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Rebecca MacKinnon’s blog post about Google’s recent moves with their homepage for their mainland Chinese users is informative but what’s more interesting to me is her testimony at the June 30th hearing on “China’s Information Control Practices and the Implications for the United States” for the U.S.-China Economic and Security Review Commission. The entire testimony is powerful but the last part, where she reminds everyone that Baidu is listed on the NASDAQ and uses money from investors in the US and elsewhere to censor the Internet in China, is worth reading.

Testimony before the U.S.-China Economic and Security Review Commission:
“China’s Information Control Practices and the Implications for the United States”

As I have described in my testimony, the Chinese government has transferred much of the cost of censorship to the private sector. The American investment community has so far been willing to fund Chinese innovation in censorship technologies and systems without complaint or objection. Under such circumstances, Chinese industry leaders have little incentive and less encouragement to resist government demands that often contradict even China’s own laws and constitution.

Two of Baidu’s five Directors are American. U.S. investors provided much of Baidu’s startup capital. U.S. institutional investors own significant stakes in the company. To be fair, American investment dollars support many businesses around the world that human rights groups and environmentalists have identified as unethical or destructive to our health and our planet. Yet in the wake of the financial crisis and the BP oil spill, it is also clear that millions of people around the world are paying an unacceptably high price for unethical – or at very least amoral – investment practices. We will not see the end of our problems unless industry and investors own up to their broader responsibilities to society and to the planet. I predict that the prospects for freedom and democracy around the world will similarly be diminished if our investments continue to support censorship and surveillance.

For the ethical investor, there are two possible responses to this problem. One is divestment from all ethically challenging situations. The other is engagement and advocacy, using financial leverage to work for positive change in industry practices and even government regulation. Such efforts often require patience and take time to bear fruit, but experience in other sectors such as mining and manufacturing show that proactive, socially responsible investment combined with advocacy and engagement can make a difference over time.

I believe the Chinese people would be worse off if all American companies and investors were to abandon the Chinese Internet. Investors who remain silent, however, should be clear about what kind of innovation they are financing. In addition to whatever product or service they set out to invest in, they are also supporting a disturbing new political innovation: networked authoritarianism.

If you own Baidu stock or have a mutual fund that owns Baidu stock you are financing China’s state-controlled censorship of the Chinese Internet.