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I don't see how any sizable foreign company could operate in China under rules like this. All sufficiently large companies are privy to certain trade secrets of

I don't see how any sizable foreign company could operate in China under rules like this. All sufficiently large companies are privy to certain trade secrets of partners, vendors, clients through agreements, technology, information sharing, etc, and will have legal arrangements in place for it. If the government gets carte blanche access to their data, no company could operate without violating those agreements.

bayesian_horse 7y ago
Many of them can't just extricate themselves from the Chinese market before these changes hit. They will take huge losses if they disrupt communications or restrict access to trade secrets. My guess is that many will try to ignore that law and just assume that the government isn't looking or that it is bound by local law not to give trade secrets to competitors and so on. Of course that's not worth a lot, but ...
- melonkidney 7y ago
  If I was an employee or customer of a US/EU company that has a large percentage of (e.g., engineering) staff based in China, I'd be seriously concerned at this point. Large multinationals may be able to avoid/mitigate the restrictions somehow. But smaller companies that depend on a Chinese branch would surely try to "fly under the radar" and stick it out in the hopes of the law not being applied to the fullest extent.
  - koliber 7y ago
    From the sound of it, such small companies would not even know if the law was being applied or not. If the government needs the information, it will take it. It will not be necessary to ask permission, or even inform the affected company that such access took place.
mirimir 7y ago
So could US companies that bail claim extraordinary business losses?
starfallg 7y ago
They can't. That's the reason why they have been leaving in droves, but it's very hush hush so far. A lot of microelectronics assembly has already moved out of the country. Samsung and Sony, for example, are closing all of their smartphone manufacturing operations in China.
- shusson 7y ago
  > Samsung and Sony, for example, are closing all of their smartphone manufacturing operations in China That's because no one is buying their phones in China [1] [1] - https://www.reuters.com/article/us-samsung-elec-china/samsung-ends-mobile-phone-production-in-china-idUSKBN1WH0LR https://www.reuters.com/article/us-samsung-elec-china/samsun...
  - starfallg 7y ago
    Samsung and Sony exports massively from their Chinese plants. Also, the smartphone market in China is shrinking. That's the reason for the current scramble for marketshare outside China. The market has reached saturation and the major Chinese brands are growing only at the expense of the smaller ones disappearing.
  - lallysingh 7y ago
    Sometimes companies manufacture things in China to sell in other countries.
    - blaser-waffle 7y ago
      Most of the time, you mean. Find me the American that doesn't have a Chinese-made TV, a Chinese-made phone, a Chinese-made laptop...
      - tombrossman 7y ago
        > Find me the American that doesn't have a Chinese-made TV, a Chinese-made phone, a Chinese-made laptop... American living in Europe here, and while I realize this is a bit of a curveball I'd like to point out that it is not difficult to avoid Chinese made products. My TV is a Samsung made in Hungary, my phone made in Taiwan (I do have an old Thinkpad made in China though). I try to avoid Chinese made products. Not because of any nationalism, but because better quality alternatives exist at nearly the same price point. For example I have a German made fridge and it's exceptional. It is difficult to get excited about a fridge but when I disassemble the shelves and bins to clean it I notice carefully finished edges beneath cosmetic covers that most customers would never see. The plastic parts haven't gone brittle and do not crack or chip. The glass shelves are thick and heavy and tempered. There are thoughtful touches that come from superior engineering and quality raw materials. It only cost a tiny bit more than similar Chinese models and I expect it will outlast them while retaining all of its original functionality.
cycloptic 7y ago
The solution is to stop operating in a culture of secrecy, lying and back-stabbing as so many US companies seem to be obsessed with. Open source your code and designs and start selling services. It's sad that it takes a threat like this to prove that the system we have in place doesn't work and is prone to corruption.
- flyinglizard 7y ago
  The examples of this model actually working economically are few and far between - and none that I know of in the case of consumer facing companies.
  - cycloptic 7y ago
    I'm not sure what you're talking about, what I'm describing is exactly the SaaS model which is already quite popular.
    - flyinglizard 7y ago
      Which SaaS company open sourced their core infrastructure to the point you could self host their services?
      - cycloptic 7y ago
        The most prominent company doing this model now is Automattic. Most other SaaS companies run tons of open source... EXCEPT for the core product. I would like to stop this trend; self-hosting is not a problem but instead an opportunity to upsell. It's true though that YC founders in general do not seem to believe this and would rather build the same moat that everyone else is building. Even if it creates practical problems when going over to different markets, as seen in the article.
        flyinglizard 7y ago
        To the best of my knowledge, Automattic followed the success of the Wordpress open source project. It's an attempt to monetize an existing open source platform. The same goes for Docker, Elastic and others. The open source platform came first, then came the services. Broadly speaking, I don't know why software is singled out in its economics. Creating software takes time of people. Time costs money, and much more of that when it comes to highly skilled engineers. The fact software has virtually no replication costs does not change the fact that its engineering is as expensive if not more so than engineering of other goods.
toxicFork 7y ago
I have been involved in companies that operate internationally and within China. What you can do is to have isolation modes. Separate email servers or providers for people who are going to be accessing emails from China. Mirror only the documents etcetera that will need to be accessed from China. It's almost as if you have a spin off company that can request very limited access of information from the main one. It's a bit more expensive but definitely worth it.
- kebman 7y ago
  Apparently no atrocity is evil enough for it not being "worth it" to work with these guys...
  - toxicFork 7y ago
    The politics and the motivations to do business with China is another issue. However if somebody has to do business there, the point is that there are ways to minimize the damages to your company, partners or customers outside of the wall.
    - hn_throwaway_99 7y ago
      I get what you're saying, but the point is that no foreign company "has" to do business there. Companies are trying to walk the tightrope but they need to decide if complete capitulation is worth it.
      - zpallin 7y ago
        Actually, they do. Considering how large China is and how powerful their economy is now, ignoring them will mean you are less competitive than the companies who don't. Even if you're a well meaning company, a competitor who doesn't mind China's policies will go there, make a lot more money than you, and buy you out. The best way forward as a business that must operate in China to stay competitive is to hire lots of Chinese employees and send them to the company's "Western" country of origin in hopes that they'll learn our preference for freedom of expression and privacy and take it back home with them.
vezycash 7y ago
There is one simple, proven tactic China could use to both have their law and still keep giant foreigner companies. App stores have been known to give api special access, and collect smaller fees from big apps. A VIP status, or exemption list will make such companies stay until China kicks em out.

bayesian_horse 7y ago

Many of them can't just extricate themselves from the Chinese market before these changes hit. They will take huge losses if they disrupt communications or restrict access to trade secrets. My guess is that many will try to ignore that law and just assume that the government isn't looking or that it is bound by local law not to give trade secrets to competitors and so on. Of course that's not worth a lot, but ...

melonkidney 7y ago
If I was an employee or customer of a US/EU company that has a large percentage of (e.g., engineering) staff based in China, I'd be seriously concerned at this point. Large multinationals may be able to avoid/mitigate the restrictions somehow. But smaller companies that depend on a Chinese branch would surely try to "fly under the radar" and stick it out in the hopes of the law not being applied to the fullest extent.
- koliber 7y ago
  From the sound of it, such small companies would not even know if the law was being applied or not. If the government needs the information, it will take it. It will not be necessary to ask permission, or even inform the affected company that such access took place.

mirimir 7y ago

So could US companies that bail claim extraordinary business losses?

starfallg 7y ago

They can't. That's the reason why they have been leaving in droves, but it's very hush hush so far. A lot of microelectronics assembly has already moved out of the country. Samsung and Sony, for example, are closing all of their smartphone manufacturing operations in China.

shusson 7y ago
> Samsung and Sony, for example, are closing all of their smartphone manufacturing operations in China That's because no one is buying their phones in China [1] [1] - https://www.reuters.com/article/us-samsung-elec-china/samsung-ends-mobile-phone-production-in-china-idUSKBN1WH0LR https://www.reuters.com/article/us-samsung-elec-china/samsun...
- starfallg 7y ago
  Samsung and Sony exports massively from their Chinese plants. Also, the smartphone market in China is shrinking. That's the reason for the current scramble for marketshare outside China. The market has reached saturation and the major Chinese brands are growing only at the expense of the smaller ones disappearing.
- lallysingh 7y ago
  Sometimes companies manufacture things in China to sell in other countries.
  - blaser-waffle 7y ago
    Most of the time, you mean. Find me the American that doesn't have a Chinese-made TV, a Chinese-made phone, a Chinese-made laptop...
    - tombrossman 7y ago
      > Find me the American that doesn't have a Chinese-made TV, a Chinese-made phone, a Chinese-made laptop... American living in Europe here, and while I realize this is a bit of a curveball I'd like to point out that it is not difficult to avoid Chinese made products. My TV is a Samsung made in Hungary, my phone made in Taiwan (I do have an old Thinkpad made in China though). I try to avoid Chinese made products. Not because of any nationalism, but because better quality alternatives exist at nearly the same price point. For example I have a German made fridge and it's exceptional. It is difficult to get excited about a fridge but when I disassemble the shelves and bins to clean it I notice carefully finished edges beneath cosmetic covers that most customers would never see. The plastic parts haven't gone brittle and do not crack or chip. The glass shelves are thick and heavy and tempered. There are thoughtful touches that come from superior engineering and quality raw materials. It only cost a tiny bit more than similar Chinese models and I expect it will outlast them while retaining all of its original functionality.

cycloptic 7y ago

The solution is to stop operating in a culture of secrecy, lying and back-stabbing as so many US companies seem to be obsessed with. Open source your code and designs and start selling services. It's sad that it takes a threat like this to prove that the system we have in place doesn't work and is prone to corruption.

flyinglizard 7y ago
The examples of this model actually working economically are few and far between - and none that I know of in the case of consumer facing companies.
- cycloptic 7y ago
  I'm not sure what you're talking about, what I'm describing is exactly the SaaS model which is already quite popular.
  - flyinglizard 7y ago
    Which SaaS company open sourced their core infrastructure to the point you could self host their services?
    - cycloptic 7y ago
      The most prominent company doing this model now is Automattic. Most other SaaS companies run tons of open source... EXCEPT for the core product. I would like to stop this trend; self-hosting is not a problem but instead an opportunity to upsell. It's true though that YC founders in general do not seem to believe this and would rather build the same moat that everyone else is building. Even if it creates practical problems when going over to different markets, as seen in the article.
      - flyinglizard 7y ago
        To the best of my knowledge, Automattic followed the success of the Wordpress open source project. It's an attempt to monetize an existing open source platform. The same goes for Docker, Elastic and others. The open source platform came first, then came the services. Broadly speaking, I don't know why software is singled out in its economics. Creating software takes time of people. Time costs money, and much more of that when it comes to highly skilled engineers. The fact software has virtually no replication costs does not change the fact that its engineering is as expensive if not more so than engineering of other goods.

toxicFork 7y ago

I have been involved in companies that operate internationally and within China. What you can do is to have isolation modes. Separate email servers or providers for people who are going to be accessing emails from China. Mirror only the documents etcetera that will need to be accessed from China. It's almost as if you have a spin off company that can request very limited access of information from the main one. It's a bit more expensive but definitely worth it.

kebman 7y ago
Apparently no atrocity is evil enough for it not being "worth it" to work with these guys...
- toxicFork 7y ago
  The politics and the motivations to do business with China is another issue. However if somebody has to do business there, the point is that there are ways to minimize the damages to your company, partners or customers outside of the wall.
  - hn_throwaway_99 7y ago
    I get what you're saying, but the point is that no foreign company "has" to do business there. Companies are trying to walk the tightrope but they need to decide if complete capitulation is worth it.
    - zpallin 7y ago
      Actually, they do. Considering how large China is and how powerful their economy is now, ignoring them will mean you are less competitive than the companies who don't. Even if you're a well meaning company, a competitor who doesn't mind China's policies will go there, make a lot more money than you, and buy you out. The best way forward as a business that must operate in China to stay competitive is to hire lots of Chinese employees and send them to the company's "Western" country of origin in hopes that they'll learn our preference for freedom of expression and privacy and take it back home with them.

vezycash 7y ago

There is one simple, proven tactic China could use to both have their law and still keep giant foreigner companies. App stores have been known to give api special access, and collect smaller fees from big apps. A VIP status, or exemption list will make such companies stay until China kicks em out.