The Chinese authorities’ decision to renew Google’s mainland China operating licence for another year has been welcomed by Google as a vital development. This renewal was publicly announced on September 7th, when Google released an official statement to various media outlets. Google’s relationship with China has been fraught with many difficulties since it launched its Chinese website (Google.cn) in 2005. This is mainly due to the American search engine’s dependence on a Western media ethos, which allows things such as gambling and pornography to be displayed unfiltered. Citing reasons that ranged from cyber attacks to censorship, Google has threatened to pull out of China several times already.

Newfound pragmatism in China

Does this licence renewal demonstrate a newfound pragmatism of the Chinese authorities concerning the issue of monitoring the Internet? In January 2010, Google suspended many of its mainland China operations and began re-routing Internet users to the uncensored Google Hong Kong website, in order to bypass mainland restrictions. Suffice it to say, this move greatly soured Google’s relations with the Chinese Government, which maintains the position that any company wishing to enter China and profit from its enormously lucrative markets must abide by Chinese law. There were concerns that this past dissent would put Google’s licence renewal in jeopardy. But on the contrary, the successful renewal of Google’s licence suggests that the Chinese Government may take a (slightly) more conciliatory approach in dealing with Western companies, especially since China’s relationship with Google often has wider implications for Sino-US relations. Going one step further, this renewal may also be an example of the influence that China’s economic liberalisation programme has had on the government over the past ten years, which has been viewed by some as becoming more receptive to Western influences.

Google steps out, Baidu steps in

Following its decision to pull out of China, Google has continued to lose market share in the mainland to Chinese search giant Baidu. Even though Google’s mainland China operations only account for about 2% of its annual income, China is the world’s largest Internet user market (with almost 485 Million users), and is still a very important region. As some experts have noted, Google, seceding this enormous pool of potential customers to Baidu, is in a sense admitting defeat to a rival search engine for the first time (albeit due to mitigating circumstances). Baidu now controls over 70% of the search engine market in mainland China. Even worse, Google China’s syndication deals have also been in rapid decline over the past few years. Sina.com, one of China’s largest online media portals, recently abandoned its Google-run search engine, instead opting to develop its own search technology.

Although Google, which holds an 82% worldwide market share as of May 2011, is still light years ahead of every other search engine worldwide, it still needs to be wary of the consequences of losing mainland China. With China being the biggest and fastest growing market for new Internet users, Google’s loss could potentially spark a catastrophic domino effect worldwide, particularly if Baidu uses its Chinese success as a springboard for further ventures into the global market (it already has the third largest market share). Google’s global search engine hegemony remains intact and unparalleled, but for how much longer?
 

Related links
Failure of Foreign Websites in China: A Question of Style
China's Most Popular Websites (and What Happens on Them)
The Birth and Death of China’s Civilian-Run Corruption Reporting Websites

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Keywords: Google in China Google Chinese operating licence renewed Google and Baidu in China Baidu in the global market