Thursday, January 14, 2010

Google To Exit China ?

On  12th January, Google threatened to pull out of China after it learned of immense security attacks and attempts by the Chinese Government to gain access to the Gmail accounts of Chinese dissidents and human rights activists. Read Google's official statement here. Google agreed to censor its search results in China when it entered the market in 2006. If Google does leave, it would be an unusual rebuke of China by one of the world's largest companies.

Foreign companies already face a long list of obstacles while doing business in China, including “buy Chinese” government policies, widespread counterfeiting and growing restrictions on foreign investment. China has long restricted the sale of foreign movies, books, music and other media. For example, China only allows the broadcast of only 20 foreign movies per year.

When China joined the W.T.O. in November 2001, it promised to allow free trade in government buying. But it has never actually done so, leaving the Chinese government free to use its enormous buying power to steer contracts to Chinese-owned companies. China has also restricted the export of the so-called 'Rare Earth' elements which are important ingredients in things like hybrid engines, magnets used in wind turbines etc. China has become the world’s largest auto market, yet it still limits foreign automakers to 50 percent stakes in auto assembly plants in China and imposes steep tariffs on imported cars.


If Google pulls out of China China could be left with just one major Internet search engine: Baidu.com. Baidu is the clear market leader in China. Refer the market share below:





Considering the size of the Chinese market (300mn plus internet users), the market is considered strategically important. The search market in China reached revenue of two billion yuan ($293 million) in the third quarter of 2009, 28% higher than a year earlier


Google's revenue in China is relatively small. As per analyst estimates only a few percentage points of Google's nearly $22 billion in 2008 revenue came from China. In fact it is possible that Google’s inability to catch Baidu was one reason the company might have decided it was willing to give up on the China market.

Does Google still believe in 'Do No Evil'?
Maybe, maybe not...

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