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Exit by Google would be blow to high tech in China

BEIJING — China without Google — a prospect that looks increasingly likely — could mean no more maps on mobile phones. A free music service that has helped to fight piracy might be in jeopardy. China's fledgling Web outfits would face less pressure to improve, eroding their ability to one day compete abroad.

The extent of a possible Google pullout from China in its dispute with the communist government over censorship and hacking is unclear. But on top of a local search site that Google says it may close, services that might be affected range from advertising support for Chinese companies to online entertainment.

"If Google leaves, it's a lose-lose scenario, instead of Google loses and others gain," said Edward Yu, president of Analysys International, a Beijing research firm.

Chinese news reports say Google is on the verge of shutting its China site, Google.cn, and has stopped censoring results. A Google spokesman, Scott Rubin, denied censorship had stopped and would not confirm whether Google.cn might close.

"We have not changed our operations in China," Rubin said. Chief executive Eric Schmidt said last week that something would happen soon, and Rubin said he had no further details.

But Li Yizhong, China's minister of industry and information technology, said Friday the company must obey Chinese law, which appears to leave few options other than closing Google.cn, which has about 35 percent of China's search market.

Such a step would deliver a windfall to Baidu, China's major search engine, but other companies rely on Google for search, maps and other services and might be forced to find alternatives.

China Mobile Ltd., the world's biggest phone company by subscribers, uses Google for mobile search and maps. Baidu offers mobile search, but China Mobile passed up a partnership with it earlier after they failed to agree on terms, according to industry analysts. Millions of mobile customers might lose access to Google's Chinese-language map service.

Chinese Web surfers are blocked from seeing Facebook, YouTube, Twitter and major blog-hosting services abroad, and a Google pullout would leave them increasingly isolated.

China promotes Internet use for business and education, but bars access to sites run by human rights and political activists, and some news outlets.

The biggest impact of a Google departure could lie behind the scenes, where many Chinese companies rely on its AdWords advertising service, Gmail e-mail and documents services.

Those might be disrupted if Beijing turns up Internet filters to block access to Google's sites abroad. Its U.S. site has a Chinese-language search engine, but is already inaccessible due to government filters.

The loss of competitive pressure from Google also might slow Chinese development in search and other Internet services, Yu said. "This is definitely a bad thing for Chinese companies that want to go abroad in the future," he said.

Charles Zhang, chairman of major Chinese portal Sohu Inc., said this in a February speech: "Without full and fair market competition, there will be no quality, no excellence, no employment opportunities, no stability and no real rise of China."

Exit by Google would be blow to high tech in China 03/16/10 [Last modified: Monday, March 22, 2010 5:39pm]
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