Reform and the Internet, With Chinese Characteristics

China's 18th Communist Party congress has two more days to run but preliminary reports predict that there will be no significant reforms coming out of the meeting. Some in the Chinese commentariat are not yet so bearish on the prospect, even though Hu Jintao unsurprisingly said “we will never copy a Western political system.”

It was never realistic to expect an announcement of major changes during the congress. There are signs in official statements of positive economic measures but it will take months or longer for Xi Jinping to consolidate his rule, especially since he will have to manage two predecessors - Hu Jintao and Jiang Zemin - and avoid directly challenging their legacies.

The lineup of the Politburo Standing Committee, expected to shrink to seven men in the 18th congress from nine in the 17th, will be a good but incomplete indicator of the likelihood for future reforms. There is much speculation about the identity and political leanings of the new leadership, but other than Xi Jinping and Li Keqiang, we know nothing and have just rumors until the official unveiling Thursday.

The goal of any reforms is to strengthen the rule of the Communist Party and ensure the continuation of what the leadership calls “the Great Chinese Renaissance.” That is why many observers, myself included, believe that Xi Jinping will have to to push through significant changes to stay in power, as the economic and social pressures in China have reached a dangerous level not seen in many years.

CHINA's MANAGEMENT OF THE INTERNET over the last few days has not been encouraging for those who want to believe the leadership will push reforms. Beijing blocked access to many Google services and thwarted usage of Virtual Private Networks, or V.P.N.'s, that foreigners and increasing numbers of Chinese use to scale the “Great Firewall.” I have lived in Beijing since 2005 and these have been the most draconian few days of Internet restrictions I have experienced.

Chinese “cybercrats” have tolerated V.P.N.'s as the vast majority of citizens on the Internet do not have one and foreign firms and financial institutions rely on them. Perhaps fear of publication of another story about the finances of a leader's family during the Congress led to the decision to upgrade the Great Firewall.

Indiscriminate blocking of major parts of the global Internet is not going to help China in its quest to internationalize the renminbi and make it a reserve currency. Internet controls at the level of the last few days may also deter foreign firms from moving their regional headquarters to China.

CHINA'S INTERNET IS BOOMING, with nearly 600 million “netizens,” one of the fastest growing markets in the world and more than a dozen Internet firms listed on stock exchanges in the United States. Clearly censorship has not been bad for business.

Baidu, China's dominant search engine whose shares have soared since Google's 2010 partial pullout, trades on the Nasdaq market at a $36 billion market capitalization. Tencent, listed in Hong Kong, is worth about $62 billion, making it the third or fourth largest Internet firm in the world by market cap. Alibaba recorded $3.1 billion in sales during Sunday's “Singles Day” event on its Tmall service, topping the $1.25 billion U.S. online retailers took in last year on Cyber Monday.

None of the Chinese Internet firms have made material expansions into the United States, Europe or Japan, but some are making inroads into the developing world. Tencent has been the most aggressive and Wechat, a mobile messaging app that already has 200 million users, is rapidly gaining global users.

American investors will have a chance to invest in another Chinese Internet company with the impending Nasdaq initial public offering of YY.com, a profitable communications platform for gamers whose investors include Steamboat Ventures, a fund affiliated with Disney.

The former United States ambassador to China, Jon M. Huntsman Jr., recently told a Stanford University conference that he expected Xi Jinping to relax Internet controls in the next couple of years. In July, Google's chairman, Eric Schmidt, said that the Great Firewall will eventually fall. Last week Bloomberg's editorial section published “Mr. Xi, Tear Down This Firewall!” I even predicted it in an August interview.

Foreign hopes aside, there is no reason that China cannot continue reforming its economy while maintaining some Internet controls. Political reforms and Internet restrictions will have a harder time coexisting. In the meantime, the world needs to get used to the fact that China is serious about building “Socialism with Chinese characteristics” and an “Internet with Chinese characteristics.”