Google in negotiations to continue other key operations in China

Written by Associated Press | Beijing | Updated: Jan 28 2010, 03:34am hrs
Even if Googles stand against censorship leads it to close its search engine in China, the company still hopes to maintain other key operations in the worlds most populous Internet market.

Google Inc is in delicate negotiations with the Chinesegovernment to keep its research centre in China, an advertising sales team that generates most of the companys revenue in the country and a fledgling mobile phone business.

Both sides are torn by conflicting objectives. Google says its no longer willing to acquiesce to the Chinese governments demands for censored search results, yet it still wants access to the countrys engineering talent and steadily growing online advertising and mobile phone markets.

Chinese leaders are determined to control the flow of information, but realize they need rich and innovative companies such as Google to achieve their goal of establishing the country as a technology leader. Even some Chinese media that rarely deviate from the party line have warned that Googles departure could slow technology development and hurt Chinas economy.

Analysts are split on how the current impasse will be resolved, with some resigned to Google having to pull completely out of China for the foreseeable future while others envision a face-saving compromise that preserves a toehold in the country for the company.

Robert Broadfoot, managing director of Political and Economic Risk Consultancy in Hong Kong, is among the camp that expects Communist leaders to bend their rules to keep Google in the country.

Theyre hardly going to close the door on the innovator. They are very interested in what (Google is) innovating, because they may want it for themselves, said Broadfoot, who has advised companies on China since the 1970s. Google said on Jan 12 it might close its China-based search engine, Google.cn, because it no longer intends to censor the results as it has for the past four years. And, the company, warned, the decision could lead the company to pull out of the country completely. The threat stemmed from computer hacking attacks on Googles computer code and efforts to break into the e-mail accounts of human rights activists. Google said the intrusions originated from within China, but stopped short of linking them directly to the countrys government.

Google chief executive Eric Schmidt told analysts last week that the company planned to make changes in China in a reasonably short time while raising hope for a compromise.

We made a strong decision that we wish to remain in China, Schmidt said. We like the business opportunities there. Wed like to do that on somewhat different terms than we have.