China's New Cybersecurity Law Smacks the Internet Giants

There are many potential pitfalls for operating in China. Local businesses can gain and maintain a competitive edge resulting from the quagmire of government regulations and local bureaucracy, which in many cases favors Chinese companies over foreign competitors. But even that advantage can be both a blessing and a curse.

Regulations can also be much stricter in the world's most populous country while providing little in the way of guidelines when it comes to implementing these rules. Those that run afoul of them can find themselves facing the wrath of regulators and on the receiving end of harsh penalties, or they can find themselves shut down entirely.

In August, China's top internet regulator, the Cyberspace Administration of China, notified the country's three largest social-media operators that they were being investigated for violating China's cybersecurity law. Tencent Holdings Limited (NASDAQOTH: TCEHY), Sina Corporation (NASDAQ: SINA) and its subsidiary Weibo Corporation (NASDAQ: WB), and Baidu, Inc. (NASDAQ: BIDU) were notified late last month that they would be fined under the law for failing to police their users.

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Source: Fool.com