China Reports 10 Percent Rise in Web Users to 564 Million

2012-10 BIZ China Tickets Illustration

When it comes to doing business with China, the devil is always in the details. The recent announcement that the Chinese government finally will comply with a World Trade Organization order to treat U.S. films more fairly is no exception.

Driven by widespread smart phone adoption, the number of Internet users in China grew by 51 million last year.

The number of Internet users in China grew 10 percent last year to hit 564 million, according to new figures released by a government-affiliated monitoring organization in the country.

Lifted by expanding smart phone use nationwide, the country added 51 million new Internet users over the course of 2012 -- a number larger than the entire population of Spain, the Associated Foreign Press pointed out in a report about the increase.

With now 564 million users -- more than the combined populations of the United States, Canada and Mexico -- the Chinese Internet market is by far the world’s largest.

STORY: Youku Tudou CEO Talks Hulu, Opportunities Outside of China

The China Internet Network Information Center, which published the report, also said the number of Chinese Internet users who go online via smart phones and tablets rose 18.1 percent last year to reach 420 million.

Amid the growth in online activity last year, Hollywood forged a number of content licensing deals with Chinese streaming video sites for distribution of their copyrighted content online.

In July, for example, NBCUniversal struck a multiyear agreement with Chinese online video giant Youku for video-on-demand rights to a broad collection of past, current and upcoming NBCUniversal content. Then in August, the Chinese VOD space saw major consolidation when Youku acquired rival streaming video site Tudou for an estimated $1 billion. The new entity is believed to have a 30 percent share of the Chinese online video market, with an estimated 450 million users.

STORY: Censorship Fears Grow in China After Government Forces Newspaper to Run Editorial

The growth in the number of online users also came amid increased censorship and government control of the Internet in China, as social media rose to become a powerful force for demanding political accountability in the country. The Chinese government has invested greatly in Internet infrastructure in recent years, but also works to block and delete content it deems politically sensitive or subversive of state authority. In a reference to the Great Wall of China, this online censorship is commonly called the "Great Firewall.”

A number of key incidents led to greater government control and less freedom for web surfers in China last year. After the scandal and fall of senior party official Bo Xilai -- in which his wife was charged with the murder of a British citizen and Bo was stripped of all party titles -- the country’s wildly popular, Twitter-like microblog service, Sina Weibo, was shut down for three days so censors could remove offending tweets.

STORY: Bo Xilai Murder Scandal a Game Changer for Chinese Social Media

That was followed by a series of exposés and allegations of corruption among senior communist party officials, many of which first broke and were widely circulated on Chinese social media sites.

In another incident, The New York Times ran a front-page article detailing the accumulated wealth of Chinese Prime Minister Wen Jiabao’s extended family -- some $2.7 billion -- only to find its English and Chinese web sites blocked in the country the next day. The Times sites remain inaccessible in China.