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China faces tough challenge over Google dispute

Fri, 01/15/2010 - 7:01am
JOE McDONALD - AP Business Writer - Associated Press

At a time when they wanted to focus on the economy, Chinese leaders face a surprise political challenge: A possible Google pullout that could anger China's public and embolden other companies to vent grievances.

Google Inc.'s threat to shut down its China-based site Google.cn over censorship and e-mail hacking alarmed a Internet-connected public that has tolerated a gap between rapid economic and technological progress and a closed, secretive political system.

"The political outcome is that it could stir up a restive group of people, which is the younger people and the Internet users in China who may look at access to information as a civil right," said James McGregor, a senior counselor for consulting firm APCO Worldwide Inc. and a former chairman of the American Chamber of Commerce in China.

That potential Internet lobby is vast. China's online population soared by nearly 30 percent last year to 384 million people, bigger than the whole U.S. population. It includes the Chinese elite of entrepreneurs and professionals who have benefited most from economic reform and usually support the ruling party.

Other companies that accept pervasive controls in exchange for access to China's huge and growing market appeared unlikely to follow Google's lead. Still, there could be less drastic changes in their relations with Beijing.

"We're not going to see a lot of foreign companies stand up and walk out of China but you might see a lot more foreign companies standing up and being much tougher in dealing with what they consider to be an unfairness in market access and trade issues," McGregor said.

The timing of Google's announcement was awkward for the Chinese government, which is consumed with managing its 4 trillion yuan ($586 billion) stimulus and international efforts to end the global economic slump.

The Commerce Ministry tried Friday to avert damage to ties with Washington and business confidence, promising investors good conditions and saying U.S.-Chinese trade ties would not be affected by a Google departure.

But the government had yet to respond to the substance of Google's complaint, which goes to the heart of Internet controls that communist leaders believe they need to protect their monopoly on power. Beijing blocks access to Web sites abroad run by human rights groups and dissidents and material deemed subversive or pornographic.

Political analysts say the government may be waiting to measure the level of public sentiment before deciding how to proceed.

Foreign Minister Yang Jiechi defended the controls during a meeting Friday with his visiting German counterpart.

"China's Internet regulations are implemented in order to maintain a stable Internet environment and to prevent harm to people's physical and mental health," Yang said.

Many in China's public disagree, to judge by the bundles of flowers left outside Google's Beijing offices this week and pleas on Internet sites for it to stay.

It was a striking show of support and affection for an American company in a society where foreign investors have created millions of jobs but are regarded with distaste by some Chinese officials and a vocally nationalistic segment of the public.

Chinese critics suggested Google's censorship complaints were cover for pulling out due to poor business performance. Google.cn, set up in 2005, trails local rival Baidu Inc., with a 35 percent market share to Baidu's 60 percent.

"Google if you want to go, please go ahead. Without you, the sun will still rise in China," said a note on the tianya.cn Web site.

But Google also has millions of Chinese admirers. One group created a Web site, hosted on a California blog service, whose plaintive title says it all: www.googlebiezou.com — Chinese for "Google, Don't Go!"

"Google I haven't been able to live without you since 2005," said a note left by one of the site's 291 members. "If you go, what will China's netizens do?"

Such sentiments might extend to the princelings, children of the communist elite who have played on family ties to make fortunes from partnerships with foreign investors and might be uneasy about alienating them.

"Around the dinner tables of the senior leaders, given that their relatives are working in companies like this, will there be pushback?" said Duncan Clark, chairman of BDA China Ltd., a technology consulting firm in Beijing.

Chinese and foreign businesses rely on Google's e-mail, maps and other services based abroad, which could lead to disruptions if authorities try to retaliate for a Google pullout by blocking access to its U.S. site.

The conflict also could fuel trouble for China's companies abroad, where its swollen trade surplus and complaints about trade barriers are straining ties. Chinese investments in mining and oil face opposition in Australia and elsewhere.

"Chinese companies abroad will start hitting a ceiling caused by this stuff happening at home," Clark said. "Being Chinese might be a liability."

Beijing caused a similar uproar in 2002 when its new filters blocked Google's main site outright. Scientists pleaded that they needed it to find information online. The government of then-President Jiang Zemin relented and eased access.

"That was hailed at the time as a victory of common sense," Clark said. "Will they be able to do it again?"

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