Wed
13
Jan
2010
Google likely to retreat from China (update)
Please note: the original commentary was moved to the personal blog of the author here.
Google posted an article on its offical blog today stating that it will no longer censor its Chinese language search results even if this means that the company will "have to shut down Google.cn, and potentially our offices in China." The company lists recent hacker attacks from China in order to monitor China based activists as a reason.
This move doesnt come entirely surprising to us, after all we've heard from sources very close to Google's China operations and also after the resignation of Google China's former president Kai-Fu Lee in September last year. The company has been constantly losing market share against its rival Baidu in the last few months and is currently left with a small part (below 30%) of the Chinese search market. The way however Google (US HQ) arguments and prepares its exit of the Chinese search market is very surprising.
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- Bernard Leong » Some Thoughts on Google vs China (2010-01-13 17:14:19)
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26 Comments
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#1
I'm sorry that this happened, and I see it as a big loss of reputation for China. It is true that Google may lose some business, and Baidu may gain some. The lesson for the rest of the world is that China is not a safe place to do business, especially web business. This may change China's future.
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#2
Well, I don't think so...
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#3
“Breaking with China at this point in time is global suicide for any international company in the long run. Period.”
Maybe not. Maybe this will prove the rest of the world can get by without China. Maybe it's time to stop the China hype. -
#4
Hey George,
Agreed. Seems a little too convenient to suddenly get this new found conviction that did not exist 4 years ago when they saw China as a giant mountain of gold. Would they do the same thing if they had 75% market share? Probably would handle it a lot differently - and that alone should be telling, if this were truly simply about ethics. They give no room for China to respond gracefully to this, so I expect China to act very forcefully to this, or simply call Google out on this. Just plain foolish though to fling all this mud under the guise of righteousness. Would have been much more powerful of a statement if they never entered in the first place. It's like saying you would never date your best friend's ex, but only after she's turned you down 10 times before. Admire the conviction, but question the motives. -
#5
well, there's been the argument that Google is doing more good by being in China and having a censored search than to not have any Google presence at all.
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#6
You neglect Google's own argument for why it engaged in China: On the reasonable expectation (at the time, given the upcoming Olympics etc) that the Chinese internet was going to become a freer place in which to do business, and that Google's presence could help speed along this process.
I myself heard that argument from people in the industry a few years ago. After a year of progressive clamping down on sites that do abide by ever-tightening censorship by the Chinese state, nobody makes that argument anymore.
So yes, Google may have been naive in thinking back in 2005 it could both do good in China and make money. But others thought so too. Now Google knows it cannot do good and make money in China. And so it chose to do good.
Those who put money before morals might not understand, but for a company like Google where the free flow of information is part of its genetic code, I don't think this decision was unexpected. The decision to go in back in 2005 was already controversial. This decision to leave is less so. -
#7
I definitely see your point about their Chinese staff and hanging them to dry... It should have been handled better!
That said, decisions from 5 years ago are sunk costs! Google can't and shouldn't keep thinking about their actions from back then, they owe it to themselves and their investors to move forward with that seems to be the most appropriate course of action.
In this case, they decided to play a game of Chicken with China and 10 hours into it, they are winning!
The biggest impact at this point is related to that point you made: Companies cannot do without China!
Google seems set on proving the contrary and I can't blame them... The rest of the world needs china as much as China needs the rest of the world... we all know that yest accept to be bullied in the name of reaching 1 billion potential customers.
What google is doing here seems more like opening Pandora's box and setting a precedent that some other people will follow eventually! Companies within and outside the tech industry will look at their involvement twice before making more concessions... ask the folks behind the Danone group about the concessions they made in China and how those came back to haunt them.
It's gonna be an interesting year -
#8
Nice post. I'm stunned by Google's decision, but I don't know if it's stupid or not. Now it's not only about market share or business, it's about politics.
Anyway, it's pretty entertaining to watch the outcome. I'm curious to see how China will bite back. But does it have to bite back?? Google already lost there :) -
#9
Agreed that the stated reason for Google's pullout doesn't make a lot of sense (that is, unless the "stolen IP" charge is revealed with more detail), but like Beijingdaze I'm really puzzled by your claim Google can't do without China. China already told Google to, ahem, enter its own orifice long ago.
To make this case briefly: most apps hosted by Google are already blocked in China, especially, and lamentably, Google Docs; the Google app store for Android has been blocked off-and-on; our beloved Gmail is subject to regular Zhongnanhai-sponsored outages; and even the play-by-the-rules Google.cn was subject to legal penalties and state media scrutiny that Robin "I get to go on the Spring Festival Evening Program after my company helps do PR for a child murdering dairy company" Li's Baidu will never have to face, yet Google, somehow, was still supposed to do business with China?
These are irreconcilable differences.
That said, I think the decision was too sudden for the Chinese staff. Google may have decided to stop "being evil" by compromising with the Chinese government only to do evil towards its own employees in the end. -
#10
I really have to say your "shot from the hip" is brilliant. Even without "native English" skills you are eloquent.
Agreement is easy with such a clear view.
However, regardless of Google's so called "new ethical position" following this event, it is good to have a company reverse a poor ethical business decision no matter what or when.
I think it matters more that if your company has the power for an ethical stance, you take it as soon as possible.
I think another matter is quite important and visible with this announcement.
Google needs to redeem its integrity. We give great power to companies with great products but those who use their power with integrity.
We expect the same from our governments. We want governments with integrity. (US, Chinese or any other country.)
Media and Tech watches google carefully because we understand their power. We are sending a non-aggressive message to google. "Get your integrity back" and stop acting like an ego maniac. China has much more power.
If this is really an ethical play a quiet "exit: Stage Left" is a smarter move.
Do we have yet another ego problem at the top?
@auge2u
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#11
thanks all for your comments. stinson: i agree that google can live without china as a sales market for a very long time (but not forever). however it, right now, will have a very hard time without china as a development and r&d location. even if not directly through their offices: i know several of the large (us) sw outsourcing companies and what they are doing for which clients from here in china - just like in almost any major industry in the world today, you wont believe how much of the development process is done by contractors in china. no matter if in machine tools or software/internet products. if google is so noble to "boycott" china for freedom of speech reasons it should also stop all (also through subcontractors) production and research in china. lets see if they bluff or not. if they'd go all the way id have true respect for them. a pitty that the import of sw products cant be as easily monitored as cuban cigars ...
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#12
Really excellent post George. Western firms cannot expect that every country they operate in will suddenly do business like they do. I cannot imagine that US counterparts would not also snoop GMAIL accounts under the Homeland directive. Western folk may think what China are doing makes no sense. Clearly China think otherwise and Google will need to rethink which flavor of evil they live with.
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#13
I think it is better to bite the problem now. There is no reason for US to step up its manufacturing in-house. If Apple, Intel and all the big guys slowly move tech production out of China and even if the costs were to go up, I think China would be put to difficult.
The fact that Chinese buy the max US treasury should not worry the US because they have no choice left on grounds of risk. -
#14
I would even go as far as no other major economy in the world currently can .... but thats another topic that we hopefully don’t have to face
But we will have to, soon:
1) When the US eventually stops printing USD liberally to shore up a failed economy, the Chinese bubble will also be forced to end. Perhaps dramatically.
2) Governments will soon face the choice between being friendly with China, support one-way (i.e. "free") trade and the continued export of jobs or be replaced by ever more nationalists incumbents. Losing their jobs and losing China - that is an easy choice really, for a politician.
I think the wheels will begin to come off the bus in earnest when Iceland votes against paying any foreign creditors back in March. This is a default in a 1'st world country, totally new, it will give other people in a similar situation ideas. Bye, Bye "globalisation". -
#15
I am not so sure about this keeping the face thing. China wasnt really improving over the years with all this pleasement. So maybe the outsmart strategy failed. Look what happened in Copenhagen - Chine fooled them all at the end. (But yes, it was also a business decision by Google)
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#16
It might make Google a more attractive employer in China than they already are! It will certainly have this effect in the west. You are assuming that the Chinese people are going to be somehow offended by Google's actions. But the Chinese government is not the same as the Chinese people. I would love to know what the ordinary Chinese bloggers are saying about this.
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#17
I am sure there is a lot more to the story than we know. However, the Chinese government is a simple dictatorship nothing more. Google should have never entered china. I personally will never buy anything Chinese after their display of defiance in the Copenhagen climate conference. I simply cant understand why anyone wants to do business with china, hell with the money, it just aint worth it. Just like pissing in the pants in winter time! P.S I have nothing against Chinese people.
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#18
Love it! After years of kowtowing to the thugs in the CCP, Google finally stands up to these goons. China hype is so 1999, if one of the world's preeminent tech companies can lead by example, why not leaders in other sectors?
I live in China and deal with horrible internet censorship on a daily basis. As somebody who relies on the internet not only for communication, but also to run my business, my productivity is awful and my ability to get things done seriously impaired by China'a awful internet and the GFW. Even in Shanghai, the mainland's largest business center, the internet is almost unusably bad.
So thanks Google for taking a stand and hopefully setting a new precedent when dealing with Chinese scum: China needs the world, the world doesn't need China. We have India (whose people have superior tech skills), Mexico, Vietnam, heck even Bangladesh. All Chin has to offer is cheap labor. The myth of 1.3 billion little American-style consumers needs to go away, the sooner the better. China is still a backwards bit player, despite it's new found economic clout, and worthy of our contempt. Let foreign capital and technology investment flee China for greener pastures, and see how long the odious regime can keep lying to the masses about economic "growth" and "modernization". -
#19
I think you're off the mark here on a few points.
Google can afford to leave China. (period) It's operations elsewhere will benefit from this supposed decision of conscience -- whether it's a sincere decision of conscience is irrelevant.
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#20
Very interesting post, and very interesting points. I have to say that I agree with most of your arguments.
One thing for google's retreat is that, such decision is never a wise one. If google really intend to blame the Chinese government on its censorship or its attacks on the GMAIL accounts, it could act in a more formal, serious and possibly political way. Releasing the message by a blog post looks like kind of funny........ I even doubt whether they really mean it at the first place.
When it comes to China, there are always so many things to blame about. But will people ever think about that the current situation of China is extremely complex with historical reasons? The process of reforming, even in the most ideal case, is never a smooth path. If you don't drive those big guys off their throne, you won't have a chance to have an instant and overall change of the system. However if that really happens, what China has been developing in the past 30 years -- economy, education, national defense, city accommodation, etc - are bound to ruin, which is a thousand times worse than lacking "freedom of speech".
If google ever wants to leverage the freedom-of-speech situation in China, why don't it trying to say and help gradually improve it? A sudden quit looks rather radical. -
#21
Google did not threaten to leave China.
It only refuses to LIE anymore to the Chinese people.
The CHOICE will be left to the Chinese regime. -
#22
a couple of points:
1. below 30% of the a huge market is not "small". 30% of 100 people may be small, but 30% of 1,000,000 is quite a lot. There's lots of money to be made.
2. It does create a lot of bad will between the Chinese gov't and Google, but the pull out does hurt China and its business environment as much as its censorship does. -
#23
+1 Ping Guo.
for once, i'd like to meet a local chinese person talk about this without the whole 'nationalistic' pride thing. i always get so embarrassed for them. they come off as brainwashed and small-minded even if they've had years abroad studying. it's impossible to have a discussion with them.
we don't need china. it's NICE to have. but it's not a need.
i'm sure you like all those nice foreign things like an iphone that comes with wifi? and wouldn't it be nice for once to get the real thing instead of reverse engineering something and pretending it's innovated in china? or oh my! gawd forbid it! - hacking and stealing IP? also, wouldn't it also be nice to have easy access to the rest of the world? broaden your minds a little, perhaps?
google has to step in and slap that issue on the table for you? come on... do your bit for your own freedom. how many people are you again? perfect timing to do something, yes? unless, of course, you're PERFECTLY fine in the filthy basement, in the dark.
what will your technology and web landscape look like in the years to come as a result of this little situation?
what china stands to lose is way more than face here. -
#24
Onyxia, I've added a note at the beginning of the the post. A misleading article on the net linked to this post claiming it was written by "an average Chinese person". Sorry about the confusion. Regarding your iPhone with wifi: Sorry to disappoint you but the production of your fancy American phone was subcontracted by Apple to a manufacturer in China (the company is called Foxconn - google it). Heres a little exercise for you: take at look at the room you're in when you're reading this. Make a list of all items in it like your computer, your screen, your phone, your tv , your clothes, your shoes, your watch, etc. and then check how many of them (or most of the parts that they contain) were produced in China. Oh: and don't get fooled by the "made in USA" label inside your baseball cap. This just means that it was manufactured in China and then shipped to Guam (better google that one too) for the final assembly (=attachment of the label) before it was transported to mainland USA ...
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#25
I am Chinese and there are many comments on Chinese website about this issue now! Apparently most Chinese pople are angry at the government's control on the website. It's a great shame for the government! Facebook is leaving us, Youtube is leaving too, now is Google! things must be changed sometime!!! google is a respectable website, though retreating from China may be not the best choice! Anyway, there are still many Chinese who do support google and there are pro-google comments everywhere on the website!
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#26
produced but nt innovated, yes?
also: http://arstechnica.com/security/news/2010/01/researchers-identify-command-servers-behind-google-attack.ars?utm_source=rss&utm_medium=rss&utm_campaign=rss# 
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