Business Forum: Why Beijing Likes Linux

By Isaac Cheifetz
Published January 13, 2003

It is now government policy in China to use the Linux operating system across all government ministries, Jon "Mad-Dog" Hall, executive director of Linux International, told CNN three years ago.

And for reasons that transcend information technology, China's Linux strategy has important implications for global politics and economics.

Linux is the open-source (free) software operating system, a result of collaboration between software developers worldwide. Unlike commercial software such as Microsoft's, Linux source code (inner workings) is available to anyone for modification as long as they share those enhancements.

The adaptation of Linux says much about the extent to which systems software is becoming a commodity, with the emphasis of information technology migrating from technology to information. Linux is showing the potential to become the standard corporate operating system.

IBM and Hewlett-Packard are driving its adaptation as a means of emphasizing their expertise in systems integration. According to industry analysts International Data Corp., Linux has become the second-most-popular software platform for building large corporate networks behind Microsoft.

In the past several years, Linux has made inroads across China. The China Daily newspaper reported in July that since the Beijing municipal government announced it would adopt Linux software, a growing number of government contracts have gone to the open-source software, including China's power, postal and telecommunications, education and financial sectors.

Policy of Piracy

Until recently, it would have made little difference to China whether software was free or not. China has made enormous strides in economic growth during the past 20 years, but it was notorious for ignoring intellectual property rights. Software not only was duplicated illegally but resold openly. Software vendors betting on the potential of China's huge market complained but could do little about it.

All societies experience a certain amount of software "piracy," sharing a single copy of a program with friends or co-workers. But in societies that have been isolated from the rule of law, the piracy is rampant, even to the point of being government policy.

The Soviet Union, for example, used Western software for most commercial applications. The software licenses were not purchased -- the KGB paid U.S. and German hackers to steal the source code of UNIX, VMS and other operating systems (as described in Clifford Stoll's 1989 classic, "The Cuckoo's Egg.")

But the Soviet economy was not part of the Western economy for anything besides commodities such as oil and gold. As such, there was little that a Western company could do about copyright infringements.

For many years, the same was true of China. But today China's principal reason for adopting Linux is membership in the World Trade Organization (WTO). As a condition of being admitted to the WTO in 2001, and in return for the trading and tariff advantages that WTO membership offers, China agreed to consistently crack down on software piracy and comply with international agreements protecting intellectual property.

Signs of Progress

Since Mao Tse-tung's death in 1976, China has made strides legally as well as economically. After the Cultural Revolution in the 1960s, a 10-year period of chaotic persecution and mass murder in the name of communism, China did not have a functioning legal system. The "rule of law" had broken down, replaced by arbitrary decisions by paranoid ideologues.

China continues to face serious challenges. Many of its companies are state-owned, with massive accounting irregularities. Its banking system is rife with improper relationships and non-performing loans. In other words, China is struggling with some of the same excesses of capitalism as the United States, France and Japan.

That itself constitutes progress. A brutal elite still may rule China, but it is an elite that long ago embraced capitalism and replaced the quest for ideological perfection with the pursuit of riches.

That wealth will arise from exports and from partnering with Western firms. In doing so, these oligarchs inexorably answer to the stabilizing effect of the Commerce Chain.

By choosing participation over isolation, China is choosing the rationality and transparency upon which the global economy depends. It will substantially (if reluctantly) conform to WTO regulations regarding intellectual property protection and conflict resolution or it will lose the advantages of membership.

More important, it will answer to its customers, such as Wal-Mart and Target. Its factories will be required to conform to quality standards and share those measures with their supply-chain partners. These standards are a close cousin to rigorous financial accounting.

And Wal-Mart answers to its shareholders and to its customers. Large retailers are hypersensitive to their brand image. Recall the Kathie Lee Gifford incident of 1995, in which the celebrity's clothing line, distributed by Wal-Mart, was revealed to be manufactured by young teenage girls in a Honduras sweatshop.

Public Pressure

The ability of citizen groups in the United States to affect Chinese human rights and environmental policies through the mechanism of negative publicity and consumer boycotts of China's U.S. corporate trading partners will increase.

It is ironic that the country representing one-fifth of the world's population is rejecting the advances of Microsoft, one of the great capitalist successes of all time, in an effort to join the global capitalist trading system it once so violently rejected.

China has other reasons to choose Linux, of course. It is flexible and adaptable to a variety of purposes. It lends itself to the building of Chinese intellectual capital in systems design and integration and lessens dependence on U.S. software vendors.

Ultimately, every society faces a stark choice: It can participate in the global economy, or it can be a starving outlaw such as North Korea (the closest society in the world today to Maoist China). But it can't do both.

China consistently has made decisions that support participation. The more intertwined China becomes with the global economy, the more it is choosing rationality, and rule of law.