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Xinhua: China Seeks More Information On Google Statement - Update


Government officials in Beijing are seeking more information on internet search giant Google Inc.'s (GOOG) statement that it may exit China, the world's biggest internet user market, Xinhua reported Wednesday.

Google said Tuesday that following the recent hacking into some of its G-mail accounts in China, the company was reviewing the feasibility of its business operations in that country. Google, which had agreed to censor some results when it launched Google.cn in China in 2006, said it is "no longer willing to continue censoring our results on Google.cn."

The country's official news agency quoted a high-ranking official with China's State Council Information Office as saying that it was still hard to say whether Google would quit China or not. The official did not reveal more information, but promised to follow the case and accept more interviews if possible, the agency reported.

David Drummond, SVP, Corporate Development and Chief Legal Officer of Google, had said in the blog, "'If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China."

In mid-December 2009, Google detected an attack on its corporate infrastructure originating from China that led to the theft of some intellectual property. However, it turned out that the attack was not a security incident. Google found that a primary objective of the hackers was to access the Gmail accounts of Chinese human rights activists. But, just two accounts appeared to have been accessed, only to the extent of account information and subject line, rather than the content of emails themselves.

The company's investigation also found that accounts of dozens of U.S., China and Europe-based Gmail users, advocating for human rights in China, were routinely accessed by third parties, mostly through phishing scams or malware placed on the users' computers, and not because of any security breach at Google. The company also said its probe showed that at least twenty other large companies operating in sectors such as the Internet, finance, technology, media and chemical, were similarly targeted.

While launching Google.cn in January 2006, Google had said it would carefully monitor conditions in China, including new laws and other restrictions on its services. The company had come under severe criticism for its capitulation to the "Golden Shield Project", also known as the "Great Firewall of China", when it agreed to comply with the internet censorship laws in China.

As per these restrictions, certain searches did not generate the required information, if those key words were part of a blocked list maintained by the Chinese government as in the case of 'independence for Taiwan', 'June 4 1989' or 'the 1989 Tiananmen Square massacre'. Google critics in the United States claim that Google China is a flagrant violation of the Google motto, "Don't be evil".

A departure would deprive Google of an estimated $600 million in annual revenue from China's 338 million Internet users and may help Baidu Inc. (BIDU), which is often called the Google of China, to extend its lead in the Chinese online search market.

Baidu accounted for 58.4% of China's Internet search market in the fourth quarter of 2009, compared with 35.6% for Google, according to Beijing-based research firm Analysys International. Other Chinese Internet portals such as Netease.com Inc., Sohu.com Inc., and Tencent Holdings Ltd. - all of which have their own search engines with negligible market share - could also benefit.

However, Google's ambitions in China go well beyond traditional online advertising and search, and is widely believed to be looking for multiple ways to introduce its Android mobile operating platform in China. Google is estimated to make about $600 million from China in 2010.

Meanwhile, Xinhua also reported that Google's possible retreat from China has prompted the company's 700 China staff to fear for their jobs. An employee with Google's Beijing office reportedly said that the employees were told Google might quit China at a general meeting on Wednesday morning. However, Google.cn was still posting this rider on its searches as of Wednesday evening, Chinese time.

According to media reports, students and others gathered at Google's offices in Beijing and Shanghai on Wednesday with flowers in an emotional show of support for the company. However, few political and Internet analysts doubt that China's government will stick to its tough stance and reject Google's proposal to stop censoring its Web site.

Last year, China pushed personal-computer makers to install Green Dam, a filtering software, on their machines. The government backed away from that requirement in June after the software was shown to slow down and damage computers, though it later said it would require the software on computers in schools and Internet cafes.

In Wednesday's regular trading session, GOOG is trading at $584.04, down $6.43 or 1.09% on a volume of 2.45 million shares. In the past 52 weeks, the stock has been trading in a range of $282.75-$629.51.

by RTTNews Staff Writer

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