China Press: Google's dilemma

Recently the Google incident has raised heated discussions. It all started with a blog post by Google's Senior Vice President & Chief Legal Consultant David Drummond on January 21, 2010. In the article titled "A new approach to China", Drummond claimed that Google detected "a targeted attack", which resulted in the theft of its intellectual property. He said that Google is "no longer willing to continue censoring the results on Google.cn, and so over the next weeks we (Google) will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China."Soon, people in all walks of life at home and abroad expressed their views on the issue. Some believe that Google's China business is "not at all important" and the search engine's success doesn't rely on the Chinese market. On the other hand, if Google pulls out, China's economic development, particularly its international image will be adversely affected. Foreign companies will question China's investment environment and market profitability, and will eventually drop further investment plans and leave the Chinese market for good. Some people even asserted that China's internet industry will be degraded to the Stone Age and Chinese internet users will be reduced to second-class netizens. Of course there are people who take the opposite sides too. Tang Jun, president & CEO of China's Xinhuadu Industrial Group said "this (Google's pulling out) matters little to Chinese internet users. However it will be the most stupid decision Google has ever made. Pulling out from China equals giving up half of the future world market!"

There are three main views concerning the reasons behind Google's sudden announcement: 1. Google China's business performance has never been satisfying, therefore Google is using the attack as an excuse to quit; 2. China's stringent censorship makes Google unable to maintain normal business operations; 3. Google wanted to quit because its corporate infrastructure suffered attacks which originated from China, causing an infringement of internet security.

In my opinion, the reasons above all seem to have some logic, yet they are not quite convincing. Firstly, Google China isn't doing that badly. It is now the second biggest search engine in China and holds over 30 percent of the total market share. Also, according to latest statistics, Google's market share is increasing gradually.

Secondly, internet supervision is a common international practice. Western countries have established a series of internet regulation measures and laws such as the US Patriot Act and Canada's Personal Information Protection and Electronic Document Act. Similar laws can also be seen in Britain, Australia, New Zealand, Germany and Switzerland. It should be noted that Google has also faced boycotts in Greece, Japan, France, Germany, Saudi Arabia and Turkey, due to reasons including questionable news resources, pornographic pictures, and cultural and ethnic issues. However, Google didn't quit any of those countries.

Thirdly, hacker attacks are a global technical disaster and until now no country has completely managed to avoid cyber attacks from international hackers. If a company chooses to quit the local market whenever it's attacked by local hackers, it's being childish and ridiculous. As Microsoft CEO Steve Ballmer said "There are attacks everyday, I don't think there was anything unusual."

Thus it's clear that Google's pull-out threat is simply a psychological tactic. Google choosing to declare the attacks hours after Baidu came under cyber attack is nothing else but its strategy to win some bargaining chips in future negotiations. This is why David Drummond only posted a blog article instead of issuing an official statement. This is also why Drummond said in the blog post that "so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all."

Common sense economics tell us that the ultimate goal of capital operation is to pursue the maximal interests (not just maximal profit). As a public listed company, Google doesn't make an exception. China is a huge market to the world and the internet industry. And as a company that seeks maximal interests, Google knows this. Otherwise, it wouldn't have poached Kaifu-Lee from Microsoft to run its China business at the cost of an expensive lawsuit in 2005. Therefore I think Google is very unlikely to quit the Chinese market.

So why did Google announce a possible pull-out? In order to find the real reason, we need to look beneath the surface. Besides the intention to get a looser operating environment for itself, Google is playing the role of a chess piece of the US government. I have always held the view that all the remarks and moves made by either the US government or its mouthpieces (US multinationals) about China are subject to the country's overall strategic goal to contain a rising China. The Google incident is no exception. A lot of the US multinationals act like a spoiled child of the US government. Whenever they can't get what they want, they will cry, then make a scene and eventually turn to the "mother" for support. Google is now at the stage of crying and making a scene. If it can't achieve its goal, it won't be long before Google drags the US government to a face-to-face with China.

In fact, on January 6, 2010, the US magazine Foreign Policy published an article titled "Twitter vs. Terror", which called for the US State Department to use new network technology to lead the global fight for freedom. The next day, the US Secretary of State Hilary Clinton invited some of the major players in the communications technology field to dinner at the State Department. Google CEO Eric Schmidt was among the guests. This may be the reason why Hilary was able to make a prompt response after Google announced the possible pull-out. Furthermore, the US State Department would roll out a new technology policy about internet freedom within the week that followed, which aims to help citizens of other countries gain access to uncensored Internet resources

Therefore it's obvious that Google won't step out of the Chinese market. And even if it fails to succeed in its scheme and really pulls out, we don't need to make a big deal about it. Google is out, but eventually Boogle, Toogle or some other search engine will start operating in China. We welcome companies from all over the world to operate in China in accordance with the law. But we are opposed to any company that attempts to coerce China.

The author is with the State Information Center.

(This post was translated by Yan Pei.)