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Google Weighs Leaving China

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The Google office in Shanghai. Philippe Lopez/AFP/Getty Images hide caption

toggle caption Philippe Lopez/AFP/Getty Images

Google's threat to pull its operations out of China in the wake of cyber attacks has generated a groundswell of support from free speech supporters and activists in the United States. But what are the financial implications for the company if it abandons one of the world's fastest growing economies?

According to J.P Morgan estimates, this year Google is on track make $600 million in China. Although that number sounds impressive, it's a paltry sum for the world's number one search engine. Analysts predict that Google will post $26 billion in profits this year with the Chinese market representing only a small fraction (between 1 and 2 percent) of that revenue.

If Google were to leave China, the sacrifice would be long term growth. China is already the world's largest Internet market with over 20 percent of the world's users, and that number will only grow as the Chinese economy continues its rapid ascent. Google's Chief Legal Officer David Drummond said his company's bottom line in China is "truly immaterial" and that Google's entry into China just over four years ago "was never really a financial move for us." In a blog post yesterday, Drummond explained that Google first entered China because it believed, "the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results."

Early indications suggest Google's bold move will cost the company profits outside of China. Today the company's stock price is slipping while its biggest competitor, Baidu, saw its shares skyrocket.

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