Wen Yunchao: An Open Letter to the Investors of Sina

Note: Below is a translation of an open letter written by Wen Yunchao (twitter: @wenyunchao), an outspoken blogger and free speech activist on the Chinese Internet. It is addressed to the investors of Sina Corp, and explores the censorship practices and implications of the corporate structure of the company, which runs the most popular microblogging service in China. If you are not familiar with Wen Yunchao, the recent New York Times feature about him, Where an Internet Joke is Not Just a Joke, is strongly recommended. For an extensive discussion of the methods used by Sina to censor its micro-blogging service, be sure to read the blog post by Jason Ng at Kenengba. The post is in Chinese, but William Farris has provided a helpful English summary.

Update: If you would like to sign the letter, you can send your name, country and occupation to wenyunchao@gmail.com.

Dear Investors of Sina Corp,

We issue this open letter because Chinese Internet company Sina and its microblogging service, Sina Weibo, fully cooperate with the Chinese government to censor and suppress the free speech of online citizens, without regard to any principle. Their behavior is disgusting.

The blog “Kenengba”, which received the Best Chinese Blog award in the 6th Deutsche Welle Best of the Blogs (BOBs) competition in 2010, once published the article “Ten Impressions I’ve gotten from Sina Weibo”. The article summarizes the censorship tactics of Sina Weibo, including keyword screening and post deletion, unidirectional blocking, screening of posts, banning of speech, “The Little Secretary Helps You”, account deletion, blocking of re-registration, and blocking of IP. The article also uses the case of Sina’s plagiarism from the Google-focused website Guao (http://www.guao.hk/) to illustrate how Sina Weibo not only cooperates with the government on censorship, but also deletes users’ information on its free will. ((可能吧：新浪微博给我印象最深刻的10件事， http://www.kenengba.com/post/3019.html))

Beifeng, well-known Chinese blogger and winner of the 2010 annual award of the French National Consultative Commission on Human Rights, writes: “Sina not only cooperates with the authority to impose censorship, it also conforms to their requests to frame certain people.” The article highlights the practice of Sina to change the account name of a user so that others can use the original name to publish contents which can endanger that user with legal liabilities. ((北风：新浪配合“他们”作恶的明确证据， http://www.bullogger.com/blogs/wenyc1230/archives/383569.aspx))

Xiao Han, associate professor at the China University of Politics and Law, “protests against Sina’s account deletion through reincarnation.” In his article “Why I leave Sina Weibo”, he writes, “the outrageous behavior of the administrators (the banning of unused ID intended for reincarnation) is for all to see. They abuse their power to destroy other people. Although they only destroy IDs, their way of thinking is the same as the Communist Party.” Xiao Han’s blog, on which the article was published, has also been removed by Sina. ((萧瀚：我为什么离开新浪微博？ http://news.jcwb.net/news_of_microblog/378.html))

Furthermore, a video on YouTube entitled “How Sina Weibo deceives its users” clearly shows how Sina Weibo limits the number of followers of some accounts. Ms Liu Ping is an indepedent candidate for the local people’s congress of Jiangxi province. Because of her candidateship, over 30,000 people follow her on Sina Weibo at some point. But then Sina Weibo uses deception to reduce her followings. When other users click to follow her on Weibo, the system will send a message showing that the operation is successful, when in fact it is not. Now, the number of followers of Liu Ping’s account has dropped to 20,000. ((Youtube：新浪微博是如何故意欺骗用户的？ http://www.youtube.com/watch?v=543pH7uUd-g))

Chinese internet users cannot count on any legal remedies against the actions of Sina which go beyond the bottom line.

Chinese netizens have previously tried to sue Chinese Internet companies for their censorship practices. But none of the cases have ever received a trial. On 16 August 2007, Chinese human rights lawyer Liu Xiaoyuan went to the Beijing Haidian court to sue Internet services provider Sohu for hiding blog posts. The court accepted and filed the case on the same day. But on 12 September, the same court refused to accept the case, which was assigned the civil case number 23191. Liu appealed to no avail.

Some suggest to sue Sina in its place of registration or listing. However, according to publicly available information, what we normally refer to as the Sina portal is different from and has no subordinate relationship with the NASDAQ-listed Sina Corp.

The NASDAQ-listed Sina Corp is a holding company registered in the Cayman Islands. It has four subsidiaries, namely the Hong Kong Sina Co. Ltd. (which operates the Hong Kong Sina portal), Lifang (Hong Kong) Investment Co. Ltd., the California-registered Sina Online (which includes two Sina portals in North America and Taiwan), and the British Virgin Islands-registered Sina Limited.

In mainland China, Sina has registered several companies using the variable interest entities (VIEs) structure, including Beijing Sina Information Technology Co. Ltd., Sina Interactive Corp, Sitonglifang Software Corp, and Beijing MicroDream Creation Internet Technology Co. Ltd. Sina Information Technology operates the content part of the Sina portal, and holds the ICP, news publishing permit and other relevant licenses; MicroDream operates Sina Weibo and independently holds the ICP and other licenses.

Sina Interactive is fully in charge of the advertising business on the Sina portal and Weibo, while Sitonglifang provides technical support to Sina Information Technology and MicroDream. Advertising and gaming revenues from the Sina portal and Weibo are shared to Sina Interactive through an agreement. For Sifanglitong, it receives revenues in the form of fees for technical support. In turn, profits from these two companies are transferred to a subsidiary fully owned by the listed Sina Corp through other agreements.

The Sina portal and Weibo cooperate with the Chinese government on censorship, and they are respectively operated by Beijing Sina Information Technology Co. Ltd. and Beijing MicroDream Creation Internet Technology Co. Ltd. These are purely Chinese entities which only have business and contract relationships but no direct affiliation with the listed Sina Corp. Therefore, it is impossible to force them to stop censorship by taking action in the place of registration or listing of Sina Corp.

In 2011, several New York residents tried to sue Baidu Corp in a US district court for “shielding” the information they published online. Chinese Foreign Ministry spokeswoman Jiang Yu said that China’s management of the Internet is in line with international practices. This is an act of sovereignty which foreign courts have no jurisdiction under international law.

We know that China has severe restriction on public speech, and it is not realistic to request Sina to completely abandon censorship. However, in view of the reality that Chinese netizens have no effective channels to limit the behaviors of Sina, we believe that appealing to the investors of Sina Corp to reduce their shareholding could weaken Sina’s efforts in censorship. This can force Sina to follow clear censorship rules and ensure that users can seek judicial relief in China or third places.

According to Sina Corp’s 2011 second quarter financial report, although revenue has increased year on year, the net profit is down 60.3% to US$10 million. “The operating expense of the second quarter of 2011 is US$59.7 million, compared with US$32 million for the same period last year. The increase in operating expense is mainly related to Weibo marketing and human resources.” According to outside estimates, Sina employs nearly 1,000 people to censor Weibo. For some time in future, Sina Corp will continue to increase spending on marketing and staffing related to Weibo. We think that it is feasible to pressure Sina to reduce its censorship efforts by dumping Sina’s stocks.

The Chinese government’s policy on Weibo has a significant effect on the prospects of Sina. Holding the shares of Sina Corp entails tremendous uncertainty. On 20 September 2011, the share price of Sina dropped by 15.17% to US$92.76, the greatest daily drop since December 2008. Sina’s market capitalization has shrinked by US$1 billion to US$6 billion. Market commentators attribute this drop to concerns over regulatory risks. ((第一财经日报：微博监管风险重挫新浪股价 http://www.21cbh.com/HTML/2011-9-22/wMNDA3XzM2NzUwMg.html))

On 17 October 2011, Beijing Daily published an anonymous op-ed titled “Lack of credibility will mean the end of Weibo”, which calls for a real-name registration system for Weibo. ((北京日报：网络微博诚信缺失将无以立足， http://news.xinhuanet.com/politics/2011-10/17/c_122165528.htm)) The article criticizes the serious shortcomings which come with the rapid growth of Weibo. If left unchecked, these problems will threaten the society. It urges the government to purify the Internet through more comprehensive and targeted measures so that new media will be responsible for ensuring integrity. It suggests that the government should fully implement a real-name registration system for Weibo and an accountability system for online media. Guangdong’s Southern Metropolitan Daily thinks that “a strict real-name system may drive away users.” ((南方都市报：微博要搞实名制？ http://gcontent.oeeee.com/6/9a/69a5b5995110b36a/Blog/9a1/4437ac.html))

In a recent interview with CCTV’s program Economic Half-hour, Sina CEO Charles Chao commented that Weibo will be the future driving force of Sina. ((曹国伟：微博将是新浪未来驱动力， http://finance.sina.com/bg/tech/sinacn/20110226/0635235624.html)) China’s regulatory policy towards Weibo will undoubtedly have a significant impact on the prospect of Sina. As social conflicts are becoming more acute, the government’s control on the society will tighten, and the space for free speech will shrink. In this context, Internet censorship will undoubtedly be strengthened, and the possibility of the Chinese government shutting down the microblogging services will always be with us.

Perpetrators and their collaborators should be punished. We hereby urge investors to reduce their shareholding in Sina based on both moral and rational judgments, thereby indirectly applying pressure to Sina and its microblogging service to get them onto censorship practices based on clear and transparent principles.

 

Written by: Beifeng
November 2011