A new report issued by a Chinese government-funded research organization states Facebook and Western social networking sites pose spy risks, and these problems should make social media mavens worry about possible clampdowns on social networking sites in China.

According to local media, the “Blue Book of New Media” published by the Chinese Academy of Social Sciences criticizes social networking sites for both gathering Chinese netizens’ personal information and selling that information to third parties without the full consent of users.

The Blue Book points out that social networking sites became a new development hot spot in China in 2009. With the development of social media functions on the Internet, more and more networking applications have become the major channels for people’s social interactions in China. There are now a large number of social networking users in China and the users and visits of social networking sites further surged in 2009, attracting more business giants to this industry. Though domestic sites like Kaixin001.com dominate the space, foreign interlopers like MySpace and FaceBook have also tried to make headway.

According to the Blue Book, the viral marketing methods and the privacy leaks have raised great doubts within CASS of whether this sector is running well without much oversight. In particular, Facebook and other social networking sites have been singled out as means by which Western intelligence services may exploit Chinese netizens’ data for subversive and political purposes.

Via social networking sites, businesses such as advertising and direct marketing firms, can not only collect users’ personal information, including mobile phone numbers, but they also can predict their consumer trends, marital status, and working status by analyzing blogs and posts published by these netizens. These issues are seen as threats to Chinese netizens, according to CASS.

Ultimately the Blue Book posits no definite legislative agenda for the licensing or registration of SNS businesses in China. However, as CASS was born from agencies of the State Council of China, recommendations and reports issued by CASS may find themselves as the fodder used in the future to force social media businesses to better align themselves with government mandates.