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Computerworld - Both Google Inc. and the Chinese government appear to be leaking word that the search firm may soon shutter its operations there as negotiations between the two break down.

The Wall Street Journal reported today that the Chinese government has begun informing news Web sites in that country that Google's Chinese site is likely to close soon.

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

Google has since been negotiating with the Chinese government to find a way to continue operating in the country. Google did not respond today to requests for comment on the state of the negotiations with China.

"I think Google thought China would be flexible," said Rob Enderle, an analyst with the Enderle Group. "As the U.S. government has often found, flexibility isn't something you generally look for in China with regard to Western ideas of what human rights should be. This is China playing hardball, and it once again would indicate that when you negotiate with a government, you are generally at a massive disadvantage."

Google's continuing stand against China has been met mostly with support from industry watchers, who say it is helping the search giant has overcome the major hit in good will it's taken in recent years by ceding to China's censorship demands.

Dan Olds, an analyst with The Gabriel Consulting Group, said the latest reported statements on the negotiations probably indicate that there's been a major rift between the two sides.

"I think that the latest reports we're hearing about Google leaving China signal an authentic breakdown in talks rather than typical posturing," Olds said.

"From what I'm seeing, there has been a long-term philosophical conflict at Google ever since they decided to play by the Chinese government's rules on search. I think Google's stand on principal now, is in large part fueled by their discomfort in agreeing to play the role of censor in the first place. It's goes against their fundamental belief in freedom of information and the social good arising from that," he added.

If Google does leave China, Microsoft could be hit harder by critics of its decision not to censor search results in China.

Microsoft executives have made clear of late that the company will remain in China no matter what the resolution of Google's battle with the government there.

While Enderle said that Microsoft shouldn't suffer too much ill will from staying in China and continuing to censor search results, Olds suggested that the company could be pummeled by bad press.

"Google leaving China while Microsoft stays and, assumedly, continues to cooperate with the government by censoring content may certainly bring some bad press to Microsoft," added Olds. "No one argues that China censoring the Internet is a good thing or that it is within their rights, but companies have complied with this requirement in order to get a piece of the massive and growing Chinese market. If Microsoft continues to run censored search for China, I would expect to hear plenty of widespread criticism -- some of it perhaps even fueled by Google."

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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