3 Myths You Need to Know About Chinese Censorship in 2013

On Dec. 28, China's government signed new censorship laws that, at first glance, may spell terror for your investments. But that's only what news outlets may have you believe.

In reality, the law mostly makes official what companies and the government have been practicing all along. To put it another way, the law doesn't bring any new changes to how censorship is carried out in China. So before you pull back on your investments, here's a quick rundown of China's real censorship policies.

Myth 1: This law will make censorship much worse

Just as The New York Times and The Wall Street Journal report, China's new laws do require Internet users to provide their real names to service providers. In turn, Internet companies now bear greater responsibility for deleting and reporting illegal activity online.

However, the move is not really an "attack" on freedom of speech. To a great extent, almost every Internet company censors and reports users already. For example, both SINA (NASDAQ: SINA) and Baidu (NASDAQ: BIDU) have algorithms that wipe the Internet of illegal postings and employ up to 1,000 "censors" to patrol the website. So all this law really does is make official what companies have done already. Not much has changed.

Myth 2:Censorship will crush your companies, your investments

The news also portrays China's micro-blogging communities such as SINA Weibo ("Twitter of China") or hi.baidu.com (Baidu's blogging service) in danger of dying slowly or shutting down. But neither are likely to happen -- at least, not because of censorship.

Think about it: All companies, big and small, must comply with these new regulations. And the bigger companies have an advantage at managing these new rules at relatively minimal costs. The only way that SINA and Baidu's social efforts are in danger is if a better product comes along, like Tencent's WeChat, and makes micro-blogging obsolete. But that's another story.

So far, it seems censorship has done little to scare investor confidence in these companies. That shouldn't be a surprise. Many Chinese investors probably recognized the governmental risk a long time ago, and most have probably concluded that the potential, long-term returns outweighed the risks. It seems like investors still believe that.

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3 Myths You Need to Know About Chinese Censorship in 2013