China has launched another crackdown on the internet — but it’s different this time

Chinese President Xi Jinping delivered a message for the world during his opening speech at the 19th Communist Party Congress: Chinasupports an open economy, and it will further liberalize its markets to foreign investors.

But while the leadership talks of financial liberalization, some facets of life inside the world’s second-largest economy are becoming a lot less free.

That’s especially true for digital communication inside China. Regulators have moved aggressively to curtail what the country’s more than 750 million internet users can or cannot do online. While Beijing has shut out access to Google and Facebook in the past, new restrictions introduced this year have been some of the strictest ever, according to experts.

This year, authorities have cracked down on China’s top video-streaming websites, doubled down on their crackdown of virtual private networks (VPNs), removed foreign TV shows from online platforms, required users to register to online forums with their real names and introduced laws that hold chat group admins accountable for what is said in their spaces.

New rules also require online news websites to be overseen by government-approved editorial staff and for workers to have reporting credentials from the central government.

Those limitations are likely here to stay, and may even grow, tech experts and china watchers told CNBC.

Circumvention intervention

Internet users in China have long relied on circumvention tools to access hundreds of websites that have been blocked by the country’s censorship apparatus.

Zahra, a student who has been living in the mainland for six years, had relied on VPNs to get past China’s infamous “Great Firewall” and connect to the outside world. It also allows users privacy by hiding browsing activities from internet service providers.

The 23-year-old medical student, who asked to be identified by only her first name, told CNBC that VPNs allowed her to access YouTube and numerous reference websites that were relevant to her coursework.

“It’s like being shut off from the world.”-Zahra, a medical student in China, who relies on VPN for her studies.

While Beijing allowed users some wiggle room in the past, commentators said pressure had been mounting on authorities to rein in China’s growing online space. Unlike the heavily regulated offline media in the country, the internet had allowed anyone to disseminate information and express critical opinions with little chance of punishment.

“The increasing pressure to gain control over online media is longstanding, reflecting Xi’s goal to treat online media in the same way as traditional media,” Paul Triolo, practice head for geo-technology at consultancy Eurasia Group, told CNBC.

As a result, authorities this year have aggressively targeted VPNs as part of what they characterized as an effort to clean up China’s domestic internet.

Though quite a few VPN services are still functioning on the mainland, a source told CNBC in July that some of the remaining companies could end up collaborating with the authorities and hand over user data when requested.

Zahra told CNBC that it has become harder in recent months to rely on VPNs to access banned websites from the mainland. Many of the services, she said, were either not working or the connections through them were very slow.

“It’s like being shut off from the world,” she said.

China’s new cybersecurity law leaves companies with uncertainty  9:49 PM ET Thu, 1 June 2017 | 02:19

It’s not just VPNs, either. Authorities have also stepped up restrictions in other areas to control the online narrative surrounding the country’s national and political identity.

The moves from the Chinese government keep “surprising me (in not a good way) in terms of what else they can regulate, control and censor,” Lokman Tsui, an assistant professor at the Chinese University of Hong Kong, told CNBC in an email. “Let’s also not forget that they push propaganda and misinformation actively.”

He even predicted that Beijing officials could begin “taking a more active role outside their borders. There have been signs of that: lobbying at the UN level, the kidnapping of the booksellers, the great cannon, etc.”

Reports have previously detailed the “Great Cannon” — a term coined by the University of Toronto’s Citizen Lab for a Chinese tool that can flood a website with traffic to overwhelm its servers and, as a result, force it offline.

For now, Tsui explained the current restrictions to control the domestic internet are on multiple levels that “push the Great Firewall even higher.”

On a technical level, he said, China is increasing disruptions to messaging services like WhatsApp or circumvention tools like VPN. Existing regulation such as real-name registration are being enforced more strictly and new laws are holding more platform stakeholders liable for online content, he said.

“Controls on new media are much stricter now than we have seen at any point since the dawn of the internet,” David Bandurski, co-director of the China Media Project and a fellow at the Robert Bosch Academy in Berlin, told CNBC.

Since regulators have “effectively neutralized” the dissemination of any unwanted information in traditional media, “the real heart of controls is shifting to cyberspace,” he added.

Regulations vs. ‘special measures’

Beijing has often made headlines for restricting the flow of information online, but this time is fundamentally different, experts said.

Historically, authorities have tightened controls over the domestic internet in the lead up to the once-every-five-years Communist Party Congress. Even though the event drew to a close on Tuesday, regulators are unlikely to now roll back many of the tighter regulations, analysts said.

There are two kinds of restrictions used by the authorities.

First are the publicly announced moves introduced by regulatory bodies, explained Rogier Creemers, a researcher at Leiden University in the Netherlands. So-called special measures are the other kind of restriction. They are aimed at creating a stable online environment during a major event like the Party Congress, Creemers explained.

Companies themselves may seek to clamp down on their users ahead of such important national occasions, said Charlie Smith, the co-founder of China censorship monitor, who operates under a pseudonym. Such private sector measures include preventing certain videos from being shown or not letting users alter their profile pictures.

“These are moves being made to make sure that your users do not do anything stupid during the Congress,” Smith said. “These restrictions will be lifted as soon as the meeting is over.”

But Smith said the crackdown on circumvention tools like VPNs were likely to stay and the “current state of difficulty” that the Chinese encounter when trying to access the free internet is going to be the “new normal.”

Creemers concurred, telling CNBC that broader regulations were “likely here to stay.”

Eurasia Group’s Triolo added that Xi’s vision of cyber-sovereignty means that “China should be able to control and monitor all internet traffic that traverses China’s internet infrastructure.”

On top of all the external controls, Beijing is also considering taking a stake in some of China’s largest internet companies, according to the Wall Street Journal. Planting a flag in those firms would likely give the Chinese government a more absolute role in corporate decision-making.

Beijing’s 2017 crackdown

Jan. 22 – China’s Ministry of Industry and Information Technology says it will clean up the domestic internet by March 31, 2018.

May 2 – The Cyberspace Administration of China introduces new restrictions that require online news platforms to be managed by party-sanctioned editorial staff.

Jun. 1 – China’s new cybersecurity law goes into effect, which requires foreign businesses in the country to store crucial data on local servers. The move draws criticism due to vaguely defined terminology and worries over potential surveillance.

Jun. 22 – Beijing shuts down online video services of three Chinese media sites: Weibo, ACFUN and Previously, authorities shuttered 60 popular celebrity gossip social media accounts for not being in line with “core socialist values,” according to Reuters.

Jun. 29 – The Ministry of Culture shuts down 12 live-streaming mobile apps and hands out administrative punishments to another 20.

Jul. 10 – Beijing orders China Mobile, China Telecom and China Unicomto bar the use of VPNs by Feb. 1, 2018, according to a report.

Jul. 18 – Reports say users experience difficulties sending and receiving photos on Facebook-owned WhatsApp messenger without a VPN.

Jul. 31 – iPhone-maker Apple pulls several VPN services from the local version of the App Store — the move is slammed by multiple VPN service providers online.

Sept. 4 – China bans streaming of dramatic video content that does not have government permits.

Sept. 7 – China issues new rules that require internet chat service providers to verify the identities of users and keep a log of group chats for no less than six months, according to Reuters. Those rules also require those who manage chat groups to monitor the online activity of their fellow forum members. The regulations also said that chat group service providers had to establish a credit scoring system.

Sept. 25 – Regulators fine tech giants Baidu, Weibo and Tencent for failing to deal with pornography, violence and other banned content on their social-media platforms.

Oct. 1 – New rules require internet users to register their real names when using online forums. Authorities have attempted to push “real-name” registration before — users of social media platform Weibo and online portal Sohu have been asked register their identities in the past — but those initiatives were not as strictly implemented.

There’s a company reporting after the bell that’s beat the Street every quarter for 8 years straight

Earnings season can be hard for traders as they try to game who will beat or miss Wall Street estimates.

But one company is making it look easy.

Business communications company LogMeIn has reported earnings per share higher than the consensus Wall Street estimate every quarter for the last 8 years, according to research firm Bespoke Investment Group. That’s 32 quarters in a row.

And yet this incredible track record of surprises does not seem to be yet priced in.

The shares averaged a nearly 6 percent pop, on average, the day after its earnings report for the last eight years, according to Bespoke.

View image on Twitter

View image on Twitter


Bespoke @bespokeinvest

LogMeIn $LOGM has beaten EPS estimates 32 quarters in a row. Hasn’t missed a quarter in 8 years! Reports this Thursday after the close.

Twitter Ads info and privacy

The business, known for its service of providing remote access to computers, is expected to report third-quarter EPS of $1.10, according to Estimize. Regular traders and investors polled by Estimize believe the company will surprise once again, with earnings per share of $1.12.

To be sure, LogMeIn’s impressive track record of beating the Street for more than half of the company’s 14-year existence may raise the eyebrows of some skeptics.

One would think Wall Street would take a hint and raise their EPS by a penny or two after the company beats estimates for 32 quarters straight.

But going by the stock’s reaction, the market is still willing to reward this “surprise.”

Amazon shares surge 13% to record above $1100 as Wall Street shocked by giant’s rapid growth

Wall Street is buzzing over Amazon’s impressive September quarter results.

Analysts say they are growing more confident Amazon’s success will continue because of its proven ability to invest in new opportunities.

The e-commerce juggernaut generated third-quarter earnings per share of 52 cents, handily beating the 3 cent Thomson Reuters consensus estimate.

Its shares hit a new all-time high Friday and closed up 13 percent after reporting the results after the closing bell Thursday. Around midday they rose above $1100 for the first time ever.

“Amazon reported better-than-expected revenue and operating income, driven by strong Prime Day signups,” wrote Credit Suisse analyst Stephen Ju in a note to clients on Friday. “And once again it demonstrated accelerating growth across all e-commerce reporting segments.”

The analyst said the strong growth was the result of the company’s massive investment spending. Amazon had $5.7 billion in capital expenditures during the third quarter, $300 million more than he expected.

Jeff Bezos

Amazon shares break above $1,100 for the first time  12:51 PM ET Fri, 27 Oct 2017 | 01:03

“We have always believed that Amazon continues to allocate capital as a function of consumer and enterprise demand for its services across e-commerce and AWS,” he wrote, referring to Amazon Web Services, the company’s web hosting operation. The third-quarter result “serves as the confirmation of the rationale for the investment cycle that began in 3Q16.”

Ju reaffirmed his outperform rating on the shares and raised his price target to $1,385 from $1,350. The new target is 42 percent higher than Thursday’s closing price.

Jefferies analyst Brent Thill said he believes Amazon’s big investments are driving growth for its Prime subscription services, which is then spurring stronger sales.

The Amazon “results reinforced again our long-standing thesis that investment in the assets behind AMZN’s competitive moats (fulfillment, digital content, AWS) continues to drive the Prime flywheel effect,” Thill wrote Friday. “Subscription rev growth accelerated in Q3 on strong Prime membership growth driven by above-expectations Prime Day results which also drove higher than expected results internationally.”

Thill reiterated his buy rating and raised his price target on Amazon shares to $1,350 from $1,250.

One analyst said he is optimistic that Amazon’s scale and track record will help it maintain strong growth rates. Third-quarter sales rose 34 percent from the same period last year, to $43.7 billion.

“Amazon is one of the highest quality companies in the internet sector considering its consistent innovation and execution, the size of the opportunities it is pursuing, and its positioning within those future growth opportunities,” Citi Research analyst Mark May wrote Friday. “We believe the company is positioned well relative to a number of growth vectors in the Internet sector and see upside to shares considering its compelling growth versus industry peers.”

Amazon has been one of the best-performing large-cap stocks in the market. Its shares rallied 30 percent this year through Thursday versus the S&P 500’s 14 percent gain.

This chart shows how Ruth Porat is exercising discipline at Alphabet — and investors love it

Ruth Porat, CFO of Alphabet, at the New York Economic Club on May 22, 2017.

Google Fiber was one of the company’s most ambitious projects. Under the original vision, the company was going to run fiber-optic cable directly to consumers’ homes, giving them super-fast internet.

Google announced it would roll the service out in Kansas City, Kansas, in 2011, and followed by eight other cities.

Then, Alphabet happened.

Specifically, Google hired new CFO Ruth Porat in 2015, and that August it reorganized into a holding company called Alphabet, consisting of the core Google businesses — which provide nearly all of its revenue and all of its profit — and a set of longer-term investment areas called “Other Bets.”

Fiber was placed into that Other Bets category. A year later, in August 2016, the company took a closer look at the Fiber business and saw it wasn’t meeting subscriber expectations. So it decided to concentrate on less-expensive wireless last-mile solutions, according to a report in The Information. A couple months later, in October, Google Fiber CEO Craig Barratt stepped down, the company “paused” all uncompleted but previously promised rollouts, and laid off some Fiber employees.

While Alphabet never disclosed exactly how much it was spending on rolling out Fiber, the company does break out capital expenditures within its Other Bets category. Capex there started climbing rapidly in the second half of 2016, peaking at $504 million in Q4. Then, it dropped dramatically. In Alphabet’s most recent quarter, which it reported Thursday, it spent only $77 million on capital expenditures in the Other Bets category.

Here is a chart showing the spike, which we first saw from analyst Jan Dawson via Twitter.

The conclusion? Porat and the rest of Alphabet management are keeping a tight lid on spending in the company’s long-term bets, and if these bets are not performing to expectations, they’ll shut them down.

Investors seem happy with this discipline — Alphabet stock is up about 6 percent after Thursday’searnings report exceeded investor expectations.