Internet behemoth Google's site recently carried an announcement indicating that unless China resolves issues with filtering information and hacker intrusions, it would consider pulling out of the country. The announcement shocked both the political and business worlds. Although a blue jean company once pulled out of China for political reasons, this time the key figure is none other than the omnipresent Internet juggernaut, Google.

Google's announcement was met with a variety of assessments. Among these, an editorial in the Financial Times best exemplifies the love/hate relationship big corporations have with China's market interests and assorted control measures, saying "Google is the first major company to steadfastly refuse China's demands for control. Let us hope it is not the last."

On one side of this confrontation we have Google, the Internet giant with hundreds of millions of users accessing its various services, from the Google search engine to Blogger (blogspot.com), YouTube and Gmail, while on the other we have the Chinese government, whose ideology is always present in its control over the details of 1.3 billion citizens' lives.

Google's Big Three Square Off

When google.cn commenced operation in China in 2006, it was immediately faced with the conflict between market interests and political censorship. After some consideration, executives at Google, whose motto is "Don't Be Evil," agreed to abide by China's legal restrictions, believing that allowing China's people to enjoy the benefits of sharing information from around the world far outweighed the costs.

These policies and laws have quite distinct "Chinese characteristics." Internet traffic related to "rumors, slander, or dissemination of pornography, inciting the overthrow of the state, overthrowing the socialist system, inciting the splitting of the country or harming national unification," must be filtered. Filtering methods include automatic blocking of such keywords as "June 4," "Liu Xiaobo," and "Falun Gong" from searches by the company system. In addition, Internet companies are required to manually screen and remove sensitive content.

As China pulled out all the stops to prepare for hosting the Olympics, the international community was confident that the 2008 Olympics would help promote further liberalization in China, which would move it in a direction beneficial to Google. However, Google never anticipated the series of incidents that has transpired since 2008, including the Sichuan earthquake, conflicts in Tibet, the financial crisis, and unrest in Xinjiang. These events have turned the situation completely around, putting the Chinese government under the gun. Following the policy that "stability trumps everything," Beijing has placed its strictest controls to date over Internet speech, exceeding Google's initial estimates.

Where to draw the line when investing in China is a difficult dilemma many companies and even governments must face. Google's Big Three, co-founders Sergey Brin and Larry Page, and chief executive Eric Schmidt, have had heated discussions and arguments over these issues.

According to a Wall Street Journal report, in contrast to Schmidt's stance that engagement will promote greater openness in China, Brin, a Jew born in the former Soviet Union, maintains the spirit of the "Don't Be Evil" slogan, adamant that Google cannot continue to censor itself. The China policy recently announced by Google represents the agreement reached after debate among the Big Three.

Unlike Google's top troika, the Chinese regime neither understood nor gave much consideration to the Internet a decade ago. This enabled such outstanding private companies like Baidu, Alibaba, Sina, Tencent, and Ctrip to establish themselves in a market mostly monopolized by state-run enterprises, and China's politics, economics and society have become more open as a result of the development in cyberspace.

Balancing development and management

With the rapid rise in the number of Internet users in China, exceeding 380 million last year from just over 20 million in 2001, and with 180 million blogs, the Internet has become the most powerful force in China outside of the Communist Party itself. The regime is alert to the fact that it could be a double-edged sword that could do it considerable damage.

At the party congress in the autumn of 2004, CCP secretary-general Hu Jintao addressed the issue of the Internet for the first time, saying the party must "be keenly aware of the influence of such new media as the World Wide Web on public opinion."

In 2007 the Politburo held two meetings specifically to address the Internet. For the first session scholars and experts were enlisted to give Politburo members clinics on the Internet. Three months later the Politburo formally came to the decision to "adhere to development with one hand and management with the other" when approaching cyberspace.

Late that year, a message revealing the presence of censorship appeared on google.cn page caches with material touching upon sensitive content: "This page could contain material not in compliance with related laws, regulations, and policies, and cannot be accessed via google.cn."

Google.com is an open website operating internationally, while google.cn is a controlled intranet site operating within China. The two give vastly different results for searches made in Chinese. Repeated blocks of google.com by the Chinese regime forced Google to move searches made from China to google.cn.

Popular Google-owned sites YouTube, Gmail, and Blogger are not obligated to comply with censorship as they are not located in China. Yet they are also frequently blocked for that very reason, making it difficult for them to team up with the Google search engine in China to gain a collective competitive advantage.

Baidu, Google China's most formidable competitor, adheres to government policy, has strong grasp of Chinese Internet usage habits, and has long provided a music downloading platform. This accommodating strategy has given Baidu the edge, allowing it to outperform Google in terms of both hits and advertising share. However, Google still claims a segment of more educated adherents. If google.cn should shut down, China's vast search engine market would become totally dominated by Baidu.

Who's changed whom?

Google's tussle with China represents different beliefs and interests in today's world toward freedom of speech. In a speech on Internet freedom given at Washington, DC's Newseum on January 21, U.S. Secretary of State Hillary Clinton asserted, "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." She further called on American businesses to take the Google fracas seriously, stating, "I really believe that those who lose that confidence of their customers will eventually lose customers."

The Chinese regime issued a scathing response to the US government's stance on this issue. After initially condemning Google for considering a withdrawal from China because it could not stand to lose, state-run media raised its rhetoric to the political level, stating, "business in China must respect China's laws," and "Google was the fourth largest contributor to Obama's campaign… Google should sever its close ties with the US government, not act like the ‘Goldman Sachs of the Internet,' and not become the whip of US foreign policy."

Once it got political, the Chinese media's discussions of the Google situation quickly went from basically split in two to leaning toward the government's side. Yet in Internet forums, in which greater leeway for different opinions remains, the authorities are getting roasted for their control of the Internet. Comments supporting Google have flooded onto blogs and forums, balancing out those opposing the company.

Outsiders have no way of knowing how negotiations are progressing between Google and China, yet given the reality of globalization and the Internet, one can scarcely imagine China's future without Google, or Google's development without the China market. The most likely outcome of the talks would be for Google not to pull completely out of China, and China not to place a total interdiction on Google products.

Looking at the long term, the question people are most curious to know is, after all the negotiations are through, will China have changed Google or will Google's presence have changed China?

Translated from the Chinese by David Toman