The Chinese government today made sweeping changes to its state secrets law that directly affects Internet companies operating in the country. The amended law goes further to force these companies to help the Chinese Communist Party suppress free speech and censor the Internet.
The law requires that the transmission of "state secrets" over the Internet be stopped by these companies if they "discover" it. The companies are also required to keep records of such transmissions (e-mails, blog posts, text messages and so on) and report them to the Chinese government.
The law effectively requires all Internet companies operating in China -- including Microsoft, Cisco, Yahoo and others -- to serve as agents of the Government's internal security apparatus.
What is or is not considered a "state secret" by the law is determined by Communist Party officials. For example, if Falun Gong supporters protest, and some blogger writes about it, that might be considered a "state secret," and Microsoft would be required to report it.
American Internet companies who operate in China have come under some pressure after Google announced its departure from the country. Microsoft was especially vocal after the Google announcement that it would obey all Chinese laws.
What will companies do? My prediction: They'll do nothing until their hands are forced by events. It's a near certainty that information the Chinese government considers "state secrets" will be "transmitted" via Microsoft or Yahoo services, and via Cisco equipment. The American companies will no doubt try their best to not know what's being communicated, but the Chinese government may actually force them to monitor communications somehow.
In the wake of Google's brave stand against censorship, it will be interesting to see if a larger exodus of foreign companies isn't forced by aggressive abuse of Internet companies by the Chinese government.
Read more about the amendments to China's state secrets law.