Google Defies China on Web

Google Inc. stopped censoring its Web search and news services in China, a risky and dramatic act of defiance that could prove to be a pivotal moment in the history of U.S. companies’ efforts to do business in China.

Google’s move puts its business in one of the world’s most important markets on rocky ground, using a strategy that seeks to preserve the company’s principles about information freedom while still keeping a foot in the country.

The company Monday said that it was redirecting people who visited its Chinese site, Google.cn, to an uncensored Chinese-language version of its service hosted in Hong Kong. Company officials said Google would continue to host its maps and music search service in China and intends to keep its sales and research operations in China.

The switch began in the middle of the night in Beijing and the unfiltered service became available to people inside China, but authorities can revoke Google’s permission to use Google.cn and have the ability to block or interrupt access to sites in Hong Kong and elsewhere.

Google executives reached the decision after meetings with Chinese officials at which the company discussed its plans but Beijing didn’t sanction them, said a person familiar with the matter. That became apparent Tuesday as Chinese officials issued a swift and angry response.

Early Tuesday in Beijing, China’s state-run Xinhua News Agency quoted an unnamed official at the Internet bureau of China’s State Council Information Office as saying Google had “violated its written promise.”

“We’re uncompromisingly opposed to the politicization of commercial issues, and express our discontent and indignation to Google for its unreasonable accusations and conducts,” the official told Xinhua.

The White House said it respected Google’s decision and voiced disappointment that Google and China couldn’t agree. Google informed the National Security Council shortly before it announced its decision. “Google made its decision based on what it believed was in its interest,” said NSC spokesman Michael Hammer. “We have previously raised our concerns about this issue directly with the Chinese government.”

At the Chinese Embassy in Washington, officials said Google’s announcement wouldn’t change the investment environment in China, which has been profitable for many multinationals. “China is firmly committed to opening up, and continues to welcome foreign companies to come to China to do business within its legal framework,” said embassy spokesman Wang Baodong. “China’s policies of encouraging Internet development will remain unchanged. So will be its policies of managing the Internet according to Chinese laws and regulations.”

Google is trying to continue to offer search services to Chinese users outside the purview of mainland Chinese law, a strategy that few other companies, even those who have expressed growing frustrations with doing business in China, are likely to follow. Google appears to be setting itself up to fight China’s rules on its own and to manage what is likely to continue to be a complicated relationship with Beijing as it tries to ensure the government allows it to maintain some of its operations in the country. “This is an elegant solution if it were to hold, but I’m not convinced China will allow this to continue,” said John Palfrey, an Internet scholar at Harvard Law School.

Chinese officials have said they intend to crack down on routing users from government approved “.cn” domains to Web sites that provide content the government deems illegal. In recent weeks, as talks between Google and China failed to progress, Li Yizhong, Minister of the Ministry of Industry and Information Technology, said the company would have to bear the consequences of being “unfriendly” and “irresponsible.” Officials have also defended their rights to regulate the Internet.

In a blog Monday, Google’s chief legal officer, David Drummond, said the company’s decision to redirect Chinese users to its uncensored Web search and news services is “entirely legal.” He said Google was hopeful “that the Chinese government respects our decision, though we are well aware that it could at any time block access to our services.”

Internet users in China began noticing the changes. Within the Hong Kong site, there were links to Google’s search engine in simplified Chinese, most commonly used by mainland Chinese Internet users, as well as links in traditional Chinese, which is commonly used in Hong Kong. The simplified-Chinese service viewable in Hong Kong looked much like Google.cn, with links to products Google only offers in the mainland, such as its free music search service.

Google said the future of its 600 employees in China depends on how things play out. “Given that we have not yet worked out all the details, we cannot rule out letting people go, though we very much want to avoid that,” said a Google spokesman. “In addition, our plans may require some people to relocate.”

Google said it was in the processing of migrating users who access Google.cn from their mobile phones to the new service. It will stop syndicating censored search results to partners in China as well.

The move is the latest in a series of arrangements Google has tried in China over the years as it has agonized over how to reconcile its corporate opposition to Internet censorship with the desire to establish a beachhead in China, home to more Internet users than any other country.

As of the fourth quarter, Google had 36% of the Internet search market in China compared with Baidu Inc.’s 58%, according to research firm Analysys International.

Google first started a Chinese-language search service in 2000, but operated it from the U.S. so access to the Web site was vulnerable to periodic blocks by Chinese censors, who at times even redirected requests for Google to Chinese search sites.

But Google’s interest in China grew by 2004, when it bought a 2.6% stake in Chinese search company Baidu for $5 million. Google later sold its stake for more than ten times the amount, citing its desires to focus on its own business, and it did.

In 2005 Google established its own operations in China and hired Kai-Fu Lee, a former Microsoft Corp. official, to run it for a hefty price tag of $10 million over four years. It opened Google.cn in 2006, though some executives, including co-founder Sergey Brin, had reservations about censoring the results.

Google’s business in China remains small. Youssef Squali, an analyst at Jefferies, wrote Monday that Google.cn accounted for just 1% to 2% of the company’s net revenue.