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Google’s China Blunder

When the Going Gets Tough…Google Leaves
22 March 2010

by Daniel Michaeli

There was never a chance that the Chinese government would cave to Google’s demand that it end censorship of search results, as I argued when Google first announced its threat to leave China in January:

For the Chinese government to cave in and begin allowing Google to display uncensored search results is inconceivable for many reasons. Here are two: First, Chinese authorities have long seen a “marketplace of ideas” as incompatible with the long-term maintenance of one-party rule, which is non-negotiable.

Second, the communist party, particularly under Hu Jintao, seeks to build internationally competitive companies by sheltering them from foreign competition in the domestic market and helping them undercut competitors abroad with state financing and government contracts. Google’s departure would open up tremendous opportunities for local companies willing to play by the government’s rules.

So, not surprisingly, China called Google’s bluff. Google then had two choices for the Chinese search engine market.

The first option was to back down, recognize that censorship is an unavoidable fact of life in China, and lose negotiating credibility with the Chinese government. The second was to give up the world’s most promising (and largest) Internet market. Astonishingly, Google chose today to give up the search engine market, though it will attempt to continue some of it’s Chinese operations in other areas.

Google’s presence in China was supposed to encourage companies from China and around the world to push the envelope on access to information. Instead, the end of Google’s four-year experiment will only discourage companies from taking risks in this regard. The message is: if the world-leading Internet company can’t make China change, then no one else should dare. Freedom of information would have been better served had Google said nothing at all.

And then there’s the economic angle.  The real concern for Google was not censorship, but intellectual property theft (the hacking incident that started all this). So it really a shame that Google is giving up in the world’s largest Internet market, where it controls a third of the market, for a principle with little relevance to the hacking incident.

American economic competitiveness in the long term will depend on how U.S. companies fare in emerging markets, especially China. So American corporations must not, and probably will not, follow Google’s example. Luckily, there are concrete steps foreign companies can take to challenge Chinese economic policies that disadvantage them, and better approaches Google could have taken; more on that later this week.

Competing in China means abiding by Chinese laws–at least to the point that doing so does not risk the safety of any individuals.

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