Ever since my last post on the whole Google vs China situation I’ve steered clear of jumping into the fray again. That’s not for lack of material though especially when Google took the impressive step of shutting down its China servers and redirecting all google.cn traffic to their Hong Kong (which are politically and legally isolated from mainland China) servers which put the ball square back in China’s court. I knew it wouldn’t be long before the Chinese government retaliated and I expected that they would do much the same as they have done to other services that don’t follow their rules, I.E. block them outright. Especially when they accused them of being spies.
It seems however that the situation is a little bit more complicated than that:
The Chinese government has attempted to restrict access to the Hong Kong–based servers where Google is offering uncensored search results to mainland China users.
On Tuesday, according to The New York Times, mainland China users could not see uncensored Hong Kong–based content after the government either disabled certain searches or blocked links to results.
Citing business executives “close to industry officials,” The Times also reports that China Mobile – the country’s largest wireless carrier – is under pressure from the government to cancel a pact with Google that puts the web giant’s search engine on the carrier’s mobile home page. The carrier is expected to end the pact – though it doesn’t have an agreement in place with a new search provider.
The Chinese government isn’t stupid and they know that blocking Google outright would just fan the fire that’s swelling up against them. Instead they’ve curtailed the uncensored search engine as best they could to match how it worked previously, leaving the switch to the Hong Kong servers mostly transparent to the less tech savvy amongst its residents (who really wouldn’t have been bothered by the initial censoring anyway). What does come as a surprise is the reaction of the government towards Google’s other businesses which seems to be their way of strong-arming Google back into place.
Initially Google signed on to censor its results as it thought that at least having some presence in China was better than none at all. Whilst the shareholders were unanimously for the move (come on, who wouldn’t want their company to make more money?) they copped a beating from their critics who trotted out their corporate motto of “Don’t Be Evil” as a sticking point for bowing to the Chinese Government’s will. It was well founded as many felt capitulating implied some level of support for the government’s activities which, even at the best of times, been highly questionable to observers. Even more interesting is that the same critics also threw a bit of flak Google’s way for pulling out of China, as it provided them with vindication of their initial stance.
Google didn’t make this decision lightly. Ever since their initial scuffle and rebellion against the Chinese government Google’s shares have taken a whopping 6% hit since January. From a business perspective they would have to judge this (hopefully) short term damage to their stock price as less than what continuing business in China would have done to them, which is saying quite a lot. They’re far from shutting down all of their operations within China’s borders but pulling the plug on their biggest asset shows that they aren’t keen to play games with the Chinese government anymore, despite the damage it will do to its bottom line.
I made the prediction that should Google pull out of China many companies would begin to follow suit. At the time I was really only focused on Internet based companies, as they’re the ones who struggle the most within China’s borders. As it turns out I was right as the domain name giant GoDaddy is discontinuing its services to the region:
GoDaddy.com Inc., the world’s largest domain name registration company, told lawmakers Wednesday that it will cease registering Web sites in China in response to intrusive new government rules that require applicants to provide extensive personal data, including photographs of themselves.
The rules, the company believes, are an effort by China to increase monitoring and surveillance of Web site content and could put individuals who register their sites with the firm at risk. The company also believes the rules will have a “chilling effect” on new domain name registrations.
GoDaddy’s move follows Google’s announcement Monday that it will no longer censor search results on its site in China.
It’s not only pure Internet companies that are looking for solutions to the China problem, Dell has also begun looking to other less restrictive regions as well. So whilst there isn’t a mass exodus of all western based companies from China there is mounting pressure that such companies aren’t willing to deal with the government’s regulations in order to do business there. Honestly I wouldn’t of expected such moves from either company as Dell makes its money on the volumes it moves (provided in the most part by China) and GoDaddy isn’t renowned as a bastion of corporate morals, but they do have the freedom of not being controlled by share holders. Still if two large multi-national companies are willing to throw their weight behind Google you’ve got to wonder how long other companies will put up with China’s restrictive market.
Hopefully enough big names will jump on the Google bandwagon and we’ll begin to see China’s government rethink its restrictive stance. I’m not naive though and I know it will take a lot of pressure for the Chinese government to make any concessions for western companies looking to make a name for themselves on China’s shores. However what we’re seeing now are the opening chapters to a book that still has many pages to be written, and has a long time to go until it’s published to the wider world.