How China enforces it's Interntet "self-regulation" rules

From the NYTIMES:

Intimidation and "self-regulation" are, in fact, critical to how the party communicates its censorship rules to private-sector Internet companies. To be permitted to offer Internet services, a private company must sign a license agreeing not to circulate content on certain subjects, including material that "damages the honor or interests of the state" or "disturbs the public order or destroys public stability" or even "infringes upon national customs and habits." One prohibition specifically targets "evil cults or superstition," a clear reference to Falun Gong. But the language is, for the most part, intentionally vague. It leaves wide discretion for any minor official in China's dozens of regulatory agencies to demand that something he finds offensive be taken offline...

American Internet firms typically arrive in China expecting the government to hand them an official blacklist of sites and words they must censor. They quickly discover that no master list exists. Instead, the government simply insists the firms interpret the vague regulations themselves. The companies must do a sort of political mind reading and intuit in advance what the government won't like. Last year, a list circulated online purporting to be a blacklist of words the government gives to Chinese blogging firms, including "democracy" and "human rights." In reality, the list had been cobbled together by a young executive at a Chinese blog company. Every time he received a request to take down a posting, he noted which phrase the government had objected to, and after a while he developed his own list simply to help his company avoid future hassles.

The penalty for noncompliance with censorship regulations can be serious. An American public-relations consultant who recently worked for a major domestic Chinese portal recalled an afternoon when Chinese police officers burst into the company's offices, dragged the C.E.O. into a conference room and berated him for failing to block illicit content. "He was pale with fear afterward," she said. "You have to understand, these people are terrified, just terrified. They're seriously worried about slipping up and going to jail. They think about it every day they go into the office."

As a result, Internet executives in China most likely censor far more material than they need to. The Chinese system relies on a classic psychological truth: self-censorship is always far more comprehensive than formal censorship. By having each private company assume responsibility for its corner of the Internet, the government effectively outsources the otherwise unmanageable task of monitoring the billions of e-mail messages, news stories and chat postings that circulate every day in China. The government's preferred method seems to be to leave the companies guessing, then to call up occasionally with angry demands that a Web page be taken down in 24 hours. "It's the panopticon," says James Mulvenon, a China specialist who is the head of a Washington policy group called the Center for Intelligence Research and Analysis. "There's a randomness to their enforcement, and that creates a sense that they're looking at everything."

The government's filtering, while comprehensive, is not total. One day a banned site might temporarily be visible, if the routers are overloaded — or if the government suddenly decides to tolerate it. The next day the site might disappear again. Generally, everyday Internet users react with caution. They rarely push the government's limits. There are lines that cannot be crossed, and without actually talking about it much, everyone who lives and breathes Chinese culture understands more or less where those lines are. This is precisely what makes the environment so bewildering to American Internet companies. What's allowed? What's not allowed?

In contrast to the confusion most Americans experience, Chinese businessmen would often just laugh when I asked whether the government's censorship regime was hard to navigate. "I'll tell you this, it's not more hard than dealing with Sarbanes and Oxley," said Xin Ye, a founding executive of Sohu.com, one of China's biggest Yahoo-like portals. (He was referring to the American law that requires publicly held companies to report in depth on their finances.) Another evening I had drinks in a Shanghai jazz bar with Charles Chao, the president of Sina, the country's biggest news site. When I asked him how often he needs to remove postings from the discussion boards on Sina.com, he said, "It's not often." I asked if that meant once a week, once a month or less often; he demurred. "I don't think I can talk about it," he said. Yet he seemed less annoyed than amused by my line of questioning. "I don't want to call it censorship," he said. "It's like in every country: they have a bias. There are taboos you can't talk about in the U.S., and everyone knows it."

Jack Ma put it more bluntly: "We don't want to annoy the government." Ma is the hyperkinetic C.E.O. of Alibaba, a Chinese e-commerce firm. I met him in November in the lobby of the China World Hotel in Beijing, just after Ma's company had closed one of the biggest deals in Chinese Internet history. Yahoo, whose share of the Chinese search-engine market had fallen (according to one academic survey) to just 2.3 percent, had paid $1 billion to buy 40 percent of Alibaba and had given Ma complete control over all of Yahoo's services in China, hoping he could do a better job with it. From his seat on a plush sofa, Ma explained Alibaba's position on online speech. "Anything that is illegal in China — it's not going to be on our search engine. Something that is really no good, like Falun Gong?" He shook his head in disgust. "No! We are a business! Shareholders want to make money. Shareholders want us to make the customer happy. Meanwhile, we do not have any responsibilities saying we should do this or that political thing. Forget about it!"