American capital and venture investors in search of big profits tolerate Baidu’s aggressive censorship.
WASHINGTON—A year ago in January 2010, Google reversed itself in its operations in mainland China, and said it would no longer censor customers’ searches in accordance with the requirements of an Internet search-engine company operating on the mainland. In contrast to Google—always a reluctant censor—Google’s chief competitor in China, Chinese-language Internet search provider Baidu Inc., has aligned itself closely with the regime’s censorship rules and has received commendation for its cooperation with the regime’s policies.
While Google’s policy to cease censoring its users received much media coverage, the media has given scant attention to Baidu’s aggressive censorship policy, and the fact that Baidu’s beginnings and continual financial support and operations involve significant American finances and management.
We may think of the Internet rivalry as an American-based company, Google, pitted against a Chinese-based company, Baidu, but that conceptualization would be overstating their differences. The U.S.-China Economic and Security Review Commission (USCC) made a case study of Baidu in its 316-page Report to Congress, the 2010 annual report, released Nov. 19, 2010.
The 2010 annual report displays a pie chart, revealing substantial holdings by American investors and firms. This information was not secret, of course. With the aid of public sources, the commission’s report highlighted the nexus between American finance and Baidu Inc.
American stockholders own a significant portion of the company. U.S. companies Marsico Capital Management; FMR LLC (Fidelity Investments); T. Rowe Price; Joho Capital LLC; Morgan Stanley; and a firm based in Edinburgh, Scotland, Baillie Gifford & Co., altogether own 31.4 percent. Baidu cofounder and CEO Robin Yanhong Li owns 31.9 percent. This information is based on filings with the U.S. Securities and Exchange Commission.
Moreover, Baidu turned to American investors and American firms for much of its startup capital.
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Two of five of Baidu’s board of directors are American: Gregory Penner and William Decker. Penner, 39, is a general partner of Madrone Capital Partners and director of Wal-Mart Stores Inc. and sits on the 2010 Wal-Mart Board of Directors. He is the son-in-law of Rob Walton (son of Wal-Mart founder Sam Walton). William Decker, 63, is a retired partner of PriceWaterhouseCoopers, according to Reuters. Penner and Decker have been on the Baidu board since 2004 and 2005, respectively.
The U.S.-China Economic and Security Review Commission is mandated by Congress to report “on the national security implications of the bilateral trade and economic relationship between the United States and [China].”
The commission’s annual report, Chapter 5, “China and the Internet,” Section 1, “China’s Domestic Internet Censorship Activities,” relied primarily on the written and oral testimony of two expert witnesses, Rebecca MacKinnon and Rebecca Fannin, at a panel discussion held June 30, 2010.
