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Google Leaving China?

According to Google’s CEO Schmidt, Google’s “negotiation” with the Chinese government over Internet censorship regulations will end “soon.” There are speculations in the tech-sphere that it looks like Google will have to leave China. According to ZDNet’s Tom Forenski, for example:

Champagne corks are undoubtedly popping in Redmond on reports that Google is planning to close its Chinese search service.

Google will try to maintain its other operations in China but this is unlikely to succeed. Any foreign business requires the approval of the Chinese government. Google has shown itself to be in opposition to the Chinese government — this is an untenable position.

This also means that Google will unlikely be able to take part in joint ventures with others in China. In early February, Reuters reported that Google is a member of a consortium led by Disney, to buy a large stake in Bus Online, a large Chinese advertising company.

It’s difficult to see how this deal will go through with Google as a member, if it is an opponent to the government.

This means Google is barred from the world’s largest and fastest growing Internet market.

Forenski also referenced a good read from McKinsey Consulting regarding China’s important and fast-growing Internet community. That article observed:

Just how big (or small) a market would Google leave behind were it to pull out of China today? In January, China Internet Network Information Center, the country’s official domain registry and research organization, reported that by the end of 2009, the number of Internet users in China had touched 384 million, more than the entire population of the United States. That’s an increase of around 50 percent over 2008. Moreover, 233 million Chinese—twice as many as in the previous year—accessed the Net on handheld devices, partly because China’s cellular providers started offering 3G services widely last year.

The Chinese are obsessed with the Internet. People in the 60 largest cities in China spend around 70 percent of their leisure time on the Internet, according to a survey we conducted in 2009. In smaller towns, the corresponding number is 50 percent. The PC is fast replacing the TV set as an entertainment hub, and emotions run high over who gets to log on and for how long. In a small city in northwest China, for instance, a man told one of us that domestic squabbles over using the PC got so out of hand that his wife and he discussed spending, for them, a large sum of money to buy another machine—or filing for divorce. They eventually bought a second PC and saved their marriage.

Marketers woke up to the Internet’s ability to influence opinion after the Sichuan earthquake, in May 2008. A huge amount of buzz glorified big donors and crucified small ones. In fact, Wanglaoji, an herbal tea brand, became nationally known partly because of its postquake online tag line: “If you want to donate, you donate 100 million renmibi. If you want to drink, you drink Wanglaoji.”

Seismic changes are likely to take place in the Chinese consumer market because of the Internet—and we aren’t talking just about the fact that 50 million Chinese may soon have to stop using their favorite search engine, Google.

Until Google formally leaves China, one can always hope that good sense will prevail over ideology or politics. But if Google does leave China, I will admit that it will definitely be a sad day.

Unfortunately, even if Google does eventually decide to stay in China, I think things have inextricably changed for Google in China. Google’s willingness to put politics ahead of business in China should make government officials think twice about the strategic consequences of allowing a foreign company like Google dominate important, nationally strategic areas of the Internet such as search.

According to this article, Google may have become an indispensable research tool to some Chinese scientists. Imagine a Google that provides a truly dominant service in China – for both ordinary netizens as well as intellectuals – but continues to keep its algorithms arbitrary, proprietary and away from scrutiny – and continues to insist at any time on promoting its own vision of “good” at the expense of that of the government, China may yet succumb to the mercy of foreign powers. Just as the British was able to defeat the Qing empire by choking the Yangtze River, a dominant Google may hypothetically lay China to rest by choking (or distorting, as the case may be) access to information by Chinese citizens.

There will no doubt be more news about Google  in the coming days. Let’s all keep tuned in!

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