Google, China look for way to coexist

Chinese government renews Google's license to do business as part of back-and-forth to improve relations

The Beijing government's decision to renew Google Inc.'s license to do business in China could be a big step in a long process of negotiations between Google and China to find a way to coexist.

Google announced Friday that China had renewed the company's Internet Content Provider (ICP) license, which enables the search giant to do business there. There was widespread speculation over whether the Chinese government would renew Google's license after the public battles the two have been have been waging over censorship and privacy during the past six or seven months.

"This implies that relations are warming between [Google] and China," said Rob Enderle, principal analyst at Enderle Group. "Actually, I think this reflects concessions Google has probably made that we don't know of yet. China is historically very rigid.... Google will need to learn to cooperate with the country if they want to continue there."

According to Google spokeswoman Jessica Powell, Chinese authorities informed Google of the country's decision to renew the license early Friday. "We are very pleased that the government has renewed our ICP license, and we look forward to continuing to provide Web search and local products to our users in China," Google said in a blog post.

Hadley Reynolds, an analyst at market research firm IDC, said this step is another chess move in the back-and-forth of negotiations between the two superpowers.

"I think the Chinese authorities have shown that they are open to exercising some restraint when dealing with non-Chinese businesses," Reynolds said. "This will be an ongoing process, and this could be a short-term compromise from the Chinese perspective. The terms of Google's Internet Content Provider license give the Chinese multiple opportunities to revisit the terms of this relationship."

Google applied for renewal of its ICP license on June 29, a day before the deadline. The license expires in 2012 but must be renewed every year. Google cannot do business in China without the license.

Industry watchers have questioned whether China might drag its feet or even deny the license as part of its ongoing feud with Google.

The first salvos between China and Google were fired in January when Google threatened to halt its operations in China after contending that an attack on its network from inside China was aimed at exposing the Gmail accounts of Chinese human rights activists. At the same time, Google said it was reconsidering its willingness to censor the search results of users in China as required by the government.

After several months of negotiations with Chinese officials, Google announced in March that it had stopped censoring search results in that country. Chinese users would be redirected to Google's Hong Kong-based site, where they could receive uncensored search results in simplified Chinese.

However, Google made a concession to China late last month when it announced just two days before the deadline for its license renewal submission that the company would no longer automatically redirect search traffic from China to its Hong Kong search engine. The company said it hoped the move would placate Chinese officials, who had threatened to revoke Google's ICP license if the company did not stop redirecting search requests from Chinese users.

It's not clear how much that compromise played a role in getting the license renewed.

Regardless, Enderle said the license renewal is great news for Google from a financial perspective. Google may not be getting a big chunk of its revenue from the Chinese market today, but since the country is an economic and digital powerhouse, the company can't afford to be locked out of it.

"Not being able to compete in China implied a weakness that Google could ill afford," Enderle said. "Being unable to compete in what may become the largest economy in the world would leave an impression of coming obsolescence that no company wants to create."

Augie Ray, an analyst at Forrester Research Inc., however, was quick to caution that too much shouldn't be read into China's renewal of Google's license.

"I think too much could be made of China's actions here," he said. "The country certainly has not changed its stance on Internet control. And with Google's license requiring renewal every year, issues of censorship and control are still likely to be contentious ones in the future. China's actions are good news for Google and demonstrate a desire on the part of the country to work with foreign corporations, but this by no means resolves the many substantial discussion points that remain between China and Western companies."

Michael Kan, of the IDG News Service, contributed to this story.

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, or subscribe to Sharon's RSS feed . Her e-mail address is sgaudin@computerworld.com.

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