13 Dec 2016

THE INTRICACIES AND BENEFITS OF SCALING THE GREAT FIREWALL OF CHINA FOR FINANCIAL TRADERS

 

While some believe that the Great Firewall of China will eventually become nothing more than a memory, the nationwide censorship initiative is very much a current reality for the financial traders hoping to break into or successfully navigate the Chinese market.

And the reality is this intangible, yet powerful, barrier is gaining strength. Here’s a quick look at how it affects global forex brokers, as well as other traders and businesses.

Great firewall facts

The unrestricted reign of the Internet was short-lived in China; according to the Washington Post, the World Wide Web was introduced to the nation in January 1996, and the government began blocking foreign websites in August of that same year.

Since then, the Great Firewall — part of the larger surveillance and vetting initiative dubbed the “Golden Shield Project” — has developed into a robust government-run filtration system that blocks thousands of websites considered unfavourable for consumption, rendering web traffic slow and unstable along the way.

The American Chamber of Commerce in China, the Washington Post added, reports that 4 out of 5 of its member companies claim that web censorship has a negative effect on their business.

With a quarter of the global online population and the world’s second largest economy nestled firmly behind the wall, it’s easy to see how the barrier hurts international business.

In April, the New York Times reported that the US added the firewall to its list of trade barriers; the Office of the United States Trade Representative stated that website blocking seemed to have accelerated over the previous year with eight of the world’s 25 most popular websites, and an increasing number of foreign news sites, inaccessible in China.

The country now blocks a quarter of all websites, up from 14 percent before President Xi Jinping took power.

Effect on businesses & traders

Many users and businesses have tried to find their way around the firewall via VPNs and other technological tricks, though they’ve still succumb to lagging speeds. The Chinese government began blocking VPNs in March, leaving many businesses scrambling to find a new way around the barrier.

Others have taken more drastic routes to entering the Chinese market. For example, HP sold a large stake in its new company to a leading Chinese subsidiary in an effort to access the market.

Some tech companies born outside of China are increasing their profile in the country through costly legal action such as delisting and restructuring to better reach the 700 million Internet users there. But for traders that wish to operate across or within China with low latency, highly-stable routes and avoid these drastic measures, the intricate filtering system often remains a puzzle.

Latency-sensitive financial customers working in this sector can easily lose trading deals due to the slow, fickle nature of sending data through the country’s firewall.

Brokerages and electronic trading firms are constantly running into slow transaction speeds while operating in China, especially during peak hours with increased Internet traffic.

Due to the firewall, transmission in China can be 100 times slower compared with transfers in Europe.

However, the Chinese list “performance” as a top priority when deciding on a broker, so finding ways to stabilize and speed up your network despite the barrier is critical.

Though the complex Chinese landscape presents unique challenges, it’s a burgeoning market for forex traders for a reason. The country’s massive population and status as the worlds’ second largest economy make for a potentially profitable situation for brokers, who could also enjoy less competition in the East.

Rest assured that your trading business doesn’t have to come to a halt when it reaches China’s border — and navigating the situation will likely be worth it in the end.

Looking to improve your network in China? Get in touch.