This is all a reflection of the fact that control of information is a staple characteristic of communist governments in general and of the People's Republic in particular. And it doesn't bode well for China's prospects as an outsourcing hub. That some major Western corporations have already set up shop there doesn't change the fact.
Here's the problem. To be competitive in the Web 2.0 world, hi-tech businesses need free and instantaneous access to internal and external information. They need real-time data that supports research, customer service, sales, marketing and investing. And they don't need someone telling them what they can know and when they can know it.
This isn't just academic: A recent support call I made to Microsoft for a home PC glitch ended up with a CSR in India Googling for a workaround that could solve my problem. He'd exhausted his internal resources and needed to reach out to a wider knowledge base. It wasn't ideal or elegant, but it worked, and as a customer I was satisfied.
Contrast that with what would have happened had the rep been based in China, where Google and other Web companies self censor at the request of the Chinese government. And where many of the sites that do show up in search results are inaccessible thanks to the Great Firewall. If an answer to my problem had been posted on Wikipedia, or a server hosted by MIT, or some other site that the Chinese government has arbitrarily deemed subversive, I would have been out of luck.
That's just one simple example of why knowledge based industries are unlikely to thrive in countries where knowledge itself is seen as a threat to the state. At a panel discussion on globalization I recently attended in New York City, Tom 'The World Is Flat' Friedman said China's censorship of the Internet calls into doubt predictions that the 2000s will be The Asian Century.
I think he might be right; what do you think?