What will happen if Google leaves China?

Source:Global Times Published: 2010-1-18 9:23:44

Editor's Note:

Google's recent claim that it will stop providing censored search content in China and may withdraw from the Chinese market has stirred public debate. Is Google acting from moral principles, or is this a well-calculated business decision? Global Times (GT) reporters Lu Jingxian and Wu Mian talked to Wang Dong (Wang), assistant professor of School of International Studies, Peking University, Fan Hua (Fan), a corporate lawyer qualified in both US and Chinese law, Jay Xu (Xu), an IT business owner and Nancy Liu (Liu), an IT strategy consultant at an international consultancy, on the causes and impacts of Google's departure.

Google's headquarters in Beijing on January 14, 2010. Photo: CFP

GT: What do you think Google's real intentions are?

Wang: It is difficult to tell a group's true intentions, whether it is a government or a company. On the surface, the decision has moral appeal, which seems to be consistent with the principles Google has claimed to uphold since they started doing business.

Some are claiming that the latest decision is part of its business strategy, but I also think that its moral argument cannot simply be dismissed as hypocritical.

Four years ago, when it entered the Chinese market, Google was widely criticized by many Western human rights groups for compromising its ethics.

Even with compromised principles, its strategy didn't seem to pay off, which was frustrating for Google. This move puts Google on the moral high ground, which is good to its global strategy.

Fan: Google is finding a face-saving PR strategy to exit the Chinese market. Earnings from the Chinese market only account for a small share of its global business.

Google might also face potential legal liabilities in the US. It claimed the e-mail accounts of several Chinese activists have been breached.

The company could face class action lawsuits if many more e-mail users claim they may face the same problem.

Public opinion outside China overwhelmingly supports Google, but to me there is not much content in the hype.

After all, Google is a commercial company and has many shareholders to serve. I would support Google if it did this purely in order to uphold freedom of speech, but I doubt it.

My view of Google didn't change for better or worse because of this. It is a company, and this is a business decision. It has good products, and I will continue using it.


Liu: Google's decision to pull out of China may have something to do with their business status.

Google came into the Chinese market around four years ago, and they are still in the initial investment period, which means the payback is low, if any.

Therefore, Google made the decision to pull out of China when the governing regulation collided with their business principle.

For a multinational corporation like Google, the Chinese market is indeed large, but their chances of profiting were relatively small, so they decided to let go. For them, this is not really a loss.

GT: How will it affect your life?

Fan: I don't use google.cn, I don't believe Google won't continue to provide content in Chinese language or shut down gmail service to Chinese users.

Few of my friends use google.cn. To them, the only difference is two Chinese characters versus six English letters on the main website. Most of the content is the same.

In the long run, innovation and competition in Chinese Internet market will miss a strong rival, but Google is not the only alternative to Baidu.

There is Microsoft's Bing, local Internet companies and Yahoo.

Baidu will still keep strong innovation incentives since it has to compete with Google in the global market. Nobody believed that Baidu can be as big as it is today, but it made it.

Xu: As an owner of an IT business, I have a lot to think about now. Google.cn provides a lot of services, such as free cooperate mailbox and calendar services to small-and-middle-sized companies like ours.

I am a gmail user. I have over 9,000 e-mails in my inbox, including contracts and other important documents concerning customers. I won't take the risk of losing these files if Google leaves China.

Therefore I am thinking of moving the cooperate mailbox and personal mailbox to other servers, which would be a big and costly change to make.

Besides the above-mentioned issue, with Google pulling out of China, many of the applications, such as Google Music and Google Map, might no longer be available.


GT: This business decision has evolved into a diplomatic incident. What's your take?

Wang: Google's move has put the Chinese government in a dilemma.

If we react softly, it would embarrass us, but reacting strongly would cost us more morally.

The best result is that the two sides can reach an agreement allowing us to still use Google.

People are also proposing various conspiracy theories around US government involvement in this decision.

These are always hard to falsify, and there is some plausible evidence, such as closed door meetings between Hillary Clinton and the heads of various high-tech companies, for the case.

We may also approach the issue from the perspective of globalization. Early globalization theorists believed that the rise of multinational corporations and social groups would restrict the power of the state, and this event shows that corporations are capable of offering challenges to sovereign governments.

Fan: We respect Google's business decisions. China opened the door to Google, but it has to abide by Chinese law when doing business in China.

China is a big country, and we do things in our own way. Chinese people can push forward the limits of freedom of speech and I have confidence in the future in this regard.

It is hard to tell how much leverage Google has. The company has made a moral call, but no other company has joined it.

The whole thing is good for Google's image without sacrificing a lot of business. It can still come back in the future.

Liu: I think the Chinese government took a firm and comprehensive stance on this issue.

On the one hand, the government made it clear that Google's behavior was not acceptable, and those IT companies that wish to stay in China need to obey the regulations

On the other hand, the government also made it clear that China's Internet market is still open for competition.

Moreover, what the Chinese government should do now is to help more domestic companies to compete with world-class IT companies.

Monopolies are never a good idea for business.


GT: Who is the biggest loser in this incident?

Xu: I can't really say Google lost much in China. Even with 30 percent of the market share here, the profit Google made in China is nothing compared to their business in the US and Europe.

Their standing up to Chinese government had great effect at home, since most Western media are backing them up.

Google may lose $350 million in China, but they are winning the heart of users at home.

For Chinese users, most of the services Google provided can be found on other search engines, so they should not have much trouble adapting to that.

But the Chinese government is now in a public image crisis because of Google.

They are in a dilemma as to how to respond. If the Chinese government condemns Google strongly, then they will be accused of being against freedom of speech.

But if they step back from the previous hard stance, it will be seen as inconsistent. Therefore the best thing to do might be to remain silent.

Liu: For individual users, we might make our decision on which search engine to use based on how handy it is or how appealing it can be.

But for a country, the consideration is much complicated. They need to consider things from a comprehensive point of view, in this case, taking Internet security into consideration, which is something non-negotiable.

Users are always looking for better services. If only someone else can provide the basic services, which were provided by Google, the users will live happily.

In the short run, Google users may feel uncomfortable without their familiar applications, but this will inspire more and better services in the long run.

We look forward to seeing the emergence of more competition in this field. The short-term winners of Google's pulling out of China should be Baidu and Microsoft.

With Google gone, 30 percent of the market would be open for competition. Baidu has the upper hand, since their technology is better adapted to searching in Chinese.

It will be exciting to see what might happen.



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