Online at an Internet cafe in Huaibei, China
Liang Jialin

-Analysis-

BEIJING â€" Over the last week, Tieba, an online forum of Baidu, China's largest search engine, has sparked a new kind of online controversy that should be a warning around the world. One of the Tieba bulletin board forums, which had originally been created by patients with hemophilia â€" a genetic blood disorder â€" was sold to a shady private company. Almost immediately, the new owners littered the site with massive amounts of advertisements for false and dangerous drugs and medical care.

In the face of an overwhelming uproar from the public, Baidu backtracked within two days by saying that it “will not allow any individual to use the forum to swindle the public,” and vowed to stop selling such online forums. Baidu is thus painting itself as a victim.

But this has become a familiar song coming from all of China’s major internet portals. When an e-commerce service provider receives customer complaints that they are being cheated with counterfeit goods, the provider always says that they too are victims, and receives no compensation from those exploiting their platform. When a social media site is littered with pornographic pictures, it cries out that they didn’t take the photos, nor upload them. Everybody in the online business world is quite skilled at passing the buck.


In Baidu’s logic, as long as it shakes up these health forums it runs â€" which cover such ailments as hyperthyroidism, infertility, osteonecrosis, diabetes, and eczema â€" swindling will disappear from its ecosystem.

Like other similar players in the global industry, Baidu claims it is merely an innocent “platform” that is just part of the Internet's so-called “ecology.” But what is worth asking is whether “the platform is innocent” is still a valid defense?

Not only is Baidu a technical provider of forums, but it’s also a content manager. Along with Alibaba, the Chinese equivalent of e-Bay, as well as portal giant Tencent, all call themselves platform-based companies.

The Baidu Baike, a Chinese-language encyclopedia rivaling the Chinese version of Wikipedia, is not written by Baidu itself. Alibaba’s online shopping mall, Taobao and business-to-consumer online retail Tmall do not operate sales. And Tencent does not generate the messages of its social mobile WeChat or microblogging applications.

Infrastructure and Responsibility

However, Alibaba is the world’s largest online shopping firm. Tencent’s WeChat and QQ are Asia’s biggest communication software firms, and Baidu is China’s biggest search engine. These companies like to boast that they own the “largest platforms,” even while shirking their responsibilities. Therein lies the rub.

Tencent HQ in in Shenzhen, southern China â€" Photo: Liang Xu/Xinhua/ZUMA

As Dr. Fang Xingdong, founder of ChinaLabs, as well as a member of the Internet Society of China, stated that as a search engine, Baidu is the first port of call for obtaining online information in Chinese. It also has free access to most Internet content and thus is a monopolistic information channel.

In other words, a platform like Baidu is essentially a public infrastructure. While roads, water, electricity and coal are provided by the government, the massive amount of information Chinese Internet users read, the friends they contact, and the things they buy pass mostly through Baidu, Alibaba and Tencent. When these platforms fail to regulate themselves or, worse, take the initiative to violate rules, it is bound to trigger “Gresham's Law” according to which the bad drives out the good, on the flow of information, goods and capital. But it will also have an unpredictably major impact on China’s communication, trade and financial systems.

Using commercial confidentiality as an excuse, these leading web companies refuse to make public their products, users and operations data. For instance, Baidu never releases data on how many of its forums have been illegally sold â€" including some sold to local governments to run for propaganda purposes. Meanwhile they present themselves as the country’s infrastructure to gain institutional, strategic and financial support from the authorities, while failing to take up, or fully assume, a public services platform’s basic responsibilities.

To put it plainly, this is using a commercial operation to form a market monopoly, and then using the monopoly to hold the regulators hostage.

As one industry insider told this newspaper, paid listings are responsible for most of Baidu's profits: The search engine displays its search results pages in accordance with what advertisers are ready to pay, whether or not they are selling counterfeit goods or services. As a result the “golden locations” on the first pages of the search results are regularly sold to illegal hospitals, who are usually the highest bidders, while regular hospitals, health care institutes and services wind up denied reasonable exposure.

In mid-January, the Chinese authorities finally came up with a draft law entitled "Internet News and Information Services Provisions." The legislation specifies that, in the future, internet information service providers are not allowed to use illegal methods, such as interfering with search results, or interfering with information dissemination platforms to make undue profits. Time will tell if such a statute can instill some sense of social responsibility into China's biggest digital platforms.

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Economy

European Debt? The First Question For Merkel's Successor

Across southern Europe, all eyes are on the German elections, as they hope a change of government might bring about reforms to the EU Stability Pact.

Angela Merkel at a campaign event of CDU party, Stralsund, Sep 2021

Tobias Kaiser, Virginia Kirst, Martina Meister


-Analysis-

BERLIN — Finance Minister Olaf Scholz (SPD) is the front-runner, according to recent polls, to become Germany's next chancellor. Little wonder then that he's attracting attention not just within the country, but from neighbors across Europe who are watching and listening to his every word.

That was certainly the case this past weekend in Brdo, Slovenia, where the minister met with his European counterparts. And of particular interest for those in attendance is where Scholz stands on the issue of debt-rule reform for the eurozone, a subject that is expected to be hotly debated among EU members in the coming months.

France, which holds its own elections early next year, has already made its position clear. "When it comes to the Stability and Growth Pact, we need new rules," said Bruno Le Maire, France's minister of the economy and finance, at the meeting in Slovenia. "We need simpler rules that take the economic reality into account. That is what France will be arguing for in the coming weeks."

The economic reality for eurozone countries is an average national debt of 100% of GDP. Only Luxemburg is currently meeting the two central requirements of the Maastricht Treaty: That national debt must be less than 60% of GDP and the deficit should be no more than 3%. For the moment, these rules have been set aside due to the coronavirus crisis, but next year national leaders must decide how to go forward and whether the rules should be reinstated in 2023.

Europe's north-south divide lives on

The debate looks set to be intense. Fiscally conservative countries, above all Austria and the Netherlands, are against relaxing the rules as they recently made very clear in a joint position paper on the subject. In contrast, southern European countries that are dealing with high levels of national debt believe that now is the moment to relax the rules.

Those governments are calling for countries to be given more freedom over their levels of national debt so that the economy, which is recovering remarkably quickly thanks to coronavirus spending and the European Central Bank's relaxation of its fiscal policy, can continue to grow.

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive.

The rules must be "adapted to fit the new reality," said Spanish Finance Minister Nadia Calviño in Brdo. She says the eurozone needs "new rules that work." Her Belgian counterpart agreed. The national debts in both countries currently stand at over 100% of GDP. The same is true of France, Italy, Portugal, Greece and Cyprus.

Officials there will be keeping a close eye on the German elections — and the subsequent coalition negotiations. Along with France, Germany still sets the tone in the EU, and Berlin's stance on the brewing conflict will depend largely on what the coalition government looks like.

A key question is which party Germany's next finance minister comes from. In their election campaign, the Greens have called for the debt rules to be revised so that in the future they support rather than hinder public investment. The FDP, however, wants to reinstate the Maastricht Treaty rules exactly as they were and ensure they are more strictly enforced than before.

This demand is unlikely to gain traction at the EU level because too many countries would still be breaking the rules for years to come. There is already a consensus that they should be reformed; what is still at stake is how far these reforms should go.

Mario Draghi on stage in Bologna

Prime Minister Mario Draghi at an event in Bologna, Italy — Photo: Brancolini/ROPI/ZUMA

Time for Draghi to step up?

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive. That having been said, starting in January, France will take over the presidency of the EU Council for a period that will coincide with its presidential election campaign. And it's likely that Macron's main rival, right-wing populist Marine Le Pen, will put the reforms front and center, especially since she has long argued against Germany and in favor of more freedom.

Rome is putting its faith in the negotiating skills of Prime Minister Mario Draghi, a former head of the European Central Bank. Draghi is a respected EU finance expert at the debating table and can be of great service to Italy precisely at a moment when Merkel's departure may see Germany represented by a politician with less experience at these kinds of drawn-out summits, where discussions go on long into the night.

The Stability and Growth pact may survive unscathed.

Regardless of how heated the debates turn out to be, the Stability and Growth Pact may well survive the conflict unscathed, as its symbolic value may make revising the agreement itself practically impossible. Instead, the aim will be to rewrite the rules that govern how the Pact should be interpreted: regulations, in other words, about how the deficit and national debt should be calculated.

One possible change would be to allow future borrowing for environmental investments to be discounted. France is not alone in calling for that. European Commissioner for Economy Paolo Gentiloni has also added his voice.

The European Commission is assuming that the debate may drag on for some time. The rules — set aside during the pandemic — are supposed to come into force again at the start of 2023.

The Commission is already preparing for the possibility that they could be reactivated without any reforms. They are investigating how the flexibility that has already been built into the debt laws could be used to ensure that a large swathe of eurozone countries don't automatically find themselves contravening them, representatives explained.

The Commission will present its recommendations for reforms, which will serve as a basis for the countries' negotiations, in December. By that point, the results of the German elections will be known, as well as possibly the coalition negotiations. And we might have a clearer idea of how intense the fight over Europe's debt rules could become — and whether the hopes of the southern countries could become reality.

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