China's Google Decision: Careful Maneuver

The Chinese government's decision to switch the Google search engine from China to Hong Kong is actually a carefully nuanced solution that allows both sides to save face, as Asia Sentinel forecast on Jan. 27.

When Google announced last week that it would no longer voluntarily censor its China content, as it had done previously under agreement with Beijing, China seemingly shut off the country's access.

The decision allows China to preserve its tough image of never backing down against protest, especially protest from outside the country, while actually allowing almost all of Google's functions to continue. While it probably will continue to deliver outraged statements about Google's treachery, most observers expect it to quiet down and let the current situation stand.

In a March 22 press statement, Google officials announced that cyber attacks, surveillance of human rights activists, phishing scams and malware " had led us to conclude that we could no longer continue censoring our results on Google.cn. So earlier today we stopped censoring our search services—Google Search, Google News, and Google Images—on Google.cn. Users visiting Google.cn are now being redirected to Google.com.hk, where we are offering uncensored search in simplified Chinese, specifically designed for users in mainland China and delivered via our servers in Hong Kong.

"Users in Hong Kong will continue to receive their existing uncensored, traditional Chinese service, also from Google.com.hk. Due to the increased load on our Hong Kong servers and the complicated nature of these changes, users may see some slowdown in service or find some products temporarily inaccessible as we switch everything over."

But the decision actually allows the search engine to proclaim its dedication to human rights and freedom of speech at the same time it continues to have access to the world's biggest Internet market, with 384 million users, and one that is continuing to grow seemingly without limitation. Users increased by 28.9 percent in 2009 from a year earlier, according to CNNIC, a Chinese government-backed research institute. Only 29 percent of China's population is online.

With Internet users able to go Google.hk instead of Google.cn, Google can continue to operate outside of China and is not censoring its content. Ordinary Chinese users can still use the search engine for normal use. The censorship is not heavy-handed – although there is still plenty to protest about Beijing's decision to deprive its citizens of the free flow of information.

Google will continue to operate its two other lines of business in China -- Google.com, for Chinese advertisers who want to reach the global market and Google's Adsense network with more than 200,000 Chinese sites, for global advertisers who want to reach Chinese users, It is the largest affiliated network in China and includes the leading Chinese portal, Sina.

In addition Google.com.hk will continue to provide links to global advertisers who want to reach Chinese users as Chinese traffic is diverted to the Hong Kong site.

While on the surface Google may be dead, in fact it will probably continue to thrive off of small and medium enterprise exporters who want to continue to market themselves globally. A senior executive of Paypal in China said in an interview that eBay, also thought to be dead in China after its formal retreat in 2007, is also doing well, with SME exporters using eBay to sell globally and using PayPal to collect the money. Paypal China now employs more than 1,000 people to handle their business there. Google should be able to do the same.

It is also uncertain whether Baidu, Google's main competitor in China, will benefit from the decision. Revenue is rather likely to migrate to other online sites. Google had already begun to make considerable inroads into Baidu's market, with its fourth-quarter 2009 share growing to 35.6 percent against 31.3 percent in the third quarter. Google developed a mobile search function much earlier than Baidu, starting in 2007 in partnership with China Mobile, the country's biggest mobile operator according to Google's former China president, Lee Kaifu, Baidu only began developing mobile search last year and last May partnered with the smallest of the three operators, China Telecom. As 3G rolls out, more and more people will search the internet with their phones, making Google's advantage even more apparent if it stays.

A further 5 percent gain on Baidu would bring Google to 40 percent against Baidu's 50-55 percent and it would no longer be just a small rival but rather be a serious competitor to Baidu and a powerful player in China's Internet space.

If Google can continue to navigate the troubled waters and continue to find areas for compromise, it might have even more room to maneuver in the future.

Sherman So is co-author of Red Wired: China's Internet Revolution (redwiredrevolution.com)