April 19, 2014

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Google Threatens to Leave China

The big news today is Google’s carefully worded statement changing its policy toward China. Up to now, Google has run a China-specific site, google.cn, which censors results consistent with the demands of the Chinese government. Google now says it plans to offer only unfiltered service to Chinese customers. Presumably the Chinese government will not allow this and will respond by setting the Great Firewall to block Google. Google says it is willing to close its China offices (three offices, with several hundred employees, according to a Google spokesman) if necessary.

This looks like a significant turning point in relations between U.S. companies and the Chinese government.

Before announcing the policy change, the statement discusses a series of cyberattacks against Google which sought access to Google-hosted accounts of Chinese dissidents. Indeed, most of the statement is about the attacks, with the policy change tacked on the end.

Though the statement adopts a measured tone, it’s hard to escape the conclusion that Google is angry, presumably because it knows or strongly suspects that the Chinese government is responsible for the attacks. Perhaps there are other details, which aren’t public at this time, that further explain Google’s reaction.

Or maybe the attacks are just the straw that broke the camel’s back — that Google had already concluded that the costs of engagement in China were higher than expected, and the revenue lower.

Either way, the Chinese are unlikely to back down from this kind of challenge. Expect the Chinese government, backed by domestic public opinion, to react with defiance. Already the Chinese search engine Baidu has issued a statement fanning the flames.

We’ll see over the coming days and weeks how the other U.S. Internet companies react. It will be interesting, too, to see how the U.S. government reacts — it can’t be happy with the attacks, but how far will the White House be willing to go?

Please, chime in with your own opinions.

[UPDATE (Jan. 13): I struck the sentence about Baidu's statement, because I now have reason to believe the translated statement I saw may not be genuine.]

Comments

  1. tomslee says:

    I am a frequent critic of Google, so it is good to see it do the right thing. The one thing I disagree with is “it’s hard to escape the conclusion that Google is angry”. Companies don’t have tempers, unless the company is a reflection of an individual’s ego, so I’m not sure what this would mean. That it acted in haste? Emotionally? I doubt it.

    One data point I would find interesting – how is Google doing against Baidu? I know it was 2nd place some time ago.

    • felten says:

      Companies may not get angry in the same way that people do (except, as you note, when it’s just one executive getting angry). But companies can *behave* angrily.

      Angry behavior has strategic value, when it deters undesired behavior by others. Angry behavior sends the signal that the actor is willing to retaliate more strongly than expected if certain lines are crossed. A strategic actor will sometimes show anger even when doing so looks irrational in the short run, because there are long-run benefits to sending the signal that those who exploit the actor’s good faith will end up sorry.

      • tomslee says:

        I don’t believe in a Nixon Madman theory for corporations.

        The success of the madman theory depends on the credibility of the signal – the agent may actually be irrational – and in this case that means that the company would not only behave angrily for the purposes of signalling, but that it may be an angry entity – but you agree that an angry company is not a reasonable idea, so the signal will not be credible.

  2. tomslee says:

    Ooops – I didn’t mean to put my URL for the subject. That’s just the way a lot of comment boxes work.

  3. Michael Nielsen says:

    Where’s the Baidu statement? The first hits I get indicate that Baidu hasn’t yet made a statement – I presume that will change very shortly.

    • felten says:

      After more investigation, I no longer trust the accuracy of the translated Baidu statement I saw. So rather than adding a link to it, I revised the post to not mention it.

  4. Anonymous says:

    No statement from Baidu themselves but one from a high ranking Baidu employee, translated here: http://www.zonaeuropa.com/201001b.brief.htm#006 (note that the link to the original post on baidu.com no longer works.)

  5. Lior says:

    Closing the business office is mainly a choice-of-law and PR move — without physical presence in China Google won’t be bound by Chinese law, and looks like they did something. This isn’t a substantive change — it doesn’t change the services offered by Google, the experience of any users, or protect gmail users from hacking. I won’t be impressed with them unless they genuinely pull out of China, that is when they remove all .cn (or at least .gov.cn) sites from the index.

    • felten says:

      The importance of this step is more political than technical. Google is defying the Chinese government, and signaling that it is potentially willing to harm its position in the Chinese market significantly rather than continue business as usual.

      This move won’t make Google popular with Chinese users either. This will be seen as a snub to China as a whole. Nationalism will drive more users to Baidu, and to domestic Internet services generally.

  6. Anonymous says:

    Google has been happy to hand over details to the Chinese govt on request – so is it really the govt that’s responsible?

    • Flamsmark says:

      To my knowledge, Google has strongly resisted turning over personal data to any government: US, EU, or PRC; only Yahoo has done so. Do you have a link to the story to which you refer?

  7. Uffe says:

    I have a personal website (ie not much content except some PDFs I use when teaching), hosted on a server I have sitting under my desk. It’s only connection to internet is my (slow) ADSL connection.

    Not long ago, I was looking through the log files of the server, and found that one IP address in Cina had been trying to log on via FTP once a second for the last 30-40 hours. Looking farther back in teh logs, I found a total of 380000 (yes three hundred and eighty thousand!) attempts to log on. Thankfully, all failed.

    I sent an email to the relevant ISP pointing out this to them. A few days later, I was once again under attack from an IP address in China. And from the same ISP! I thought this was too much, and blocked the ISPs entire address range.

    I also sent an email to the Chinese embassy in my (Western Europe) country, more or less accusing the Chinese government from either condoning this behaviour, or actually encouraging it (alternatively being the source of it). I have to date, several months later, not received any reply. I cannot interpret that as anything other that that my speculations are correct. (If they had replied they could have said the Chinese government does no such thing, and I cannot prove them wrong…)

    • Andrew says:

      Uffe, there are 50% more internet users in China than in the US (which is #2 in number of internet users). There are a lot of hackers there, and lots of misbehaving/virus-infected computers there. There are a lot of bad ISPs there.

      Same thing you see in the US, just on a larger and more rapidly growing scale.