• Forbes , Friday, August 22, 2008 11:02 AM

China has the world's largest Internet audience. As such, it should be the holy grail for social networking sites, but the likes of MySpace and Facebook have found the going rather tough in China. This is partly due to the country's "perilous" regulatory environment, which renders social networks responsible for any piece of content on their site. Indeed, if a site doesn't comply with government regulations, authorities have the right to shut it down.

Unaccustomed to this, MySpace and Facebook trail Chinese social networks, whose elaborate censorship technologies block or delete politically sensitive material. As Forbes reports, these "social networks operate just the opposite way in the U.S., where users are allowed to freely share all kinds of data without the threat of government intervention." For this reason, "American social networks will find it extremely difficult to make inroads in China."

Rebecca MacKinnon, a media studies professor at the University of Hong Kong, takes that thesis one step further. "I don't think any foreign Internet company can effectively compete against Chinese companies in the Chinese market," she said. "The regulatory environment is so difficult that it's almost impossible for foreigners to have an advantage over locals who have better political connections and who can manipulate the regulatory system much more effectively."

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