The Google-China Affair: An Insider’s Perspective

When Google’s chief legal officer David Drummond made the read-round-the-world January 12 blog post that the US search engine giant was seeking “a new approach to China” and “no longer willing to censor our results” (an announcement with all the subtlety and nuance of a jackhammer), an immediate shockwave was sent through the Chinese business community – comprising of both foreign and domestic players who are reliant on Google’s services for revenue.

Google’s “threat” to cease self-censoring its search results also included a warning to altogether pull the plug on its China operations.

Foreign Companies in China React

The reaction among foreign businesses was immediate – but mixed. Internet and other foreign new media ventures have not fared as well in China as their more “bricks and mortar” peers; neither GE nor Nike would have done what Google did. While Google may be the lone multinational company airing its China gripes in public, there is definitely more chatter among western companies that the China business environment has become trickier – but the chatter is definitely more nuanced and wordsmithed.

Some have sought to play up Google’s threat in nationalistic terms: American companies represent “certain values” and all American companies believe in these values wherever in the world they may operate. Not true as these people tend to forget that most western companies operating in China wish to remain (and hopefully thrive) in the Chinese market for the long-term – regardless of the challenges.

American businesses in China have not formed a “Band of Brothers” – a united front to criticise the business environment in China just because of Google’s unorthodox step. Where the companies do tend to agree is on the broader issue of the right to security, privacy and protection of private cyber-data, away from the prying eyes of computer hackers. This is a non-controversial issue which essentially asks that companies to be allowed to participate in a fair and legal global playing field. The American Chamber of Commerce in China, speaking on behalf of American companies in China, also viewed the Google issue through the context of cyber-security and not of human rights and censorship. In a statement, they wrote: “we are concerned about the security of commercial correspondence, data and networks.” I don’t expect China business champions such as Coca-Cola, GM, Starbucks, Visa and Wal-Mart to start firing off emotional corporate press releases about political issues anytime in the near future – the corporate-speak niceties are sure enough to continue.

Keep in mind, Google literally threw the “how to handle delicate corporate communications for western companies in China” handbook out the window. Foreign companies operating in China tend to be overly cautious and prance around the more sensitive political issues – even to the point of being deferential. Nearly every press release from multinational firms in China extols their “deep commitment to China” and their “synergy and alignment with the Government’s development objectives.” By their very nature, companies seek to avoid conflict, controversy and politics as public sport.

Their end game is to raise equity value for their shareholders – period. To expand their market presence in China, foreign companies have played by local rules.

According to China expert James McGregor in a piece published in the TIME:

Multinationals have been solid citizens in China, handing over heaps of capital, technology, training, source code, best practices and proprietary products to joint-venture partners they were forced into bed with. They have funded schools, orphanages, disaster reconstruction, overseas scholarships and all manner of poverty-alleviation programs.

Given how most American companies in China have gone “above and beyond” in trying to access the Chinese market, there is a sense beneath the diplomatic surface that western companies in China have noticed a more difficult business environment over the last two years.

Will Google Disappear in China?

The closing of Google’s operations in China – which seems less and less likely every day – would mean the closure of its offices in Beijing as well as the likely shutdown of Google.cn, the search engine’s Chinese language version. It’s important to clarify that Google.com has coexisted with Google.cn in China, where you can access Google’s main English search engine or use its Chinese version. Even if Google were to cease operations in China, it’s very unlikely that access to Google.com would be blocked – content deemed inappropriate would simply be inaccessible – as it is today.

Google.com wouldn’t have to self-censor content for it to be unavailable in China.

The discussions on whether or not Chinese subscribers would still have access to Google following its departure from the China market have, undoubtedly, been abundant. However, the fact is online users will continue to be able to use Google. Services such as Google Mail, Google Earth and other Google applications will likely be available after a local departure.

Google’s threat is important because it means hundreds of Google employees would lose their jobs – although I imagine they will find other opportunities. The looming shutdown would also mean that Baidu – currently China’s market leader in web search would monolopise the market. While that may be advantageous to Baidu’s employees and shareholders, it is not good as an overall development for China’s internet industry. Case in point: Baidu’s fourth quarter earnings jumped by 48 per cent and already accounts for 60 per cent of China’s search market.

Remember, competition is good. It keeps companies on their toes, always sharp, innovative and attentive to real-time changes that are needed to satisfy customer demands. Competition also helps to seed an industry. Keep in mind that Pepsi Cola was the best thing that ever happened to Coca-Cola.

Perhaps the most important issue stemming from a possible Google departure is the one that had received the least attention from worldwide media. Many Chinese small-to-medium enterprises rely on Google’s China service to drive awareness and revenue via advertising. With China having over 3.23 million websites and the largest number of internet users in the world, the Google.cn demise would result to a catastrophic end to AdSense revenue-reliant companies. Likewise, Google SEO professionals would also be poised to lose their jobs.