Tuesday, March 23, 2010

Google pulls out of China…sort of

Google announced on March 22nd that it had ended prolonged negotiations with the Chinese government and would no longer censor its search engine. This historic decision has been praised by liberals and conservatives alike for its principled stance against self-censorship. The decision, however, may be simply good business practices and political common sense.

As of 3:00am Beijing time, Google.cn rerouted to Hong Kong, Google.com.hk, where the company offered simplified Chinese search results for Mainland users. A representative of China's State Council Information Office responded by stressing that all foreign companies operating in China must abide by Chinese law. Filtered search results may be available in the Mainland if the Chinese government chooses to use its firewall technology on the Hong Kong servers.

The Chinese government is relying on the allure of the Chinese market to discipline Google. Editorials in the China Daily and Xinhua accuse Google of putting political concerns over economic ones. Four hundred million users “can and only will grow stronger,” they warned.

Sales in China, however, accounted for only about 2% of Google's global revenue in the last quarter. Further, the Ministry of Industry and Information Technology has said China still wants the cell phone Android with its Google operating system. Google's other China operations--email, music sharing, map services, and sales divisions--remain untouched. It is unclear how Google will respond to competitor China Mobile's text message monitoring program, begun in early January. The overall revenue loss of the search engine withdrawal may not result in a significant loss in revenue for Google.

Political goodwill in Washington and in the capitals of other major markets may be the ultimate benefit for Google. The image of the company that "stood up to Beijing" plays well in an atmosphere stirred by China's uncooperative stances over Taiwan, Tibet, trade, currency, and climate change. Google's "independence" from Beijing may ease the battles faced by the Internet giant over privacy concerns, as with the launch of Buzz, and of the company possibly breaking antitrust laws.

On January 21st, at the Newseum in Washington, Secretary of State Hillary Clinton pointedly indicted China's Internet censorship activities. She said, "But countries that restrict free access to information or violate the basic rights of internet users risk walling themselves off from the progress of the next century." Soon after the speech, Google announced that it was teaming up with the National Security Agency to bolster the company's cyber-defenses. These signs of closer cooperation between Google and the US government added to Beijing's discomfort with the company.

At first glance, it looks like Google had a lot to lose by withdrawing from the Internet search engine business in China. Upon closer examination, it was a reasoned, strategic business decision. For now, Google has more to gain both financially and politically by standing apart from China than toeing the Party line.

The Congressional Executive Commission on China will discuss the issue on Capitol Hill on Wednesday, March 34th at 2:00pm with a hearing Google and Internet Control in China: A Nexus Between Human Rights and Trade?

Mr. Michael Davidson
APP Visiting Fellow

Picture: Google's salute to the 2010 Chinese New Year. From Google's Logos page.

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