Google faces fallout as China reacts to site shift

Google’s fans light candles on the company logo at its China headquarters building on Tuesday in Beijing. Google has redirected Chinese to its servers in Hong Kong.

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Google’s fans light candles on the company logo at its China headquarters building on Tuesday in Beijing. Google has redirected Chinese to its servers in Hong Kong.

Google pushed. Now China is pushing back.

The company's problems in China escalated Tuesday as its ties to some Chinese partners began to come apart and the government reacted angrily to Google's attempt to bypass government censors.

Google, the world's largest Internet company, once saw China, the world's largest Internet market, as a bottomless well of opportunity with nearly 400 million Web users, and an even larger number of potential customers for its nascent, but vital, mobile phone business.

But by directing search users in China to its uncensored search engine based in Hong Kong, Google may have jeopardized it long-range plans.

"I don't understand their calculation," said J. Stapleton Roy, director of the Kissinger Institute on China and the United States at the Woodrow Wilson International Center for Scholars. "I do not see how Google could have concluded that they could have faced down the Chinese on a domestic censorship issue," said Roy, a former U.S. ambassador to China.

Meanwhile, a number of experts said Google's decision to close down the search engine it hosted in China might not cause major problems there right away. But in the longer run, they said, China's intransigence on a basic issue of human freedom and the open flow of information has the potential to weaken its connection to the global economy.

It may also sully its image — promoted to its own people as well as 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. "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, the nation's leaders still put political control ahead of all other concerns.

Google called its move sensible and said it hoped to keep its sales, research and other operations in China.

But some of those other businesses quickly came under pressure. China Mobile, the biggest cellular communications company in China and one of Google's earliest partners in its foray into smart phones, was expected to cancel a deal that had placed Google's search engine on its mobile Web home page. Millions use the page daily.

Similarly, China's second-largest mobile company, China Unicom, was said by analysts and others to have delayed or scrapped the imminent introduction of a cell phone based on Google's Android platform. One popular Web portal, Tom.com, already had ceased using Google to power its search engine. The company is controlled by Li Ka-shing, the Hong Kong billionaire who has close ties to the Chinese government.

Technology analysts and the business executives said Google might also face problems in keeping its advertising sales force, which is crucial to the success of its Chinese language service on PCs and mobile phones.

In an interview on Tuesday, David Drummond, Google's chief legal officer, said he did not see the company's decision to serve Chinese search customers from outside China as an act of defiance. He said the move was consistent with Chinese law and with the company's goal to stop participating in censorship. While it is possible that Google's prospects in China could suffer, the company has yet to see any concrete business impact from its decision, he said.

"We certainly expected that if we take a stand around censorship that the government doesn't like that it would have an impact on our business," he said. "We understood that as a possibility."

But Drummond said that over time, Google would benefit from taking a principled stand in China and elsewhere. "It is good for our business to push for free expression," he said.

Several analysts suggested 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 site, google.com.hk, though that had not happened as of Tuesday.

Users who went to google.cn were automatically being sent to google.com.hk. Google's search engine in Hong Kong provides results in the simplified Chinese characters that mainland Chinese use. Chinese in Hong Kong use the traditional characters, which can contain more strokes and are more difficult to read and write. Government firewalls either disabled searches for highly objectionable terms completely or blocked links to certain results. That had typically been the case before Google's action, only now millions more visitors were liable to encounter the disrupted access to an uncensored site.

The potential loss of cell phone search customers could prove particularly painful over time, analysts say. As on PCs, Google makes money on mobile phones when people click on its ads. If carriers like China Mobile and China Unicom remove Google as their principal mobile search service, it could cut Google's mobile business. Also, the spread of Android phones, which is just beginning in China, was meant by Google to ensure the availability of its services like search and maps on smartphones. Yet earlier this month, Motorola replaced Google's search on Android phones in China with Bing, Microsoft's rival service, because of the uncertainty surrounding Google's fate in the country.

Google faces fallout as China reacts to site shift 03/24/10 [Last modified: Wednesday, March 24, 2010 12:31am]

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