How Social Media can Dent an Industry

Earlier this week, Sina Corp., the company who provides the Chinese social media service called Weibo, saw a 3.8 percent rise in stock prices. Bloomberg reported that Weibo, a micro blogging platform comparable to that of Twitter, is now offering a premium service for users who are willing to pay a fee of 10 yuan per month. The hope is that they will be able to offer services users will actually really want to use in order for them to oblige to paying a fee.

Recently, Weibo has been appearing in the news due to the role it played in the June 14 Chinese food scandal. It was on this day that Inner Mongolia Yili Industrial Group Co. announced a recall of infant formula that was found to contain mercury. A Wall Street Journal article reports that searches pertaining to the incident were blocked from the social media site. It’s believed that censorship of this sort is done in an effort to control the spread of news on food safety, something that could threaten the stability of that Chinese economic sector.

With the growth of China’s economy currently in question, it makes sense that the Chinese government would want to preserve their strongest industries. Right now, with last years sales reported at $28 billion, one of those industries is dairy. Directly preceding the release of this information, Yili’s shares dropped 10 percent, which is the maximum fall allowed in one session.

This issue gives new perspective to the Chinese internet censorship issue. It is often projected in a negative light, attaching to it a stigmatism of the Chinese government encroaching on the population’s freedom of speech and freedom of access to information. But in situations like this, where negative news spread via social media could potentially wreak serious havoc on an industry integral to economic stability, should regulation be enforced? Also, what about people who might not have otherwise heard about the recall and continued to consume tainted food?

With the sharp rise in popularity of social media services, there very well might be an increasing need for new forms of regulation.

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