Google case lays bare China challenge

Google's threat to pull out of China could force a broader rethink by foreign internet firms that made uncomfortable compromises to operate in the world's largest online market, analysts say.

The announcement that the US internet giant might abandon China after a spate of cyber-attacks, might also just be good business, as it has never matched up to its local rivals, they say.

"This is a very politically charged environment," Duncan Clark, an analyst at Beijing-based high-tech consultancy BDA, said.

"Multinationals have been complaining about 'Buy China' policies, unfair restrictions and hacking... and this is going to be very damaging if there isn't a solution."

The online espionage against human rights activists has led Google to reconsider its business operations in China, and it said it would no longer filter internet search results in the Asian country.

The announcement was applauded by campaigners who had accused Google of trashing its unofficial motto Don't Be Evil when it began censoring search results in China in 2006 to appease the authorities.

Beijing tightly polices cyberspace, employing tens of thousands of people to monitor online postings, chatrooms and blogs.

It also requires companies including Google and Yahoo! to block web users from accessing information about subjects deemed politically sensitive such as Tibet and the banned Falungong sect.

When such searches are carried out, some web pages are filtered out by the companies themselves. Other content listed in the search results may be blocked by government censors and cannot be opened.

"There's a feeling that China is emboldened and that they don't need to have the same sort of dialogue (as before)," Mr Clark said, noting Google's decision to go public could suggest the authorities were not open to further talks.

"This is the mismatch - people here think no one can do without China, and I think now some companies are thinking no one can deal with China."

The Chinese government said it was seeking more information about Google's intentions, state news agency Xinhua reported.

To get around the so-called "Great Firewall of China" erected by government censors, savvy web users use proxy servers or virtual private networks to access blocked websites.

Yesterday, searches for sensitive subjects like the Dalai Lama and Tiananmen revealed photos and results that are often blocked on google.cn, indicating Google may have already stopped filtering.

Google has struggled to take market share from its Chinese rival Baidu, holding more than 35 per cent of the search engine market in China compared with 58.4 per cent for Baidu.

Shaun Rein, managing director of China Market Research Group in Shanghai, said Google might be using the cyber-attacks as an excuse to exit China.

"I think Google is looking for a face-saving way to move out of China," Mr Rein said. "It hasn't done well in China: Google in China has been a complete disaster compared with Baidu."