An Epic Fight

In 2006, Robin Li, the founder of Baidu and the undisputed king of the Chinese internet search engine who Google failed to dethrone,claimed that the US giant would be out of China in five years. That dark prediction now looks set to come true. Sadly, it is not even a zero-sum game: Baidu would benefit from Google's loss in the short term, but not in the long run.  And, with Google gone, Baidu would feel the effects of a chill wind blowing through the internet industry, the most dynamic in the Chinese economy, as diversification of opinion was reduced.
 
A new hybrid model – featuring more control on one hand, and gross commercialization on the other – would rise and even expand into other industries.  The image of greater openness and transparency, which the Chinese government has diligently cultivated, would be damaged. Internet users would suffer most, of course,especially if access to Google's global services like gmail were also a victim of the ensuing turmoil. This game will only create losers – a lot of them.
 
By saying that its Chinese-language search engine would no longer adhere to increasingly strict censorship requirements, Google has changed the rules for multinationals in China.For the first time in living memory, a multinational giant has openly defied and challenged Chinese authority.
 
Google has decided not to follow the same old path trodden by almost every other multinational: carving out a pragmatic business strategy in the grey area between local rules and those of the global village.“When in Rome,do as the Romans do” used to be a convenient excuse for multinationals operating on the mainland and a way to protect them.  Google has torn up that book.  Every CEO doing business on the mainland now has to ask himself: how different is my company's situation from that of Google, and what do I choose to do? If he does not ask himself that question,someone else will, and it will not be pleasant.
 
Google cannot be ignored. To do so would be like a New Yorker ignoring King Kong on the Empire State Building.But, like the huge ape, Google is a sensible giant. It represents a good thing:  brilliant innovation turned into unimaginable wealth through an honest business model. A start-up founded by two Stanford PhDs 10 years ago, it is today valued at US$186 billion.  Most inspiring, Google has done less evil than any of the other big companies arriving today's status.

The Chinese internet industry presents a great opportunity,as can be seen from the success of local internet companies like Baidu, Tencent and Alibaba, which have expanded into industry leaders, enjoying astronomic market value. Many observers believe that the business opportunities are just too lucrative for Google to walk away. They tend to see Google's decision as being calculating, rather than based on principal.   With Google briefing the US government on the situation, some analysts believe Google is engaging in an audacious and brilliant offensive: by politicising and then seeking leverage,the company is aiming to secure a better business environment for itself on the mainland, they claim. According to these observers, Google may win this fight while its back is against the wall.
 
The chances are slim, however. Even if Google is as wise as David and as strong as Goliath, it is still battling the Leviathan. Since last summer, a determined, systematic, and co-ordinated operation has targeted the heights of the Chinese internet industry. It may not be aimed at one specific company, but decision makers are fully prepared to crush any resistance. Even if it has to pull back – as was the case with its Green Dam filtering software, which Beijing originally said would have to be installed on all computers sold in the country by both domestic and foreign manufacturers – it will advance on other front.The US government won't be of much help anyway. The best scenario I can imagine for Google is to win some breathing space, again similar to the Green Dam project, which has been postponed, not canceled. Would Google accept a probation period?