Google threatening to quit China

The threat by the world's leading Internet search provider may win it praise for seemingly putting ethics above business, but give Microsoft and a handful of local rivals an edge in the huge yet problematic Chinese Internet market.

Google generated 53 percent of its US$5.9 billion in third-quarter revenue outside the United States, although it does not disclose the size of its business in China.

While Google's potential exit from a Chinese search market that is growing at 40 percent would have little impact on its short-term revenues, analysts said that cutting itself out of this important market may carry a longer-term strategic cost.

Google issued its warning after discovering what it called "a sophisticated and targeted" cyber attack on its email service. Google said it believed hackers were targetting Chinese human rights activists.

That attack follows years of frustration in China for Google, which was heavily criticised for self-censorship when it entered the market in 2006.

China has more than 350 million Web surfers and annual search revenue topping US$1 billion, but its Internet market has been a thorny one, with companies having to adhere to strict self-censorship rules dictated by Beijing.

Anyone disobeying those rules, which prohibit sites on sensitive issues like Tibetan independence or the outlawed Falun Gong spiritual movement, can have their site blocked or closed.

"Google's move is related to censorship and not a business decision at all," said a high-level industry executive close to Google's former China chief, Lee Kai Fu, speaking on condition of anonymity because of the subject's extreme sensitivity.

"Google has been agonizing for a very long over this decision. Since last year, Google was talking about making a gesture to show the Chinese government it will no longer tolerate strict censorship over its operations," the source said.

In a statement, Google's chief legal officer David Drummond said the cyber attacks and other attempts to limit free speech on the Web had prompted the company to review its China business.

"We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all," Drummond said.

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