Chinese Internet firms have a great deal of leeway to use their creativity

In many ways, China's Internet is by far the most open industry in its whole economy. The country's largest public websites, from the longest-standing general portals like Sina and Sohu to latecomers' sprawling empires like Tencent and Baidu to nascent e-commerce stars like Alibaba and JD, are all to a large extent owned by foreign investors.

It is close to meaningless to discuss how much the investors have earned, from venture capitalists who have exited to strategic investors who have kept up their holdings and remained long-term partners. Financial information websites have the details.

Investors may like or dislike any specific company's balance sheet. They may even be turned off by a company's management and forecast its eventual bust. But in general, the overseas interest is still on the rise.

Foreign ownership in the Chinese Internet has historical roots. Back in the late 1990s and early 2000s, when all financial services remained under the control of the state and guided by old ideas inherited from the planned economy, just a few thousand yuan of start-up funds would look like the "ninth level of heaven" to young entrepreneurs who were importing novel business ideas from schools and workplaces in Western countries. They had nowhere to turn to except the resources they knew about outside the country.

It is hard to imagine how the Chinese Internet industry could have grown so fast and so large without entrepreneurs' connections to global investors. They also have benefited from what can be called conspicuous restraint from business meddling on the part of a government.

Even now that local venture capitalists have sprung up, many Chinese Internet entrepreneurs still operate through their overseas networks of financiers and collaborators.

They will have to keep doing so because they need to learn about the new frontiers of the market (about the so-called new new things), especially the market in the United States, and compare notes about the difference between business overseas and in China.

This has led some seemingly serious commentators to suggest that the Chinese government would someday, on a whim, impose state control over the country's Internet industry and ruin its value.

Or, even worse, that there might be some rational grounds, when China is 35 years from the Mao era and the planned economy, for it to wage a political campaign to expropriate all foreign investors' Internet assets.

Such wild suppositions can be traced to a basic assumption that China is a lawless state, or, at least, people there have a different sense of law from others and the leaders don't have even a minimum of respect for established business practices.

Or, in an assumption applying the same logic, that even though the Chinese Internet industry has grown to a great extent in an environment where its business is left alone by government regulators, the same regulators might come up with harmful rules to interrupt the flourishing industry's growth.

Those who hold these assumptions miss the big picture. Not only have China's laws and policies rendered it impossible to stop its reform and opening up, but its society has also developed resistance to dialing back the clock.

People outside of China often don't know about the debates in the Chinese business press and their constant theme. There has been a strong lobby, led by some of the country's most prominent economists, to criticize every excess in government regulation and interference, from the 4 trillion yuan stimulus program in 2009 to the recently aborted attempt to shield state-owned banks from the threat from budding Internet finance.

Thanks to such a protective environment - where one can say no interference is also a kind of interference, or a deliberate move - Chinese Internet entrepreneurs have a great deal of leeway to use their creativity and overseas connections. Some of their companies report 20 to 30 percent annual growth in business revenue even though the rest of the economy's growth has fallen to about 7.5 percent.

Trade and services based on the Internet, especially the mobile Internet, will be the driving force in China's entire economy in its next stage of development. What would motivate its leaders kill the goose that lays the golden eggs?

The author is editor-at-large of China Daily. Contact the writer at edzhang@chinadaily.com.cn

(China Daily European Weekly 05/30/2014 page13)