The Chinese market continues to whisper its siren song. Google, the internet giant, is reportedly planning its return to China with a search app that would comply with the Chinese government’s censorship requirements. It may seem like a curious move for a company whose motto was once “Don’t Be Evil.” Now, however, its motto is “Do The Right Thing” — and that would seem to include tackling a huge and growing market that Google is effectively excluded from today.
Google was once a major player in the Chinese internet. It operated a Chinese-language search engine through its U.S. website, Google.com, but the company decided to offer a locally based version — Google.cn — in 2006. To do so, it had to comply with Chinese laws that strictly regulated content. That, Google explained, was consistent with company policy in other jurisdictions. Moreover, “while removing search results is inconsistent with Google’s mission, providing no information (or a heavily degraded user experience that amounts to no information) is more inconsistent with our mission.” Google did, however, inform users when information was removed from search results.
That position worked until 2010 when Google revealed that its computers had been hacked and the accounts of Chinese dissidents living abroad penetrated. While the Chinese government denied any responsibility for the attacks, Google decided to abandon its China-based search engine and instead routed users to an uncensored version based in Hong Kong. The move made it easier for Chinese authorities to block access to the site and thus search, along with other Google services like YouTube, Google Docs and Gmail, remained out of reach ever since.
The hacks spotlighted decisions that Google had made to win a place in China. Sergey Brin, one of the company’s co-founders who was born in the Soviet Union, explained that “In some aspects of their policy, particularly with respect to censorship, with respect to surveillance of dissidents, I see the same earmarks of totalitarianism, and I find that personally quite troubling.” It became clear that the price of compromise was too high. Google only claimed about one-third of Chinese searches, losing out to China’s own Baidou search engine, which dominates the market. That limited market share still exposed the company to considerable heat in the U.S. from politicians and human rights activists.
Yet the Chinese market continues to expand. There are nearly 800 million internet users in China, more than six times Japan’s entire population and more than twice that of the U.S. Google has a presence in China, but it is limited — and nothing compared to the advertising revenues that would be generated by a robust search presence, even if it was restricted.
Equally important, some of the world’s cutting-edge technologies such as artificial intelligence, are being developed in China and Google, like other companies, wants to be part of the ecosystem to stay atop the class. Last December, the company set up its first AI lab in the country. This promises to be profitable as well: While 90 percent of it Google’s money comes from advertising, AI-related products and services are generating an estimated $1 billion each quarter.
The problem for Google is that the compromises it made over a decade ago, and disavowed a few years later, are no less formidable. The Great Firewall has become higher and stronger still, and China’s use of technologies for surveillance and social control has become more obvious and more effective. If Google had moral issues then, the quandaries are only more intense now.
Earlier this year, Google engineers protested the company’s involvement in AI projects for the U.S. Department of Defense. The Chinese government’s potential uses of Google products are even more worrisome. Will there be the same outcry? Google’s dilemmas are shared by most companies that do business in China. There are concerns about protection of intellectual property, the transparency and rule of law in a country whose government reaches into virtually every corner of social activity — and is calling for an extension of the party into the management of most businesses.
In recent years, those concerns pushed Japanese companies to look elsewhere for investment opportunities in Asia. Apparently, however, a change is underway. Chinese growth and the promise of the Belt and Road Initiative has tempted many of those firms to reconsider their plans. The “Made in China 2025” plan to nurture high-technology businesses has also lured Japanese companies, and earlier this year China surpassed the United States as the leading destination for Japanese exports for the first time since 2011. Those companies need to be alert to the larger implications of those business decisions — whether trade or investment. Their dilemmas may be less acute than Google’s but their ultimate decisions are no less important.
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