal interpretation of what represents due process in China. An informal “request” from the Chinese government may not have legal force, but in a country where government patronage is crucial to many businesses, that may not matter. The Gods of PR (dark and terrible gods that they are) help any American company found to have been surrendering information on Chinese users via extra-legal processes. That’s why it is important to articulate under what circumstances records will be turned over.

    3) The debate will be framed in an oversimplified view of China
    Those who argue that US Internet firms should either get out of China or reject government demands to filter content (which equals getting out of China) will likely frame the debate in very stark terms rooted in fiery rhetoric about the evils of the CCP, China’s sinister national ambitions and the need to protect universal values (a malleable concept) and to pressure China to improve its human rights. Many of the people making those arguments won’t know much about China, or will ignore nuanced reality in the pursuit of powerful headlines that can advance agendas. (Example: here are the digerati of Boing Boing with a satirical image that aptly demonstrates how even US cultural sophisticates view China.)

    China’s government is pretty awful in a lot of obvious ways, but it is not some cackling, cartoon vulture perched atop the nation. It is not a caricature dictatorship or a Kim Jong-il-style one-man fiefdom (at least, not anymore). For all its problems, the government here has genuine ambitions for improving the country. But it governs 1.3 billion people –that’s four USAs–, two thirds of whom are desperately poor and many of whom speak different dialects, and who are beset by a range of tensions and deeply structural problems. Furthermore, the Chinese government cannot rapidly escape the legacy of its origins. It is factional and divided and there is often a pronounced lack of common cause between the central government and provincial and local governments. Progress will not be smooth or even.

    But there is progress. Consider where this country was thirty years ago, when it was just emerging from the Cultural Revolution. In the space of one generation it has gone from complete isolation and destitution to a fair state of development and engagement with the world. The target audiences that US Internet firms are trying to reach are the children of people who lived through Cultural Revolution as youths. To make this example more accessible to Americans, basketball player Yao Ming’s mother was a Red Guard. Think about the progress this represents. Where once there was uniform poverty there is now growing prosperity. Where once there was isolation there are deepening international connections. Where once there was only state controlled  propaganda there is now a lively and growing commercial media, and a fair amount of access to international media. This doesn’t excuse the bad things that the government does, but it highlights that we are not talking about a Myanmar-style irredeemable military dictatorship or a sub-Saharan kleptocracy busy reducing its people to ever greater penury.

    4) Chinese Internet users may not need or want to be rescued by us
    When MSN killed off Michael Anti’s blog he didn’t need help from an NGO to move to Blog City (blocked in China, I note with some irony). Chinese people aren’t idiots or naifs wandering in the wilderness, waiting to be lead to civilization by foreigners. Certainly in my office they discuss government control and management of information matter-of-factly (of course, they are all also media experts).

    We westerners seem to be conflicted in how we feel about China. We have an idealistic conviction that the simple flow of our ideas and culture and the relentless march of technology will somehow precipitate change, yet we can’t resist an interventionist desire to actively impose our values. At the same time we mythologize China into something unknowable and impenetrable. The result is that no matter what we do we risk patronizing the Chinese Internet users we want to help, and driving them further away.

    Imposing foreign activism on China has a pretty dismal record of failure. In a country where nationalist sentiment runs high and is easily provoked, it is liable to backfire. Imagine for a moment that American Internet firms are drummed out of China by legislation or activism. My guess is that Chinese youth would not swell with admiration for courageous, highly-principled foreign companies. Rather, they would likely seethe with nationalist contempt for companies that don’t “get” China and for foreign governments that are trying to dictate what is good for China. That won’t do wonders for dialogue. I can tell you who would be happy though: Bokee (who launched a devastatingly self-interested attack on MSN prior to Anti’s removal, as reported here by ESWN) and other Chinese blogging engines who would be pleased to see off foreign competition.

    Not that they need to at the moment. Most Western Internet companies in China are not doing very well. In the grand scheme of forces affecting China, the inclination of American (as opposed to Chinese) Internet companies to toe the censorship line is so far down the list as to be nearly beneath concern. The free operation of China’s domestic mainstream media ranks substantially higher. Although the two issues are tangentially connected via the Shi Tao case, US Internet companies and American interventionism are probably not the key to freeing Chinese media. (Howard French’s recent International Herald Tribuneopinion piece on China’s information control efforts is worth reading.)

    What does all this mean for communication?
    I have said many times that the “just obeying local laws” excuse, widely used by American Internet firms when they explain their compliance with Chinese censorship requirements, is inadequate. It is inadequate because it ignores the visceral reaction that their American stakeholders have to issues of censorship and free speech and the emotionally and politically-charged complexities of all issues China, especially in the United States.  American Internet companies need to start communicating better now how they see this situation, why they feel it is justified to do business in China, why they will conform to local regulations, why this is not selling out American values, and under what circumstances they will reveal customer information or communications to governments. They need to do it before they are on the defensive in congressional hearings, when everything they say will be greeted with skepticism reserved for the proclamations of those already convicted in the press.

    While they are communicating, US Internet companies need to be mindful that their audiences include the US government, their US customers, the Chinese government and Chinese customers and that public messages must be considered in that context. US Internet companies need to be prepared to act as rational advocates for China, aware of its problems while resisting attempts to demonize the country or oversimplify its situation. They need to understand China well enough to be able to explain its complexities to foreigners who might otherwise take a simplistic, emotionally charged view. They must be able to provide context for their decisions without condescending to their Chinese customers or to western stakeholders who have legitimate concerns about what their national business champions get up to abroad.

    Most important, they need to remember that this is a situation driven by social values, and values have to figure in the communication, if even in explaining why they have to be applied differently in different times and places. The terse “obeying local regulations” reply is insufficient because it leaves the values part of the equation unaddressed. As long as that “values” hole in the communication is not filled by Internet companies, others, such as RSF or anti-China agitators in the US, will start filling it themselves.

    This approach won’t stave off confrontation or debate about this issue, and nor should it. Part of believing in free speech is believing in the value of the debate. But it will put Internet companies in a better position to answer the accusations that will inevitably be flung their way as the rhetoric grows hotter.

    Update: At the risk of creating a circular link, it’s worth reading Roland’s post on this issue at ESWN. His capsule intro: “If the subject is about Chinese Internet censorship, then this had better not be a decision made by the US Congress, Reporters Without Borders, Cisco, Yahoo, and Microsoft.  It would seem that you better ask the Chinese Internet users themselves.  I assert that they couldn’t care less about Yahoo but the loss of MSN Spaces would be a blow.”  Go check it out.

    Also, Danwei’s metaphorical take.

    Also, for balance, Daai Tou Laam Diary’s different take on this issue, including his deconstruction of my own arguments. Apparently I’ve made it to “arrogant China hand”, thus fulfilling one of my childhood ambitions. Not bad for only a year-and-half in China. Also in trackbacks, below.

    Disclosure: Imagethief is a strong believer in freedom of speech and feels that censorship generally does far more harm than good in a society. I believe that China would benefit greatly from a more open and unfettered discourse, that the arbitrary jailing of journalists and activists is appalling and that universal human rights carry the label “universal” with some justification. My point behind writing this is not to disavow my own strong affinity for free speech or my anxieties about the complicity of American firms in practices I personally finds reprehensible, nor is it to be an apologist for the brutalities Chinese regime or for censorship. My point is to explain why I feel this is a much more complex and nuanced issue than it is generally made out to be and, thus, to illuminate some of the communication challenges and explain why current communication efforts are inadequate.

    Imagethief does not represent any companies currently caught up in this issue. He does, however, represent other companies that do business with the Chinese government.

  • Harbin aftermath: Government vows to thoroughly scape all goats

    Catastrophes are fun to watch, but not nearly so much fun as the aftermath of kicking, screaming and recriminations as blame is liberally heaped and fingers pointed. Katrina lasted only a day, after all, but the operatic fallout has reverberated for weeks, although less loudly now than it did at first. Chinese post-disaster convulsions are, perhaps, a bit more cryptic and mysterious than the American version, but interesting nonetheless. The aftermath of the Songhua River poisoning is just getting going, and, as it unfolds, the Chinese government and US government are notable for some of their similarities as well as some of their differences.

    The Chinese are following the US precedent by eagerly shoveling blame down onto lower levels of government. The better to distract people’s attention from the fact that the central government, if not directly responsible for the explosion, was apparently directly involved in the subsequent ten-day coverup. But at the same time, they are indulging in the classic central goverment pastime of erasing the inconvenient bits of the story in a way that the US government only wishes it could do.

    My attention was drawn back to this issue by an article that ran on Xinhua’s website today, hopefully titled, “China vows to “sternly” punish those responsible for river pollution“. (I’ve taken the liberty of correcting the spelling of the word “river”.) The article is interesting because it’s a classic bit of PR misdirection. Read this:

    The head of national work safety watchdog vowed Tuesday to “sternly” punish those responsible for a chemical plant explosion in northeast China’s Jilin Province, which caused toxic leakage into the Songhua River, a main water supply source in the area.

    Li Yizhong, director of the National Bureau of Production Safety Supervision Administration, pledged a thorough investigation in the explosion and the ensuing toxic spill in the river.

    Li, who headed an investigation team set up by the State Council on Tuesday to probe the accident, promised to seriously deal with those enterprises, departments and individuals held responsible for the accident.

    “Anyone, who were found guilty of dereliction of duty, will be harshly dealt with,” he said, “those who break the law will be handed over to the judicial departments.”

    “People who are found to have provided false information to investigators will also be punished severely,” the official said. “Any move trying to cover up the cause of the accident and any passive attitude toward the probe are deemed deception and a defiance of law.”

    ***

    The investigation team will probe the cause of the blast and why there were no preventative measures in place to prevent the benzene from being discharged into the Songhua River.

    An earlier report said that Yu Li, head of the Jilin branch of China National Petroleum Corporation (CNPC), was removed from his post.

    Two other officials, who allegedly held direct responsibility for the plant explosion, were also dismissed.

    Besides, Xie Zhenhua, head of the State Environmental Protection Administration (SEPA), China’s environmental watchdog, resigned after the accident, becoming the highest-ranking Chinese official to resign for an environmental incident.

    Ask yourself two questions. 1) What do you see in this article? 2) What do you not see in this article? My answers:

    What I see in this article:

    • A resolute central government taking action
    • An investigation team created by the State Council to probe the accident
    • Rolling of heads involved in the explosion (and one central government head)
    • Stern threats of punishment for those found to have caused the article through dereliction or negligence
    • Stern threats of punishment for those found to have “provided false information to investigators”
    • This last one is important: stern threats of punishment for those found to have covered up the cause of the accident (my emphasis)

    What I do not see in this article:

    • Any acknowledgment of the coverup of the release of Benzene (as opposed to the cause of the explosion)
    • Any suggestion that the central government was complicit in any way in that coverup (although the resignation of Xie Zhenhua suggests some acknowledgment of responsibility for the initial accident)
    • Any suggestion that a general climate of lax central regulation and control might have played a role creating conditions conducive to the explosion

    This is not surprising in the least, but it lets you see how the story is going to be spun. The accident was bad, and if negligence was involved, it is appropriate to punish the people involved. And this makes a handy flash-bang for catching people’s attention and making them feel that Something is Being Done. But it ignores the fact that the coverup of the benzene release was arguably an equally (or even more) serious crime to any negligence that might have precipitated the original explosion. After all, it was the coverup that exposed everyone living along the Songhua River between the chemical plant and whatever point the Benzene had reached when the coverup was blown to potential poisoning. If anything is going to be investigated, it’s the coverup and the decisions made around it that should come under scrutiny.

    But there is, of course, faint hope of that. The coverup is joining the lengthening list of catastrophic un-events in recent Chinese history.

    I realize this is a deconstruction of a translation, which is dangerous territory. But everything I see is consistent with how I would expect the government here to respond.

    In what looks like another consequence of the disaster, it was reported by the AFP today that a Jilin City vice mayor and environmental chief has died in apparently mysterious circumstances:

    The vice mayor and environment chief for China’s Jilin city has been found dead, the city’s Communist Party press office said, amid accusations he was involved in last month’s toxic disaster cover-up there.

    “He died yesterday,” a spokesman for the Jilin city party press office told AFP, without giving any details as to the cause of death.

    “The police are investigating. We don’t know any more about it. I think the police will make a public announcement after they finish their investigation.”

    Wang Wei, the vice mayor who was also in charge of environment protection, took a high-profile role after a blast at the PetroChina chemical plant in Jilin on November 13 that killed eight people and injured 60 others.

    The accident led to the spillage of 100 tonnes of the carcinogens benzene and nitrobenzene into the Songhua River, one of China’s longest waterways and a source of water for millions of people.

    However officials said nothing of the contamination of the Songhua for nearly 10 days.

    “It will not cause large scale pollution. We have decided not to have a large scale evacuation,” the China Business News quoted Wang on November 15 as saying.

    If the police are investigating, one must assume that Wang Wei did not pass away peacefully in his sleep. A Japanese-style shame suicide, perhaps? Conspiracy buffs may supply their theories in the comment space.

    Update: The Associated Press interprets the story a little differently than I did.

  • The Harbin water crisis

    A couple of days ago, in response to a link I posted to his roundup of articles on the Harbin water crisis ESWN put this comment up on my site:

    As you are the PR expert, how would you have managed the situation? Would you have own up to the benzene problem way up front? Alternately, how would you handle the ‘clean-up’ afterwards? This is a serious matter because they were clearly way, way out of their depth in terms of what they believe that they could get away with.

    Well it’s always flattering to be considered a “PR expert”, although it’s probably closer to the truth to say I play a PR expert on TV. But the Chinese government’s response to the Harbin crisis has been a case study in bad PR management, and, with ESWN’s prodding, I’d like to explain why.

    But first the disclaimers: I am not a crisis specialist. We have hard-core people in my company who do that sort of thing. However, I’ve been doing PR for a while and there are some generally applicable rules of crisis PR that most of us in the industry know. Also, I am basing my analysis on China’s English language press coverage and on foreign press coverage. My Chinese isn’t good enough to get past headlines most of the time, so I can’t comb through Chinese-language press in any depth. Finally, I was not directly involved in this event and, therefore, do not have full information. Bear all of that in mind.

    With that out of the way, let’s have some fun.

    The Event and Coverage
    There are some basic facts that should be reviewed first, along with the history of the press coverage. The explosion in Jilin first happened on Sunday, November 13th. While there was some agonizing about the immediate casualties and the potential for major toxic events posed by shoddy chemical plant construction, there was no hint that this event had resulted in a severe toxic release.

    A China Daily report from November 14, the day after the explosion, said this:

    The local government has kept monitoring the air and water quality in the area, and further investigation into the blast is being made.

    So from nearly immediately after the explosion, representations were being made that the potential toxic fallout from the explosion was being monitored.

    A China Daily search for Jilin + Explosion, which I will use as an inexact proxy for press coverage as it should catch most articles, yields zero results from November 15 through November 22, when the announcement of Harbin’s water cutoff was made. A Xinhua search turns up a similar gap over those dates, except for one story from November 16, which carries the following headline:

    Chemical plant blasts releases no toxic substances [sic]

    The headline is based on an assertion by the Jilin provincial government that there is no problem with air quality. The story makes no mention of water. With the benefit of hindsight, this omission looks suspicious.

    So that’s a one-week gap –at least in English press– when there are no newsworthy public announcements about the potential aftermath of a chemical plant explosion next to a major river that flows through densely populated urban areas and into a neighboring country, except for a patently incorrect or deceptive one.

    On November 22, the announcement of the interruption of Harbin’s water supply is made. Initial reports specifically deny any link between the shut off and the Jilin explosion, as is clear from this China Daily article, the first in English language press to report on the stoppage. The article implausibly cites “maintenance and repair” as the official reasons for a previously unannounced stoppage. Although there is vague mention of the Jilin explosions in official statements cited in the article, any connection is vociferously denied by the authorities:

    The common refrain was that the explosion at Jilin city of neighbouring Jilin Province on the upper reaches of Songhua River may have caused a leakage of poisonous substances into the river as it is only a few hundred metres away from the plant. Harbin is located at the middle reaches of the river.

    But an official with the Harbin municipal government, who did not want to be named, dismissed the assumption as “just a rumour.”

    Harbin Water Supply Company refused to comment but sources at the municipal environment bureau said that there was nothing abnormal with the quality of water in the river.

    In corroboration, Jilin said that the local environment bureau found that the water quality was barely affected after the blast.

    In the absence of hard information, rumors flew through Harbin, stoking public anxiety and leading to a run on stores, as reported in that same article. As reported in foreign press, there was a large, voluntary evacuation of the city. Wells had to be dug quickly in Harbin and massive amounts of water shipped in rapidly.

    Only on the next day was there a Xinhua report confirming that the explosion had polluted the river. Interestingly, the admission is made by a central government agency, the State Environmental Protection Agency (SEPA). This article makes several interesting statements:

    “After the explosion at the Jilin Petrochemical Company under China National Petroleum Corporation, our observation showed pollutants containing benzene had flown into the Songhua River and caused water pollution,” said an official with SEPA.

    Benzene is a substance harmful to human health.

    The official said upon receiving the report, the administration immediately sent experts to Heilongjiang Province to assist local pollution-control efforts. Quality of the river water is under close observation for 24 hours every day.

    The Jilin and Heilongjiang provincial governments have activated their contingency programs for environmental incidents, and have taken measures to ensure the safety of potable water, said the official.

    He said Jilin had quickly blocked entry of the pollutants into the river and discharged water from a reservoir to dilute pollutants in the river. It also organized environmental, water conservancy and chemical experts to discuss pollution control plans, and beefed up monitoring work.

    Most interesting is the assertion that Jilin had “quickly blocked entry of the pollutants into the river and discharged water from a reservoir to dilute pollutants in the river”. This suggests that the Jilin government knew exactly what was going on. Bear that in mind for later.

    Then the inevitable consequences began to unfold. Public erosion of trust in government was one casualty, as reported by the Financial Times:

    “I am fleeing,” said Pang Shijun, a 50-year-old man among the crowds at the central railway station. He said his wife had already left the night before to go to the nearby city of Jixi. “I just do not trust the government to provide true information on this.”

    Whoops. More from Reuters:

    “It’s worrying, because it may not have a strong smell or colour, so you can’t tell when it’s gone,” said Hong Shan, a retired official exercising beside the river. “It’s up to the government to keep us informed. We can’t tell ourselves.”

    Commentators in Beijing and further afield condemned the “lies” told before the authorities revealed what had really happened. A paper in Harbin itself tried to play down the crisis.

    And, of course, there were recriminations. CNPC and the Jilin provincial government have emerged as the principle villains for running the plant and covering up the benzene release, respectively. Here the New York Times reports:

    “We will be very clear about who’s responsible,” said Zhang Lijun, deputy director of the State Environmental Protection Administration, at a news conference in Beijing. “It is the chemical plant of the C.N.P.C. in Jilin Province,” he said, referring to China National Petroleum.

    Mr. Zhang said the investigation would consider whether there was any criminal liability for the spill.

    PetroChina Company, a subsidiary of the state-owned China National Petroleum listed in New York and Hong Kong, is responsible for the company’s domestic petrochemical production, the China National Petroleum Web site says. China National Petroleum holds 90 percent of PetroChina’s shares.

    The official New China News Agency reported that China National Petroleum had apologized. The company “deeply regrets” the spill and will take responsibility for handling the consequences, the deputy general manager, Zeng Yukang, was quoted as saying. The vice governor of Jilin Province, Jiao Zhengzhong, also apologized to the people of Harbin, The Beijing News reported Thursday.

    Zhang Lijun is no champion of transparency, as we’ll see later. Even the China Dailyweighed in, with an editorial yesterday condemning the actions of the Jilin government. They noticed the same thing I did; that the Jilin government has essentially admitted that it knew all along that there was a problem:

    A spokesman from the State Environmental Protection Administration said yesterday at a news conference that Jilin Province and Jilin Petrochemical Corporation had adopted timely measures to stop the toxic spill from being discharged into the river immediately after the explosion.

    This shows that the corporation knew very clearly about the contamination and its possible result but still wanted to keep the secret to itself.

    Leaders from the Jilin provincial government and Daqing Petroleum Administration apologized for the contamination of river water and for the inconvenience and losses the pollution has inflicted on Harbin’s residents. But they never apologized for the hiding of truth.

    We do not know what is behind the cover-up. It might be because they were afraid that they would have to pay money for the losses the pollution has incurred in Harbin, and it might be because they were afraid of losing face.

    But the fact is they have brought shame on themselves by covering up the truth.

    So there is the chronology. Now the fun bit.

    Where They Went Wrong
    No matter how much you prepare and plan, shit happens. That the Jilin chemical plant exploded and released tons of benzene was bad. It could have been incompetence or it could have been plain bad luck. But the actions of CNPC and the Jilin and Harbin governments after the disaster have tarred them with the stink of incompetence and untrustworthiness regardless of the reasons for the original disaster. They were caught in an enormous lie, and that makes everything else they have to say about the disaster untrustworthy. And people will remember.

    Without having been in the boardroom, it is hard to say why the decision to cover up the disaster was made. It may be that Chinese doesn’t provide and incentive for openness about these sorts of things; this is an area where I don’t have enough information to make an informed judgment. Certainly neither the Chinese government nor Chinese business has a great reputation for transparency. The explosion would already be subjecting the plant to scrutiny for safety and operational standards. Perhaps a toxic release would have brought a different level of scrutiny, say from central government as opposed to malleable provincial authorities. And perhaps that level of scrutiny would have turned up some unpleasant truths surrounding CNPC, the plant and the Jilin government.

    All of this is complete speculation. But, of course, that is kind of speculation a cover-up provokes, and why cover-ups are almost always bad PR decisions. I use the phrase “spin doctor” in gentle self-mockery in the subtitle of my blog. Perhaps that’s a mistake, because it perpetuates a myth about PR, which is that it is all about twisting the truth about these kinds of situations. It’s a shame people see PR that way, because a surprising amount of the time, our advice in crises is to be completely honest. And when lives are at stake there is simply no other choice.

    Lives were at stake in this case. The moment CNPC and the Jilin government knew they had a chemical release on their hands they should have first informed the central government (which, scarily, perhaps they did) in order to motivate the appropriate support, and then informed the public. Harbin isn’t the only city along the Songhua river, and every other town along the same way deserved to know what was flowing past their riverbanks.

    How much benzene was released? What are the potential effects? How long will it take to reach key population centers, and how diluted will it be at each stage? What will need to be done to protect those population centers? What help is being offered?

    No doubt people would have panicked anyway, just as they did in Harbin. But after the supermarket shelves emptied out, there still would have been several days in which to prepare alternative water supplies and take other protective measures before the taps had to be turned off in Harbin. And the Jilin provincial government and CNPC, a major government-owned corporation (and, to a lesser extent, the Harbin and Heilongjiang governments), would not have squandered whatever trust people had in them.

    Now, I am applying western PR standards to China, which has a completely different tradition of openness and public communication than developed, western countries. As ESWN pointed out in his comment, the Jilin authorities were clearly way out of their depth in dealing with the crisis and in evaluating what they could get away with. That’s true. And it is a serious problem that the Chinese government needs to solve if it wants development to continue smoothly.

    Government is a Brand, Whether You Like it or Not
    Let’s think of the Chinese government as a brand. This is an oversimplification, but the comparison holds true in many ways. Like all brands, government, in this case Chinese Government (new and improved!), possesses or seeks certain attributes that it believes will help it in the execution of its business. Competence, compassion, pragmatism, security, and so on. For most governments, trust is an essential attribute. The job of governing is easier when people trust what the government tells them and trust that the government will provide essential services and intervene in times of stress or disaster.

    To see how erosion of trust can affect a government badly, look at the current US administration, which has two trust serious issues right now. First, many people saw Katrina as a huge abrogation of trust, and it severely damaged government credibility at municipal, state and federal levels by undermining the compact that the government will help to mitigate severe crisis. Second, a majority of the US public now believes that it was misled about the reasons for launching the war in Iraq. That is eroding public support and making it much harder for the administration to prosecute its plans in Iraq.

    With regards to China, the foreign knee-jerk reaction is to say, “The Chinese government is authoritarian! Why should they give a damn about trust?” But I would wager that most Chinese people trust their government on a fundamental level, or at least want to trust it, and that the Chinese central government places a fairly high priority on maintaining that trust. You can see aspects of this in many of the initiatives the CCP is prioritizing right now. Programs to control corruption and help the rural poor to climb out of miserable poverties are all part of building and maintaining trust. Even propaganda is designed to foster trust in the government. Power may flow from the barrel of a gun, but it is significantly easier to hold onto that power and exercise it effectively when people trust you. The Chinese government is executing several simultaneous, tricky balancing acts. I think they realize that their jobs will be much easier the more people trust them. Unfortunately, they seem unable to break their bad, Stalinist habits.

    Credibility engenders trust, and goes hand-in-hand with it. And credibility is a really serious issue for the Chinese government. Just today, the Chinese government was busyrefuting a report in New Scientist that bird flu deaths in China total over 300. (The Horse’s Mouth blogged the Boxun report that also covered this a couple of days ago – it’s blocked in China.) But people will continue to be suspicious of Chinese government protestations because the track record is bad. If the Chinese government expects to maintain credibility and trust it has to come up with the goods. Statements like this,reported in today’s FT in a good story on Chinese media reaction to the disaster, will not help:

    “There are many ways to release information. Making it public is one way and only informing the local governments and enterprises along the route of the contamination is another,” said Zhang Lijun, a vice-director of the State Environmental Protection Agency.

    The South China Morning Post summed up the Chinese government’s credibility gap (via Howard French’s “A Glimpse of the World”) blog:

    The way in which the affair has been handled raises fresh concerns about the willingness of mainland officials to disclose bad news.

    The PR aphorism is that trust is easy to lose and, once lost, fiendishly hard to regain. That’s why we so often counsel honesty and direct action in crisis situations. So here is Imagethief’s free PR advice to the Chinese government: what works in a closed, Stalinist state does not fly in a modern, open economy. There is no having it both ways. CNPC is a publicly listed company traded in Hong Kong and New York and need to behave like one, even with regards to its operations in China.  The expectations upon you are changing. That is the inevitable price of success, development and integration with the rest of the world. If you expect to continue that success, you will have to learn how you want to communicate around these kinds of events. In the long run, whatever you it is you think you are achieving by trying to hide your disasters, missteps and calamities, you are almost certainly achieving the exact opposite. Honesty in times of crisis can build your credibility. Infinite successful cover-ups add nothing to it. Every failed cover-up destroys it that much more.

    You can only get caught in so many lies before people stop listening.

    Update: Two good roundups of foreign press articles from the Peking Duck, here andhere.

    Also, tough luck if you live in the small villages along the Songhua, as reported by the New York Times here.

    Update 2: This, in particular, is  a good story to read. From the Washington Post’s Philip Pan, it discusses how local journalists broke the coverup story. That’s Chinese media doing its job well. What will be telling is how the Chinese government –especially the central government– reacts. If it is used as an excuse to crack down further on the ability of media to report such things, or if the journalists responsible are punished, it will be a very bad sign indeed.

  • Do you, uh, Yahoo? You’re busted!

    Do you, uh, Yahoo? Not, one would hope, if you’re a Chinese dissident or journalist on the wrong side of the authorities.

    It seems that American technology companies can’t stay out of trouble in China. The last two days has seen widespread coverage of Yahoo!’s alleged implication in the arrest of a Chinese journalist wanted for “releasing state secrets”, which is a euphemism for embarrassing the government, among other things. The BBC has one of the more interesting articles, because it covers the bigger picture without dwelling on the usual shopping list of scare figures, like the 40,000 lurking net monitors (cited in theTelegraph’s coverage – does anyone else notice that number inflating?):

    Yaman Akdeniz is the director of cyber-rights.net, a web-based e-mail service set up in the wake of tighter laws in the UK about the traceability of e-mail communications.

    He advises activists using the web in oppressive regimes around the world to make sure they did not set up accounts with firms which have offices in the country in question.

    “Providers with offices in China have to obey specific rules. We operate in the UK so I don’t have to reply to any requests for information made by the Chinese government,” he said.

    While cyber-rights.net collects no information about its users it is not a completely untraceable way of sending communications.

    If asked by the UK government to supply information in a fraud or terrorist investigation it is likely its parent company Hushmail would comply, even though it is based in Canada and not bound by UK law, said Mr Akdeniz.

    “But if the request was for information about the account of a journalist it is likely it would be more reluctant to comply,” he said.

    I don’t know if Yahoo! is guilty or not, but, as a PR pro, and in the wake of recent scandals concerning the conduct of fellow tech firms Cisco, Google and Microsoft in China, something is clear: there should be a whole category of crisis public relations for tech firms named as complicit in Chinese government censorship or detainments.

    It doesn’t make much difference to those firms’ business in China, of course. For one thing, not many people are likely to hear about it here. But I wonder if it will start impacting technology firms internationally. I think back to noisy, well-organized public campaigns against companies doing business in apartheid-era South Africa, or in Myanmar. So far, the calls against tech firms complicit in censorship (and now arrests) in China have been pretty scattered, and confined primarily to the digerati rather than to the great mass of customers. That might change.

    So far, most of the firms confronted have given variations on the “we comply with the laws of our host country” explanation. This is accurate and understandable, but as a PR holding statement it doesn’t do much to diffuse the perception that western tech firms are knuckling under to a repressive government in search of massive bucks. Just the thing to put college students in a righteous snit. Yahoo! hasn’t issued a statement on this situation that I can find, which is also not a great idea because NGOs like Human Rights Wach and Reporters Without Borders are busy filling the silence.

    I can see the dilemma for big, listed Internet companies. Their shareholders will punish them ruthlessly if they aren’t aggressively pursuing the Chinese market. But to do business in China, they have to submit to the Chinese government, in all it’s capriciousness. These are really media companies – the only foreign media companies allowed to do business here – with real influence over Chinese people and a commensurate level of scrutiny from the authorities. But none of them will dare foresake the market on principles, and that leaves them vulnerable to PR problems whether petty, as in the case of Microsoft’s banning of general words from it’s MSN China Spaces blogging site, or sinister, as in Yahoo!’s possible complicity in an arrest. It doesn’t seem that many of them have thought in advance about how to deal with these problems.

    Sooner or later, these companies are going to have to come up with a better explanation than “just following the law of the land”, or they will end up on the wrong side of a really aggressive, negative PR campaign that will hurt a lot. For the life of me, I can’t think of what that explanation might be; give me some time to work on it. But public statements of principle on matters of free speech and protection of the rights of journalists might be a good start. These are media companies, after all. Manufacturing companies have been down this road with China sweatshops and sketchy contract manufacturers. They’ve had to submit to independent monitoring and create codes of conduct for their contractors. And they’ve been held to account, although not often enough. Could a similar situation arise for the media companies doing business here?

    In the meantime, there is some good advice in the BBC article above. If you’re a Chinese journalist or dissident, perhaps you shouldn’t host your e-mail with a company doing business in China. Perhaps the Electronic Frontier Foundation, an advocacy group for online privacy and anonymity, would care to make some of its very good privacy information available in Chinese.

    Of course, it would probably be blocked…

    Update, Sept 9: And sure enough, Yahoo!’s defence is just as predicted above. From Reuters, via the Australian:

    “Just like any other global company, Yahoo! must ensure that its local country sites must operate within the laws, regulations and customs of the country in which they are based,” Yahoo spokeswoman Mary Osako said in a statement emailed to Reuters by the company’s Hong Kong arm.

    This is meeting the predicable response from Reporters Without Borders, who ask:

    “Does the fact that this corporation operates under Chinese law free it from all ethical considerations? How far will it go to please Beijing?” it asked.

    “It is one thing to turn a blind eye to the Chinese Government’s abuses and it is quite another thing to collaborate.”

    People who read this site know my opinions on the Chinese government’s treatment of journalists and the media. But looking at this strictly from a PR point of view, I think Yahoo! and the other firms will find their “just following the law of the land” defence progressively less tenable. That is because the NGOs and activists targeting them are attacking the morality of the laws that these companies are claiming to comply with. Go back to the apartheid comparison, above. If a company had cited compliance with the law of South Africa in submitting to apartheid, how do you think activists of the era would have responded?

    The explanation still needs to evolve. Expect more trouble ahead.

    Update 2: Other interesting links (both via Peking Duck)
    Angry Chinese Blogger translates the document that got Shi Tao busted. (Proxy link.)
    ESWN dissents on condemnation of Yahoo, although I suspect he will be a voice in the wilderness.