Google Faces Fallout as China Reacts to Site Shift (Updated)

The New York Times reports on the initial impact of Google’s closure of its China-based search engine, which it has redirected to its service in Hong Kong:

China’s biggest cellular communications company, China Mobile, was expected to cancel a deal that had placed Google’s search engine on its mobile Internet home page, used by millions of people daily. In interviews, business executives close to industry officials said the company was planning to scrap the deal under government pressure, despite the fact that China Mobile has yet to contract with a replacement.

Similarly, China’s second-largest mobile company, China Unicom, was said by analysts and others to have delayed or killed the imminent introduction of a cellphone based on Google’s Android platform. One major Internet portal, Tom.com, already had ceased using Google to power its search engine.

Technology analysts and the business executives, who demanded anonymity for fear of retaliation, said that Google might also face problems in keeping its advertising sales force, which is crucial to the success of its Chinese language service.

Several held out the prospect that the government could shut down the company’s Chinese search service entirely by blocking access to Google’s mainland address, google.cn, or to its Hong Kong Web site. As of Tuesday, users who go to google.cn are automatically being sent to the Hong Kong address, google.com.hk.

Meanwhile, the State Department has said that Google was acting on its own and not with government support when the company decided to redirect its China-based search engine to an uncensored Hong Kong-based site. From Reuters:

“This was a business decision by Google,” State Department spokesman P.J. Crowley told reporters.

“As to the issue of Internet freedom and the flow of information around the world, including the flow of information within China, that will be something that we continue our discussion with China on,” he said.

…”Ultimately individual businesses will make judgments as to the investment opportunity in China,” Crowley said.

However, Crowley, continued, the Chinese government should pay heed to Google’s decision, the AP reports:

But he says that Beijing “should seriously consider the implications when one of the world’s most recognizable institutions has decided that it’s too difficult to do business in China.”

Watch also a Financial Times video on Google’s move.

And John Pomfret writes in the Washington Post:

Analysts say that China’s willingness to stand up to Western firms is a consequence of its meteoric economic rise. The government doesn’t need Westerners’ investment as much as it once did, and it is increasingly bald-faced about its desire to acquire their technology.

“The Google affair is both catalyst and evidence of change,” said Arthur Kroeber, managing director of Dragonomics, a Beijing-based economics firm. “We are at a turning point. It had been very, very unusual for foreign business to say anything too negative about China because the opportunities here were too large.”

Indeed, for decades, Western businesses have been Beijing’s closest friends. When Congress railed against China over human rights issues and threatened to revoke China’s most favored nation trading status in the 1990s, the American Chamber of Commerce and other groups flocked to Washington to knock on doors and state China’s case. The last major Western company to openly confront the Chinese government was Levi Strauss & Co., which withdrew from the country because of what it said were China’s “pervasive violation of human rights.”

Update: Also, another New York Times report, “Stance by China to Limit Google Is Risk by Beijing“:

Google’s decision may not cause major problems for China right away, experts said. But in the longer run, they said, China’s intransigent stance on filtering the flow of information within its borders has the potential to weaken its links to the global economy.

It may also sully its image — promoted to its own people as well as to the international community — as an authoritarian country that is economically on the move, perhaps even more so than the sclerotic, democratic West.

“The Chinese are very serious about pushing their soft-power agenda,” Bill Bishop, a Beijing Internet entrepreneur and author of the technology blog Digicha, said Tuesday. “Google just put a big hole in that sales pitch, and I think they know that.”

China’s leaders appear fully aware of their dilemma. But at this stage in China’s history, and given the Communist Party’s determination to maintain absolute rule, they still put political control ahead of all other concerns.

A New York Times editorial calls Google’s decision, “a principled and brave move.”

March 23, 2010 11:00 AM
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