Google and China: In or Out?

A lawyer friend of mine once told me about a particularly humorous negotiating session he had in Hong Kong in the 1990’s. At a critical point in the negotiations, it seems, the Chinese counterpart to his Western client kept repeating, in cryptic fashion, the question: “In or out? In or out?”

Google now has to answer that question. The controversy began on January 12 when the company declared that it would stop censoring Chinese search results, and said it was considering pulling out of China. Giving Google the benefit of the doubt, I assume that this declaration followed extensive negotiations with the Chinese media authorities regarding China’s censorship policies. If it did, then bringing Secretary of State Hillary Clinton and the U.S. government into the fray might be seen as a final, last ditch effort to get what it wanted. If not, then Google made a serious error by taking the controversy to that level before it had.

Conflicting comments made by Google since then suggest to me that a serious error in judgment was made. According to a March 12 article in the China Daily:

Google denied it was planning to shut down its business in China by the end of the month, dispelling rumors that it had informed its Chinese advertising agents to cease their business operations in the country. Google’s spokeswoman Marsha Wang told China Daily on Thursday that the company had not ordered its domestic advertising agents to stop doing business. “That’s not possible. Our China operations are still at normal,” Wang said. Google’s China team continued to develop new services, hire people and its businesses were “as usual”, Wang said. In fact, two of Google’s domestic advertising agencies also confirmed to China Daily on Thursday that their business was “running well”.

A day earlier, Google’s CEO Eric Schmidt said at a media summit in Abu Dhabi that he expected “something will happen soon” about its high-profile spat with China. Schmidt said that Google’s dispute with China would be solved “soon” and that the search giant was still in active negotiations with Chinese officials.

I can’t imagine what points Google could possibly be negotiating with China. Given the importance of the country’s censorship policies to China’s leaders, and the elevation of the Google controversy to the highest levels of the U.S. and Chinese governments, it is nearly impossible for China to make any concessions at all at this point. That’s the danger of a company shining the public spotlight on its negotiations with Chinese officials. Rather than causing the other side to change its position as it might do in the West, bringing such pressure to bear tends to harden positions in China. Better to argue your points behind closed doors where compromises can be reached without anyone losing face.

More than a week after Schmidt’s comment, the situation is still unresolved and the outcome uncertain. On Tuesday, Google’s Wang said that she and the whole Google team are waiting for the result of the negotiations. In the meantime, a China Daily editorial this weekend slammed Google and accused the company of staging a “schizophrenic” farce of “I want to leave China” – “No, I didn’t mean it” – “Yes, I do” for web users all around the world.

China can certainly benefit from the participation by global leaders like Google in its information economy, but it does not consider this participation essential as it might in many other industries. In fact, Chinese media officials are on record as saying that China can live without Google. Now that it has drawn its own line in the sand, Google will have either have to leave as threatened, or simply put its tail between its legs and comply with Chinese regulations.

Google and China: In or out? In or out?

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