Google withdrawal from China imminent

Citing China-based cyber attacks as spark to new action, Google will no longer censor search results

Google on Tuesday afternoon announced that it was no longer willing to cooperate with China in the censorship of search results on Google.cn, the company's Chinese Web portal. Recognizing that such a move could result in the closure of Google.cn and shutting down of offices in China, Google says it wishes to renegotiate a deal with the Chinese government that would allow the search engine to continue to run unfiltered.

The chances of such a deal materializing? Somewhere between highly unlikely and impossible.

After four years of catering to the government's censorship demands, Google has finally uncovered something that it refuses to put up with: theft of intellectual property. According to a statement made on the company blog by Senior Vice President, Corporate Development and Chief Legal Officer David Drummond, Google discovered a "highly sophisticated" attack, originating in China, targeted at Chinese human rights activists. A couple GMail accounts were actually compromised in the attack, though only to a limited degree.

China's censorship policies, strictly enforced on the Internet, are well-known to tech enthusiasts. Google's statement yesterday almost guarantees the closing down of Google.cn, since very few people can imagine the government of China conceding to the company's desire for more openness. But still, the future remains uncertain.

Because of the highly sensitive nature of the attack involved, even the US government has gotten involved.

"We have been briefed by Google on these allegations, which raise very serious concerns and questions," said Secretary of State Hilary Rodham Clinton. "We look to the Chinese government for an explanation."

In abandoning China, Google won't be risking as much as it would if it took the same course of action in the U.S. or in other countries, where, with over half of the market share, it would be shunning its long-held number one spot. With 64% market share, Beijing-based Baidu is the king of Chinese search engines. If Google were to let go of its 31% share of the search market, not only would we see Baidu strengthen its hold on search, but we'd also see smaller engines seeking to grab more attention and users.

"With the easing of competition from Google, it's actually going to benefit everybody. The small operators now see an opportunity to gain some market share," said Elinor Leung, an analyst at CLSA. "If Google pulls out from the market completely, it will be a fight between Tencent, Netease and Sohu for the number two spot."

According to J.P. Morgan Research, Google should be generating around $600 million in revenue from China in 2010. None can say truly, however, how much Google would lose in leaving China's 300 million Web users.