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Why Is Google Such a Headache for China?

John Lee

When its executives finally bowed to Beijing’s censorship demands and entered the Chinese market in 2006, scornful Chinese bloggers called the world’s most popular search engine the “neutered Google”. But the announcement last week that Google will no longer censor its Chinese search engine—even if it means closing down its Chinese operations—puts Beijing on the back foot.

If Google gets its way, it will be a permanent breach in the state’s extensive Internet monitoring and censorship “Golden Shield” initiative, popularly referred to as the “Great Firewall of China”. But if authorities hold their ground—which is likely—the fallout for China’s reputation and its cherished soft power will be significant.

It is not as if this is the first time foreign companies have clashed with China. Why then is Google’s defiance such a problem for China?

First, early indications are that the systems of at least 20 foreign companies, most of them from California’s Silicon Valley and including industries such as technology, finance, media and chemicals, were hacked into and interfered with.

The coordinated nature of and sophistication behind these cyber attacks means that Beijing cannot pass off these activities as that initiated by a few rogue organisations, as has happened in the past.

Second, Chinese authorities would not have expected Google executives to respond in this manner. After all, in 2007, search engine rival Yahoo! thought the Chinese market important enough to capitulate and supply Chinese authorities with the online activities of Chinese journalist, Shi Tao, which ultimately led to Shi’s imprisonment for 10 years.

Furthermore, unlike the vast majority of foreign companies who pack up and leave the Middle Kingdom, Google was succeeding. Its share of the Chinese search engine market had doubled to around 35 per cent, up from about half that share in 2007.

Although profits from the Chinese operations currently accounts for an estimated one per cent of its global profits last year, China is its most important future corporate player. Google along with competitor (with approximately 55 per cent of the market) enjoy a virtual duopoly in the world’s biggest market by number of Internet users.

As one of the top 10 most valuable and admired brands in the world, Google’s “ethical stance” has immediately attracted global attention and cannot be dismissed as sour grapes.

Third, the issues raised by Google’s revelations will not die easily. The growth of the Internet in China has long been seen by the West as an important medium through which Chinese citizens could increasingly bypass the government and express their opinions.

Barack Obama is the first US president from the Internet generation. His secretary of state, Hillary Clinton, immediately demanded an explanation of these alleged activities from the Chinese government after the Google revelations came to light.

Beijing has long viewed the Internet with suspicion. Although recognising its importance, the Chinese Communist Party (CCP) has spent an estimated RM3.5 billion on monitoring and censoring the Internet over the past decade. At least 50,000 are employed to operate its Golden Shield Internet initiative.

Indeed, its annual Chinese Academy of Social Sciences Blue Book (released December 2009)—reporting on the annual situation and progress of Chinese society—expressed surprise at the number of bloggers and unauthorised sites that had sprung up, and concern at the exponential rise of “citizen journalists” sharing opinions through blogs and “micro-blogging” avenues such as Twitter.

China will no doubt fear the blow to its reputation as a secure and transparent market for foreign companies to operate in.

But there is a broader problem. In the annual CASS Yellow Book, on China’s situation in the global environment, its researchers ranked Chinese “comprehensive national power” 7th overall, while noting that it needed to make better progress in building its “soft power” before being able to take its place as one of the genuinely great powers within the international system.

Chinese thinkers broadly accept Joseph Nye’s argument that “seduction is almost always more effective than coercion” and that “soft power” is based on the attractiveness of a country’s culture, social and political system, and values.

In particular, when it comes to China’s culture, system and values, the CCP has tried hard to convince the world that its authoritarian developmental model—“capitalism with Chinese characteristics”—is perfectly compatible with both a modern and successful political-economy and a “harmonious” society.

As the argument goes, China is not working against the history of development but is writing a new and significant chapter.

This is why Google has created significant headaches for Beijing. The company and brand is a 21st-century corporate success story that represents modern innovation and dynamism. Now that its executives have thrown down the gauntlet to Chinese authorities by demanding an end to censorship of its services—while stirring up awkward conversations about Beijing’s human rights record as well as the widespread practice of state-backed cyber espionage and violations of intellectual property and privacy—the focus will be on the viability and desirability of “capitalism with Chinese characteristics”.

In the short term, Google may well lose its most important emerging market if the company pulls out of China, with rival the immediate beneficiary. Shareholder disappointment aside, however, its executives are betting that they are erring on the right side of history.

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