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Cablegate: U.S.-China Internet Industry Forum Emphasizes Cooperation;

VZCZCXRO0672
RR RUEHCN RUEHGH
DE RUEHGH #0493/01 3190428
ZNR UUUUU ZZH
R 140428Z NOV 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7316
INFO RUEHBJ/AMEMBASSY BEIJING 2265
RUEHGZ/AMCONSUL GUANGZHOU 1496
RUEHSH/AMCONSUL SHENYANG 1517
RUEHCN/AMCONSUL CHENGDU 1525
RUCPDOC/USDOC WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHHK/AMCONSUL HONG KONG 1686
RUEHIN/AIT TAIPEI 1318
RUEHGH/AMCONSUL SHANGHAI 7916

UNCLAS SECTION 01 OF 04 SHANGHAI 000493

SENSITIVE
SIPDIS

DEPT FOR EEB/CIP, EEB/TPP/IPE, EAP/CM, INR/B
DEPT ALSO FOR E U/S JEFFERY
DEPT ALSO FOR IIP AND R
USDOC PASS BUREAU OF ECONOMIC ANALYSIS
USDOC FOR ITA DAS KASOFF, MELCHER, OCEA/SZYMANSKY
USDOC FOR USPTO FOR INT'L AFFAIRS - LBOLAND
STATE PASS USTR FOR STRATFORD, WINTER, KATZ, MCCOY, BAE, POSNER
STATE PASS LIBRARY OF CONGRESS FOR COPYRIGHT OFFICE - STEPP
NSC FOR LOI

E.O. 12958: N/A
TAGS: ECON PGOV PHUM TINT KIPR ETTC KPAO OIIP SOCI CH
SUBJECT: U.S.-CHINA INTERNET INDUSTRY FORUM EMPHASIZES COOPERATION;
CHINESE BOAST OF ONLINE ADVANCES

REF: SHANGHAI 471

(U) This cable is sensitive but unclassified and for official
use only. Not for distribution outside of USG channels or via
the internet.

Summary
-------

1. (SBU) The Internet Society of China (ISC) and Microsoft
co-hosted the 2nd U.S.-China Internet Industry Forum November
7-8 in Shanghai, encouraging more bilateral cooperation on
Internet issues. Chinese participants highlighted technological
advances and the patriotic virtues of the Internet, while
speakers at the forum's breakout sessions emphasized
opportunities for online interactions, including e-commerce and
blogging. The Consul General's speech highlighted the need for
a free flow of information and the protection of intellectual
property rights online, drawing positive comments from industry
representatives. The forum attracted significant coverage in
Chinese-language media with most articles focusing on Vice
Minister Cai Mingzhao's keynote speech. End Summary.

2. (SBU) The Consul General, accompanied by FCS Chief,
Commercial Officer, Public Affairs Officer, and Pol/Econ
Officer, attended the opening of the U.S.-China Internet
Industry Forum on November 7. The Consul General delivered a
keynote speech during the Forum's plenary session, which was
attended by more than 150 company representatives and industry
experts from the United States and China.

The 2nd U.S.-China Internet Industry Forum
------------------------------------------

3. (SBU) The Internet Society of China (ISC) and Microsoft
co-hosted the 2nd U.S.-China Internet Industry Forum November
7-8 in Shanghai. During the first forum in Seattle in November
2007, Chinese and U.S. representatives from government, the
technology industry, NGOs and academia expressed their views on
Internet policies in China and the challenges faced by U.S.
companies. Discussions during the first forum ranged from
online advertising and e-commerce to technology enablers, online
gaming, and the next generation of Internet applications.
Organizers for the second forum expanded the focus of the
discussion to the value of an open online environment, the
Internet's economic, social, and cultural benefits, and the need
for privacy and transparency on the Internet. Organizers held
the second forum in China on the heels of the 2008 Beijing
Olympics where the Internet played a significant role.

Accentuating the Positive
-------------------------

4. (SBU) Hu Qiheng, the ISC's Chairwoman, opened the forum with
a speech that highlighted technological advances in China and
focused on "development and cooperation" between the U.S. and
Chinese Internet industries. Hu stated that China currently has
253 million registered Internet users and 1.9 million websites.
She also emphasized China's accomplishments towards expanding
the Internet's coverage in rural areas, promoting e-commerce,
and supporting e-government initiatives. Cai Mingzhao, Vice
Minister of the State Council Information Office, echoed Hu's
points, adding that at the current rate of growth, China could
have 500 million Internet users in three to four years.
According to Cai, as of June 2008, China also has: 63 million
online shoppers, 84 million mobile Internet subscribers, 107
million blog sites (up from 40 million in 2007), and 74 million
Internet users in rural areas (a 70 percent increase from the
previous year).

Online Patriotism
-----------------

5. (SBU) Several Chinese speakers emphasized the patriotic

SHANGHAI 00000493 002 OF 004


virtues of the Internet, particularly during a year with so many
newsworthy national events. Referring to 2008 as an
"extraordinary" year, Vice Minister Cai said the Internet played
an important role in the Tibet riots, Sichuan earthquake, and
the Olympics. In the week after the Lhasa riots, Cai said, more
than 70 million Internet users posted patriotic comments and
blogs to express "opposition to violence and terrorist acts."
During the Sichuan earthquake rescue efforts, a student posted
an online message that identified a good helicopter landing
area, Cai said.

6. (SBU) With regard to the Olympics, Cai said Chinese news
websites posted over 200,000 articles per day on
Olympics-related information in addition to Chinese citizens who
"paid tribute to the Beijing Olympics" with their own online
comments. Wang Wenbin, General Manager of CCTV.com, speaking on
"The Internet and the Beijing Olympic Games" during the November
7 plenary session, said CCTV.com and its partner websites aired
over 1 billion hours of video coverage, and he credited the
Internet for encouraging debate on topics such as Beijing's
automobile traffic control measures.

Differences in the Regulatory Environment
-----------------------------------------

7. (SBU) There appeared to be little discussion during the forum
on allowing more freedom on the Internet in China, and "trust,"
"self-discipline," and "fairness" were buzzwords for many of the
speakers when addressing differences between China and the
United States on regulation of the Internet. Hu Qiheng said
developing the Internet in China will depend on a regulatory
system that "has a strong legal basis and integrates
administrative management, industrial self-discipline...and
public supervision." (Note: At a November 8 Breakout Session on
"Internet Governance and Regulation," Huang Chengqing from the
ISC gave a presentation entitled, "Proactive Guidance,
Self-Discipline, and Push for Development." End Note.)

8. (SBU) Vice Minister Cai emphasized the importance of "how to
build an honest and trustworthy Internet community," calling for
"a cyberspace that is useful and credible, fair and orderly,
law-abiding and self-disciplined." Kai-fu Lee, Google's
President for Greater China, stated that the need for search
engines to return a "complete, accurate, fair result to the
user" still must be balanced with the legal restrictions of a
country. (Comment: Several Forum participants said they were
puzzled by Lee's speech, saying it was unclear if Lee's remarks
signaled Google's intent to be more open in China or was a
message to other industry reps that self-censorship is
acceptable. End Comment.)

9. (SBU) Several Chinese speakers also took the opportunity to
blame other countries, especially the United States, for many of
the Internet's problems. According to Vice Minister Cai, 77
percent of online attacks and 50 percent of junk mail in China
originated overseas, and he said that the China Internet Illegal
Information Reporting Center received 391,000 complaints about
online pornography, of which 81 percent involved U.S.-based
websites. CCTV.com's Wang Wenbin criticized the United States
for copyright agreements that he claims did not allow overseas
Chinese in the United States to watch CCTV.com's Olympic
broadcasts. Wang added that more than 90 percent of the
4,000-plus detected illegal webcasts were pirated overseas.

Consul General Offers U.S. View
-------------------------------

10. (SBU) CG Camp highlighted internet freedom and the
protection of intellectual property rights online during her
November 7 remarks. The Consul General emphasized that rule of
law and transparency are part of the bedrock for a successful
market economy and said that, despite much progress, it is
unfortunate that the Chinese Government has reacted to rapid

SHANGHAI 00000493 003 OF 004


changes on the Internet by trying to control the free flow of
online communication and information. Industry representatives
from Microsoft, Time Warner, and Cisco praised the speech for
"hitting the right tone"; one said the speech served as a
perfect "response" to the Chinese speakers' views.

11. (SBU) Chinese participants also offered measured compliments
to the Consul General's speech. Madame Hu from the ISC
characterized the Consul General's remarks as "very good," and a
Nanjing University professor agreed that it was important for
someone to address internet freedom and IP enforcement during
the plenary session. A trio of Beijing-based ISP providers all
said the speech was "on the mark." The Chinese Government might
not like criticisms of the regulatory environment, they said,
but "facts are facts."

Opportunities to Interact Online
--------------------------------

12. (SBU) Speakers at breakout sessions on November 7 emphasized
the increasing opportunities for online interactions. Jack Ma,
Chairman of Alibaba.com, highlighted advances to-date in
e-commerce, stating that further progress would benefit small-
and medium-sized enterprises (SMEs). Charles Zhang of Sohu.com
said that the Internet in China is very market-oriented and
other industries could learn more from the competitiveness of
online ventures. Matt Roberts, General Manager of About.com,
said the potential for greater online interaction in China is
"huge" but will depend on sound policies in IPR protection,
libel law (see reftel), and transparency. Charles Chao,
CEO/President of SINA Corporation, observed that "blogging has
become the fastest and most influential way of interaction."
Posting online comments on measures such as the Labor Contract
Law (LCL) has been a valuable channel to influence government
policy, Chao added.

Media Spotlights Rapid Advances
-------------------------------

13. (SBU) The forum attracted significant coverage in
Chinese-language media with most articles focusing on Vice
Minister Cai Mingzhao's keynote speech. Other items noted in
news articles: the rapid development of the Internet in China,
that the Internet is becoming one of the major media
contributors in China, and that the development of the Internet
is helping boost China's opening and reform. The media also
focused on the ongoing dialogue between the U.S. and Chinese
Governments on the Internet and touched on the likely impact of
the global financial crisis on China's Internet development.
Eastday.com, a local Shanghai-based Internet Service Provider
(ISP), posted an article about the Consul General's remarks
entitled, "Comparing Invention of Internet to That of Electric
Lamp, U.S. Consul General Used Chinese Idiom to Talk about
Internet." (Note: The article was later removed from the
Eastday.com site and did not reappear. End Note.)

Shanghai a Good Host, but Few Local Participants
--------------------------------------------- ---

14. (SBU) The Shanghai International Exhibition Center in Pudong
was a good venue for the first forum held in China, but there
appeared to be few participants from Shanghai. Most of the
Chinese participants traveled to Shanghai from Beijing where
they are based, and Congenoffs met few Shanghai-based contacts
at the plenary or breakout sessions. Matt Roberts from
About.com, who also is based in Beijing, told Pol/Econoff that
most Internet companies are primarily focused on government
affairs and therefore remain in Beijing. He acknowledged that
in this regard, Internet firms are different from many foreign
financial institutions, which are locally incorporated with
headquarters in Shanghai.

Bio Note: Cai Mingzhao

SHANGHAI 00000493 004 OF 004


----------------------

15. (SBU) Born in 1955 in Lianyungang City in Jiangsu Province,
Cai Mingzhao is Vice Minister of the State Council Information
Office. Vice Minister Cai graduated from the Chinese language
department of Nanjing Teachers University in 1983 and served in
bureaus of the Xinhua News Agency in Jiangsu Province and
Shandong Province as a science and technology reporter before
being appointed secretary-general of the Xinhua News Agency in
1993. He was appointed vice-president of Xinhua in 1998 and
executive deputy editor-in-chief in 2000, working during that
period to help establish www.china.com, which in 1999 became the
first Chinese Internet company to be listed on NASDAQ. In May
2001, Cai Mingzhao was appointed as Vice Director of China's
State Council Information Office where he has played a role in
drafting China's Internet policies and regulations.

Bio Note: Hu Qiheng
-------------------

16. (SBU) Madame Hu Qiheng currently is the President of the
Internet Society of China (ISC). She also is the Vice President
of the China Association of Science and technology, member of
the Chinese Academy of Engineering, and member of the National
Committee of the 8th and 9th Chinese People's Political
Consultative Conference. She has acted as President of the
China Automation Society, President of the China Computer
Society, and Chairman of the China National Committee for
International Data Center. Hu is among the earliest domestic
scientists in the field of mode identification and Artificial
Intelligence.

17. (SBU) Hu graduated from the Graduate School of Moscow
Institute of Chemical Machinery, earning an associate doctoral
degree in 1963. She has participated in research work on
Internet regulation hosted by the United Nations, and she was
elected President of the Strategy Council of the United Nations
Global Alliance for Information and Communication Technologies
and Development (UNGAID) in March 2008. Hu has received an
honors certificate from China's national 863 Program and has
served as Director General of the Institute of Automation,
Chinese Academy of Sciences (CAS), and Vice President of CAS.
CAMP

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