economics

March 14, 2010

Google ‘99.9 Percent’ Sure to Shut Down in China (Update1)

Filed under: Uncategorized — ktetaichinh @ 2:42 pm
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By Chia-Peck Wong

March 13 (Bloomberg) — Google Inc. has drawn up detailed plans to shut its search engine in China and is “99.9 percent” certain of going ahead with the closure, the Financial Times reported today, citing a person it didn’t name.

The company may make the decision very soon, while it will take time to carry out a closure to make sure staff don’t suffer reprisals from authorities, the paper said, citing the person as familiar with Google’s thinking. Marsha Wang, a Beijing-based spokeswoman for Google, said she had no comment on the report when reached by phone.

Google said on Jan. 12 that it will stop filtering results in China after what it called an infiltration of its technology and the e-mail accounts of Chinese human-rights activists. China yesterday called Google’s plan to defy government censorship rules “unfriendly and irresponsible.”

“The usual headline is companies are coming into China, not companies pulling out,” said Duncan Clark, Beijing-based chairman of business advisory company BDA China Ltd. “China wants to be the leading place for research and development. They’d like to have tech companies here but they don’t want the content involvement. But you can’t separate the two.”

Revenue Cost

Google may have to pull out of China pending talks with authorities, it said in January. An exit from the world’s biggest Internet market would cost Google, whose sales growth slowed during the U.S. recession, $600 million in revenue, according to estimates by JPMorgan Chase & Co.

China is “a market that no company can ignore, Google included,” JP Gan, managing director at Shanghai-based Qiming Venture Partners, which oversees more than $500 million, said before the FT report. “You have to play by the local rules if you want to operate here.’

The resolution of the dispute with Google rests on the company, not the government, Li Yizhong, minister of industry and information technology, said on March 12. “If one company violates the Chinese law and is unfriendly and irresponsible, that’s unwanted and means the company doesn’t merit its world class status.”

Talks with the Chinese government may yield results “soon,” Google Chief Executive Officer Eric Schmidt said on March 10.

‘Sophisticated’ Attacks

Google’s systems were targeted by “highly sophisticated” attacks aimed at obtaining proprietary information, as well as personal data belonging to human rights activists who use the company’s Gmail e-mail service, it said in January. At least 20 other international companies in technology, finance and chemicals were similarly targeted, Google said at the time.

Symantec Corp. and McAfee Inc., the world’s two biggest makers of security software, said this month they are working with the U.S. government on an investigation of the source of the cyber attacks.

China may have 840 million Internet users, or 61 percent of the population, by 2013, according to EMarketer Inc. in New York. The country had 384 million at the end of last year, according to government data.

–With assistance from John Liu in Beijing and Mark Lee in Hong Kong. Editors: Mark McCord, Alex Devine.

To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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