A few days have passed since Google China received its licence approval from the Chinese government, and now that things have cooled down, it’s worth taking a look at how the company fared. There are three possible interpretation scenarios for Google in China; they are win, lose and draw.
Let’s take a closer look at each one:
- The Google win scenario: Google won in its contest with the Chinese government in its campaign against censorship. It no longer maintains a censored search engine in China (google.cn) and its search engine now points to the uncensored search engine in google.com.hk, even though this page is hosted in China, not Hong Kong. Google can argue that while the Great Firewall of China may filter out certain search results for sensitive terms before they reach the search user in China, Google does not pre-censor those results.
- The Google lose scenario: Google threatened to leave China over the issue of censorship, but then when it realised how important the Chinese market is, it backed down. Now the company is completely humiliated, and has lost valuable revenue and market share to the leading Chinese search engine Baidu. Furthermore, Google has lost the trust of the Chinese government and will be unable to enter the most valuable market, mobile, which is key to Android’s success. At best, Google is just a weakened shadow of its former self, and the Chinese government will keep Google boxed in a small space in China.
- The Google draw scenario: Google will continue to operate in China, but it will continue to operate under the close scrutiny of the Chinese government. It will take time to rebuild the relationship, and Google will have to quietly earn the trust of the Chinese government if it is going to be able to grow market share in China again. At the same time, the Chinese government doesn’t want Google to become a high-visibility test case for the west; in the coming year, there will be many other areas for economic friction with the EU and US, and Google is especially popular with human rights campaigners. It is wiser for China to keep Google off the table.
Of the three scenarios, the Google draw scenario is most plausible. By choosing open confrontation with the Chinese government, Google took the riskiest, and for many observers, the most obtuse approach with the Chinese authorities. This was because it offered almost no face-saving way out; the choice was seemingly cast in black and white. But in fact, both sides eventually managed to find face-saving climbdowns. From the Chinese government’s perspective, the draw scenario offers the following benefits:
- The Chinese government can’t be criticised for supporting the local leading Chinese search engine Baidu on narrow nationalistic grounds. (In fact, the Chinese government has been critical of Baidu’s business practices in the past, going so far as airing documentary exposes on Baidu’s business practices on the Chinese version of “60 Minutes” on the national news channel, CCTV.)
- Domestically, having Google as a competitor for Baidu is healthy; it keeps them comparatively honest, better than if there were no competitor at all. If Baidu gets too cocky, then the authorities can issue more licenses to Google to compete in new areas such as mobile.
- The Chinese government likes to play the kingmaker role in each vertical industry sector. If it’s going to be a successful kingmaker, it needs competition among the players. If Google was completely shut out of China, there would be no kingmaker role to play. By keeping Google in China, it can continue to balance out the different players by handing out licenses selectively. And Google needs a China presence, especially as there will be strong competition over smartphone platforms.
- The Chinese government knows that Google badly wants to get into the mobile advertising field; that is the only chance the company has at making sizable revenue in China. For this reason, it’s unlikely that Google will make further public confrontations with the Chinese government.
- If there are problems with Google in the future, the Chinese government can always refuse to renew its annual licence.
Most westerners are used to one side winning or losing very publicly. This seldom happens in China. In China, dealings with the government and business are continuously about tweeking and rebalancing. And nobody publicly claims to be the winner and loser, even though they may have their own private opinion. Have you noticed that there have been no press releases from Mountain View headquarters claiming victory in the confrontation with the Chinese government? Google is learning…
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