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    China Business
     Apr 14, 2010
Page 1 of 3
Google vs China: the endgame
By John Parker

Although the dispute between the Chinese government and Google continues to evolve, there were signs at the beginning of April that a ceasefire may be taking hold, one that could allow both sides to plausibly claim victory. At the end of March, Google failed to renew its Internet Content Provider (ICP) license in China; since an ICP license is required for all China-registered commercial websites, this effectively sounded the death knell for Google's simplified-Chinese search engine, google.cn.

All requests for the google.cn website are now redirected to Google's Hong Kong site, www.google.com.hk. The pullout has obviously damaged Google's business prospects in China, but it is not clear how much, since the company continues to conduct research and development work in China, as well as serving mainland Chinese customers for the company's numerous other

  

products, including mail, translation, online ads, and so on. At the same time, the Mountain View, California-based company could reasonably claim that it had stuck to its well-known "don't be evil" slogan: the company's leaders clearly chose principle over profit by pulling out of China, the world's fastest-growing Internet market.

As for the Chinese government, it sought to force compliance with its policy of censoring the Internet; in this it has succeeded, at least in the short term, since Google's unwillingness to cooperate with the censorship policy led to the company shutting the door, in spite of its arguably great importance to Chinese Internet users.
As of April 12, the Hong Kong site was freely available to mainland Internet users (ie, without requiring special circumvention measures such as proxy servers). The company had set up a special page (http://www.google.com/prc/report.html) to track the availability of various Google pages on the mainland. The relative stability of this table (there have been few changes the last two weeks except for a blip on March 30, the cause of which remains unclear) shows that the standoff between China and Google seems to have stabilized, at least temporarily.

Youtube sites and Blogger are completely blocked, but that is a reflection of longstanding policy - the Chinese government blocks every blog service that it knows about and can't control, and the censorship axe fell on Youtube many months ago. In some respects, the table is actually overly generous towards the Chinese firewall; for example, it reports Google Image Search as fully functional, but in reality the service has been effectively unusable in mainland China for years because images unpredictably fail to load.

Interestingly, although google.com.hk, like Google's other Hong Kong-specific websites, uses traditional Chinese characters instead of the simplified versions preferred in mainland China, the page has a set of buttons allowing users to search for results in simplified Chinese only, suggesting that Google intends to continue serving mainland search customers as well as it can.

Nonetheless, it was not clear how long Google's Hong Kong gambit would last; as Google has acknowledged from the beginning, Beijing could block access to the Hong Kong site anytime it chooses, even though Google's site redirection violates no Chinese laws. This raises two interesting questions: first, will the government block the Hong Kong site, or not? And second, if it decides not to (so far it hasn't), why not?

This writer's own view is that a block is likely eventually because the switchover to the Hong Kong page is embarrassing for the government; the Chinese Communist Party (CCP) is not used to hearing the word "no" from anyone, especially from foreign companies eager to do business on the mainland, and it was clearly caught flat-footed by Google's defiance. In addition, the sudden ubiquity of the Hong Kong page on mainland computer screens raises awkward questions about why, 61 years after the founding of the People's Republic of China (PRC) and 13 years Special Administrative Region (HKSAR) after Hong Kong's return to China, there are still such drastic differences in political freedoms between the Hong Kong and mainland China.

However, one Western expert on the Chinese firewall interviewed for this article predicted that the Hong Kong page would not be interfered with. To elaborate, the main point of contention between Google and China was the state requirement for search filtering (ie, "forbidden" pages omitted from search results); Google's unwillingness to do this for google.cn led directly to the company's pullout. This expert argued that search filtering is only one aspect of the Chinese firewall and not the most important one. The government's basic goal is to prevent Chinese Internet users from encountering "forbidden" information, such as information about the Tiananmen Square massacre of 1989 (aka the June 4 incident). But in order to encounter such information, users must first know about it from another source, otherwise they would not know to search for it in the first place; in contemporary China, where many Chinese under 25 (perhaps most) have never even heard of the June 4 incident, this is a surprisingly effective first line of defense for the CCP.

The second line of defense is the blocking of web pages with "forbidden" content. This line arguably remains intact even if mainland users are conducting unfiltered searches because any "forbidden" page thrown up by the search engine will still be unavailable (without countermeasures). If this view is correct, the status quo may persist indefinitely, since the government may conclude that search filtering is simply not important enough to insist upon. Another argument against blocking of the Hong Kong page is political, related to the "one country, two systems" formula which governs the PRC-HKSAR relationship, and its relevance to the unresolved status of Taiwan.

If the CCP takes a hard line with Google and blocks the Hong Kong site from mainland users or even forces its shutdown in Hong Kong, then the government would become vulnerable to allegations that it had broken its promises to Hong Kong; such an outcome could be used in Taiwan by the Taiwan independence faction, which would point to the interference with Hong Kong's Internet access as an example of what would await Taiwan in the event of reunification.

Regardless of whether such arguments are actually being heard in Beijing, it is clear that the issues raised by the Google dispute are complex and involve high stakes, and that a decision on the case will necessarily involve the highest levels of the PRC government. This is almost certainly the reason why it seemed to take so long for Beijing to make a decision on the Google issue.

At almost the same time that Google began redirecting mainland search traffic to its Hong Kong site, it introduced another measure: the company began encrypting traffic to its gmail email system with the https protocol, so that gmail users in China now have an encrypted connection to the mail server by default. The same expert cited above felt that this measure is more significant, in the long run, than the Hong Kong site redirection.

Since https was intended for e-commerce and electronic banking use, the level of encryption is very high - far too high to be decrypted on the fly, and even decrypting the email messages of a single individual using https would require a major effort. Therefore, in a sense, the government's attempt to spy on gmail traffic may have backfired, since Google responded by protecting its customers' email accounts much more heavily than before. Of course, the government could counter this by blocking all https traffic, but this would be spectacularly counterproductive, since the vast majority of e-commerce sites worldwide would instantly become unusable within China.

The media and public response
Most media commentary on the case focused on the startling asymmetry of the confrontation between the Chinese government and a Western company, which superficially seemed to confirm notions of large corporations as independent political actors; it was as if Google had its own foreign policy. The idea of Google as an independent quasi-state entity was further reinforced by the muddled response to the incident in Washington; so far, concrete action from the US has been lacking, aside from some fairly strong supportive statements by Secretary of State Hillary Clinton. In China, there was a range of responses. The most interesting of these was the hundreds of Chinese Internet users who left flowers and gifts at Google's offices in Beijing and Shanghai. Beijing blogger Song Han, an editor for a financial industry magazine, described the scene at the Beijing office on his Facebook page:
A couple of dozen people gathered there already and the Google logo were covered by bouquets of followers, fruits, farewell notes, a bottle of soy sauce and other wish-well souvenirs. The various notes read, "Thanks Google for the Free Flow of Info", "In Google We Trust - See You on the Other Side", "It was a mistake to come here at the first place but it is honorable to choose to leave", and my personal favorite, quoting Alexander Dubcek, the late Czech leader, in response to the Soviet invasion in the wake of Prague Spring pro-democratic movement: "They may crush the flowers, but they can't stop the Spring."
It is unlikely that the government has missed the disturbing (to them) parallels between these overtly funereal gestures and the spontaneous public mourning for liberal party leader Hu Yaobang. Hu's death in April 1989 closely preceded, and directly led to, the Tiananmen Square protests of that year, which nearly triggered the end of Chinese Communist Party rule.

On the other hand, the xenophobic nationalist contingent was also heard from; for example, many Chinese comments on stories about the Google dustup argued that Google's decision was just an excuse for the pullout and the real reason was commercial failure. In favor of this theory was the popularity of Google's domestic competitors in China, especially Baidu.com, which has generally held a greater search engine market share than Google within the country. But according to web analytics company StatCounter, Google had been closing the gap with Baidu in recent months, increasing its share to 43% from 30% last summer. Many comments have appeared on overseas media websites suggesting other conspiracy theories or otherwise defending the government's stance. But given the Chinese government's well-known practice of paying Internet users to post pro-regime comments around the Internet (these employees are known as the "fifty-cent brigade" or "fifty-cent party" in reference to the payment they receive for each post), it is, at the very least, questionable whether the comments are a true reflection of public opinion.

Ultimately, Google's competition with Baidu would not have been sufficient to trigger a pullout; in terms of market share, the company was holding its own in what is rapidly becoming the most important Internet search market in the world. Furthermore, Google is not just another website; it has become a utility in modern life, like electricity or gas service, used on a daily basis by a large segment of the population. Also, the most net-savvy Chinese are well aware of the deficiencies of Google's domestic competitors, as shown by a 2006 study which found that the wealthiest, best-educated Chinese Internet users strongly preferred Google.

Immediate and root causes
What pushed Google over the edge was a hacking attempt on its gmail email service, which originated in China and compromised the accounts of human rights activists focused on the country. For a company with a "don't be evil" philosophy, this was too much to stomach, especially given the personal background of company co-founder Sergey Brin, who was born in Moscow and lived there until he was six.

According to Brin, his anti-authoritarian inclinations began during his Soviet childhood; he has recalled throwing pebbles at a police car. When his father's career plans were derailed by anti-Jewish prejudice, the family began to consider emigrating. Brin's mother wanted to stay in Russia despite the political situation; what tipped the scales in the decision to leave was Sergey's future - the Brins believed that he would have better opportunities in the US.

This proved to be wise, given that Brin is now a billionaire 17 times over. In dealing with Google, it appears that the Chinese government believed its own propaganda that "China is an indispensable market". The Chinese market is indeed very large, and countless companies, and governments, have kowtowed before it. But in Google's case, the google.cn business was just a tiny fraction of Google's global revenues. Brin had "agonized" over the earlier decision to censor search results, which he characterized as "appeasement". In an interview, he told Fortune magazine, "we felt that by participating there ... that it will be better for Chinese web users, because ultimately they would get more information, though not quite all of it." The hacking incident, coupled with moderate-at-best success of Google's China ventures, was apparently enough to reverse this earlier decision.

Moreover, although China's efforts to attract foreign companies have been very successful, there is a strong sense in the expatriate business community (which this writer is a part of) that the companies are not competing on a level playing field; that they will only be tolerated until their technology can be extracted and then the system will collectively see to it that their market share is transferred to a Chinese imitator. To Google's management, it may have seemed that this exact scenario was playing out. Realistically, a conflict between Google and the CCP was inevitable sooner or later; the difference in mindset between these two organizations could not be more fundamental.

The culture of the information technology (IT) industry in general, and Google in particular, is heavily influenced by liberal, multicultural California and the Massachusetts Institute of Technology "hacker" ethos ("information wants to be free"). The culture of the CCP, by contrast, is deeply paranoid and suffused with fear of conspiracies against it, exactly as one would expect for an unelected ruling clique which originally took power by force and continues to hold it by the same means. Apparently, Google cooperated with the Chinese government's censorship grudgingly and in the hopes that it would be temporary. Instead, during the President Hu Jintao years, even as China's economy has raced ahead and a wealthy, sophisticated middle-class has arisen from nowhere, the repression of free speech and other basic freedoms guaranteed by China's constitution has only increased, consistent with the nearly total lack of political reform during this period.

Continued 1 2


China changes its economic paradigm (Apr 8, '10)

Google wins and loses with exit (Apr 8, '10)

Google blunders in search for China success (Mar 25, '10)


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