Baidu’s recent scandal, and it’s implications

Albert LouieBaidu, the most dominant Internet search engine in China, got hit by the most dominant debate ever, for its dominant China Centric operations. It has been publicly blamed after Wei Zexi, a 21 year old university student died of synovial sarcoma, as a result of trusting the bombardment of wicked advertisements poised by the Internet giant itself. Is there a lack of enforcement involved? You bet there is. Despite the fact that laws and rules are well defined and promulgated, their enforcement often is inconstant. Since China’s government structure is an Authoritarian State, and of its protectionist nature, its business environment is opaque. Regarding Wei Zexi’s case, the Chinese authorities have been “forced” to look into the affair, facing the public indignation of a multitude of Internet users, expressing their anger on the various country’s social networks after the death of the young man (April 12th, 2016).

Competition, a matter of power collaboration

First, the regulator ordered (from May 9th) several major changes in Baidu’s diverse internet tools. They included a cleaning up of its healthcare advertisements preventing medical institutions that had not been approved by the government from being promoted. Furthermore, Baidu has also to ensure that paid promotions do not consist of more than 30 % of search results per page. Does it mean an embrittlement of the Baidu system, and, thus, a break in its dominant of the Chinese online advertising market? Not at all. This phenomenon is unlikely to change drastically neither on short-term nor on medium-term, contrary to the opinion expressed by some observers otherwise. One has to ask himself why Baidu is so dominant compared to Sohu, Sina, etc. Why was it able to squeeze Google out of the China market? Because, in mainland China, the competition does not follow the same laws as in the West. Above all, it is a matter of power collaboration, particularly Baidu is seen as a media tool and as an integral part of the country’s modernization. In return, its content has to be monitored and controlled by the authorities. Without the relevant support from the authority, Baidu would not have become the dominant search engine of the country (with a market share estimated at 70 %). In fact, the new governmental limitations do not create either an opportunity for the foreign companies to penetrate this very coveted market. It does not mean, however, that the foreign companies cannot use online advertising on the Chinese territory and make a profit from it. If they expect to succeed in it, they will have to explore other practical means.

A colossall need regarding quality medical resources

The second answer by the government to Baidu’s scandal has been to investigate the hospital denounced by Wei Zexi. As a result, two leaders from the Second Hospital of the Beijing Armed Police Corps were dismissed, among the dozen people who received disciplinary sanctions. On top of that, it would have been confirmed that the military hospital was housing a private biomedical center connected with the famous « Putian system » (coming from the Province of Fujian). Composed of mostly unqualified medical experts, and selling folk remedies, the « Putian Consortium » accounts for more than 80 % of private hospitals, including those with the Army Brands nationwide. Why was it able to ascertain the Army brand hospitals? Corruption prevails! Since the reform in the medical industry over the years has not been effective, and due to the Authoritarian State’s structural loopholes, and perhaps a lack of political will, there are inevitably rooms for malpractices and corruption in general. Undoubtedly, the weakening of the « Putian Consortium » is on the government’s anti-corruption campaign agenda. Nevertheless, it is difficult to measure today as to what extent the authorities would intervene, as it still lingers on. Nonetheless, a new regulation is under consideration, to ensure the real qualification of the private hospitals.

Baidu’s case highlights also the colossal country’s need regarding quality medical resources. Without any doubt, foreign companies should seize this great opportunity. Still, they will have to choose their partner very carefully, in order to avoid falling in turn, into the clutches of the « Putian system ».

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