Google (NASDAQ:GOOG) made a threat to China which does not have a precedent in the actions of any other US company. It threatened to pull its business from China due to potential cyber attacks on its online operations. The actions appear to have been against the company’s e-mail service-GMail. Google said it would stop censorship of its search results as a result of the attacks. Google has cooperated with the Chinese government on a certain level of keeping some results out of the hands of the country’s citizens

The FT took a different view of the story saying Google would be forced out of China if it continued to attack the government there. 

The US State Department has asked China for an explanation of Google’s claims, but there is no indication so far that that the request is being taken seriously by the People’s Republic.

Google, which by some estimates has 15% of the search market, maybe bluffing, but, if it is not, the company is taking a huge risk. China has more internet users than any nation in the world, over 350 million. Although Google trails local search firm Baidu, the American company has been trying to close the gap for years. Google may not make a great deal of money in China now, but a decade from now the search market in China will almost certainly be huge. Google risks billion of dollars in revenue if it leaves.

The company said, “Like many other well-known organizations, we face cyber attacks of varying degrees on a regular basis. In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident–albeit a significant one–was something quite different.”

Google added “we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. Based on our investigation to date we believe their attack did not achieve that objective. Only two Gmail accounts appear to have been accessed, and that activity was limited to account information (such as the date the account was created) and subject line, rather than the content of emails themselves.”

“These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.”

Wal-Mart is next.

Douglas A. McIntyre

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