What is the true intention of Google’s threat to move out of China?

So, we’ve all heard about the official blog that Google is threatening to move out of China.  Being raised in Canada, and been living in China the past 2 years learning to understand the rule to play in China, this news really shocked me.

Initial Reactions:

So far, I have heard of two major schools of thoughts. One thought originates from China, and the other originates from the rest of the world.

1. China thoughts: Yes, we have Baidu. We don’t really need Google’s search.  Gmail has the equivalent 163.com, GTalk has the equivalent MSN messenger/QQ,  GoogleDoc has the equivalent OpenOffice/pirated MS Office.  In fact even if the Chinese blocked off 7 out of Alexa’s top 15 websites, life will be the same in China because most of the services has the equivalent service in China.

2. TROTW thoughts: Great play, Google. Live up to the “Do no Evil”  motto. Don’t give in because Google thinks that some Chinese-government sponsored hackers hacked into their infrastructure and got access to their intellectual property.  Fight the communist government like the cold war.  China market was only 200M 600M last year and that is peanuts. Google can let go of this market since it’s not the leader anyways.

3. My reactions: Living in Beijing the past 2 years, I have access to many different news in HK – particularly the ones that got blocked.  Witnessing the H1N1 outbreak,Sichuan earthquake, 6-4 20 year anniversary, I can objectively compare between news coverage in the mainland vs outside world.  I must say,  that I was happy to see great improvement the past few years in how the media is beginning to open up, particularly in the run-up of 2008 Beijing Olympics.  I was happy to be in Beijing because I could see the direction of media, or even government is willing to open up.

Responding to the Chinese school of thoughts – yes I don’t think the withdrawal of Google will affect daily life in China.  But think about it, only recently (last 6 months) that we FINALLY saw Baidu moved away from the price-bidding keyword on the first 10 pages of its search result, and added more organically generated results.  If it wasn’t for Google’s “small influence” of 35% 20%, according to FT.com (I read conflicting reports- are they trying to downplay the political reasoning and stressing that it’s mostly financial reasons?) usage rate in China, I can assure you that Baidu’s first 50 pages of results will be all purchased sponsors.

Responding to the rest of the world’s thoughts – if most people think that it was because of financial reasons prompting Google to leave – that’s the most outrageous thoughts I have heard so far – especially that it was the view that Financial Times seems to be taking.  Yes, currently China market provides very little for Google’s revenue – but WHAT FOREIGN COMPANY IS MAKING MONEY IN THE FIRST 10 YEARS IN CHINA? No matter what company it is, what country it is in – when it comes to operating in a new market it takes time, money, and patience.  I think given Google’s office of 800 people,  getting 600M revenue and 35% of search, along with lots of Chinese-tailored innovations  (maps, voice search, music) itself is quite a feat. Good work, Lee Kai Fu!

What it means in the near and long term

I’m worried. As search results in China becomes uncensored, Chinese government can only do one thing: block Google and anything Google-related.

1. Gmail outage – mail.google.com will be the most impacting service.  Many people in China uses gmail. I’m  pondering how I move all my mail off the server now.

2. Google Maps – I don’t have an official statistic of how many web services uses Google Maps as its base, but there are quite a  few.  There are alternatives in China (MapABC, Microsoft, etc) but it still takes some time for companies to switch over.

3. Search – yes, eventhough there are only 35% of Chinese internet users using Google, these 35% are really the people  who are more educated, higher income – urban, young people, professionals. (Sorry I can’t find any studies regarding this,  I wonder if I can find something  like this once I do a google search with a VPN on, or heck, when I google now).

4. Music – no, Google is not a big player in music in China and there are MANY other alternatives.  However, with Google shutting down the music service, it may terminate a testing ground for other companies to step in, and offer the free-music model to the rest of the world.

5. Android – yes, Android. With Google’s plan to release more phones and better software, and China’s strategy to provide cheap, unbranded phones running the Android service, the open-source software was set  to explode in the next few years.  Now, if Google pulls out – does it even allow the phone to turn on?  Or do  phone manufacturers in China embed a VPN into the phone so people can login?

6. Internet industry overall – it’s actually not a bad thing – that Google cannot dominate the world.  I do get scared that Google has grown so big,  and that its services reach to everyone so deeply.  It’s good to be able to have a 2nd competitor to come in – but I’m just not sure if Baidu is the player I want to see competing.

What it means to international businesses intended to go into China

What bothers me most, is what it signals to international businesses. It’s not the first time that a major business pulls out of China siting inappropriate business climates.  However, whenever the industry leader does this,  it signals to the world that, “China is not ready”.  Whatever China was trying to do,  like joining the WTO, climate  conferences,  just seems to go down the drain.  In fact, it seems as if China just turned backwards 20 years, if China blocks out Google.  As a Chinese-Canadian, I am torned about the fight between the borderless Internet giant and China.

So why, why would google say such a thing?

Why is Google doing this? Is it the beginning of another Cold War? Google knew about hackers all along, but what really prompted Google to pull out?

It may think that because it is #1 company in the world, it has the bargaining power.  But my dear Google, who are you trying to bargain with? CHINA! There is no way that the government will budge, especially recently China showed its strong approach in the execution of the British drug smuggler, and even the showing at the Coppenhagen Climate conference.

More interestingly,  the US Government seems to want to get into the action, by announcing tools to help people around the world to get pass their respective countries’ firewalls (FYI, China is not the only country that filters its internet).

a few reasonings that I can think of:

1. Google has strong evidence that Chinese government is behind all the hacking attacks,  and showed it to Hilary Clinton.

2. Google wants to play the “Do No Evil” rule, in order to win over the consumers and governnents in the rest of the world – so they can own more of your data. (Now that’s EVVVILL)

3. The US government fully supports this action – although knowing that their involvement will turn into quite a international scene that will eventually turn into a cold war.  US government assure that they will  use their treasury to support Google’s stock price and future profit. (Which is already true, since many US State governments uses Google services)

What will be the best outcome?

China – we will investigate about the hackers. In the mean time, if Google intends to continue the uncensored search, after some warning, we will have to shut it down, and you will need to move out of China.  So make up your decision within the next  N months.

Google – we realize that our decision is very immature, and we respect different culture has different needs/rules.  We will re-examine our decision and adhere to government rule within the next N months.

US government – don’t intervene.

Worst case?

Cold war all over again – foreign investments/companies/personnels moving out of China – there will be two separate worlds.

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