Google's China Move Could Yield Benefits

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Google has moved operations for its Chinese search engine to Hong Kong. Earlier this year, the company announced it no longer wanted to operate under the Chinese government's censorship policies. Google's decision is a risky move but may also have benefits for the tech giant.

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Business analysts say Google's move is risky, but the company could also benefit from it's stance against Beijing.

NPR's Laura Sydell has more.

LAURA SYDELL: The decision to stop censuring Google China came more than two months after the hacking incident that was traced back to China. But it wasnt just the hacking that sparked Google to rethink its operations, the company's chief legal officer David Drummond says the attacks came after months of increased pressure from the Chinese to comply with censorship rules.

Mr. DAVID DRUMMOND (Chief Legal Officer, Google): Weve been asked to do more censorship than we had in the past. The overall environment, you know, became too difficult for us.

SYDELL: Drummond says Google executives felt that the rules of operating in China contradicted the company's mission.

Mr. DRUMMOND: So we think the right thing for our business is really to operate an uncensored search engine for our Chinese users.

SYDELL: Tech analyst Robert Enderle thinks the authorities on the mainland could block access to Google and cut it off from a population of nearly 400 million Internet users that's only growing.

Mr. ROBERT ENDERLE (President, Enderle Group): If that's the case, then by not playing in China, you effectively lock yourself out of what may be the major consumer base over the next hundred years, which would not be a good thing for any company to do.

SYDELL: Wall Street agreed, and Google stock took a dip after the announcement. Enderle believes Google's decision could put other U.S. companies in a good position. He says the Chinese are unlikely to want the embarrassment of yet another major U.S. company confronting them over censorship.

Mr. ENDERLE: China will probably bend over backwards to make sure that Microsoft doesnt do anything similar to this.

SYDELL: Human rights activists hope that is exactly what Microsoft and other American companies will do.

Flotid Lecose(ph) is with Reporters Without Borders. She hopes this sets an example that it's possible to confront the Chinese.

Mr. FLOTIB LECOSE (Reporters Without Borders): Now that it is proven that it is possible to do it, let's do it, and let's do it bigger.

SYDELL: Google may, in fact, get a boost from its stand against Chinese censorship. The company's unofficial motto is: Dont be evil. But a recent flap over privacy issues on its Buzz software tarnished its image.

Whit Andrews, of the research firm Gartner, thinks Google executives believe they will create more worldwide user loyalty by not censoring results in China.

Mr. WHIT ANDREWS (Gartner): Google believes that means that all its users will believe it would never censor or bias results for any user.

SYDELL: Some analysts speculate that the situation could go in a different direction and Google could follow in the footsteps of another American company. Yahoo was criticized for its operations in China. In 2005, it cut a deal with Chinese search engine Alibaba, which took over their operations.

But Yahoo kept a significant interest in the company, which does comply with Chinese censorship laws. That keeps Yahoo in one of the world's fastest-growing markets without having its name there. And in the long run, some analysts think that might be an appealing way for Google to stay in the Chinese market.

Laura Sydell, NPR News, San Francisco.

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