China Warns Google to Obey Its Laws

By AARON BACK, JASON DEAN And GEOFFREY A. FOWLER

A top Chinese minister warned Google Inc. "will have to bear the consequences" if it stops censoring its search results in China, suggesting there is little room for compromise in the high-profile showdown over the Internet giant's future in the country.

Friday's remarks were the sharpest words yet in an unusual duel that could set a precedent for international business in the country and could escalate tensions between the U.S. and Chinese governments.

Google made an extraordinary public reproach of China on Jan. 12 by announcing it intended to stop following government requirements that it filter the results of its Chinese search engine, google.cn, and could leave the world's biggest market of Internet users. The U.S. company cited China's tightening limits on free expression as well as a series of sophisticated cyber attacks that Google said originated from China.

Since then, Google has been in talks with Chinese agencies about whether it can operate an unfiltered Google.cn—and if not, whether other parts of its Chinese operation would be affected, such a research center in Beijing and advertising sales offices.

"I hope Google can respect Chinese rules and regulations," responded Mr. Li. "If you insist on taking this action that violates Chinese laws, I repeat: You are unfriendly and irresponsible, and you yourself will have to bear the consequences."

U.S. officials said Friday they were closely watching Google's negotiations with China over the censorship issue, as the outcome could have a "significant" impact on U.S.-China relations.

Those relations have deteriorated in recent months due to other trade and foreign policy disputes. Beijing has protested President Barack Obama's meeting with the Dalai Lama and the announcement of new U.S. arms sales to Taiwan. The U.S., meanwhile, has publicly rebuked Beijing for opposing so far new efforts at the United Nations to sanction Iran for its accelerating nuclear program.

On Friday, China fired back at the U.S. for meddling in other countries' affairs—its standard response to the U.S. State Department's annual review of Beijing's human rights record, which was released Thursday.

The U.S. officials said the Obama administration wouldn't get involved in the Google dispute at this stage at it remains at its heart a commercial issue. But they suggested Washington could be forced to take a much harder line with Beijing on the issue of Internet freedoms and human rights if Google is forced to end its China operations.

"It's not for us now to get involved directly at this stage, but the outcome will have great significance," said a senior U.S. official Friday briefed on the dispute. "If the Google view prevails, that represents the expansion of [information freedom]. If the Chinese view prevails, then that has commercial and policy implications for the long term."

Secretary of State Hillary Clinton has increasingly made the issue of Internet freedom a cornerstone of the Obama administration's foreign policy agenda. In recent weeks, the State Department has announced it will begin serving as a quasi-venture capital firm, providing funding for companies involved in ensuring communication flows.

The Obama administration has also made Internet freedom a cornerstone its diplomatic engagement with Asian countries, said U.S. officials. "To some extent, there's a fundamental difference in how the U.S. and China views all this," said the U.S. official. "China views this in commercial terms, we view this in human-rights terms."

The showdown with China is one of the biggest challenges yet faced by Google, and is being watched by business broadly as a test of the compromises that companies must make in order to do business in China.

Google's threat to stop censoring challenges the core premise of engagement with China for the last several decades: that the country is so big and its market so important that it must be accepted on its own terms.

A spokeswoman for Google declined comment on the minister's remarks.

Google Chief Executive Eric Schmidt said Wednesday he expects the company will soon reach a conclusion to its talks with the Chinese government. People familiar with the matter say the company could stop censoring Google.cn within weeks, but Google isn't likely to withdraw from the country entirely.

One person familiar with the talks said Thursday that Google may end up making individual agreements with different Chinese agencies to let it operate parts of its business in China in a patchwork arrangement.


In the latest tussle between Google and China, the country said that if search results weren't filtered, a Google ban was imminent. Christine Glancey and Julia Angwin discuss on Digits with Stacey Delo.
.Mr. Li, who was speaking on the sidelines of the annual session of China's legislature, said that many aspects of the Google matter aren't being handled by his ministry, making it difficult for him to comment on the talks.

He left open the possibility that Google could stay if it abides by China's rules, saying it would be "welcome" and it would have the freedom to expand its share of China's search market.

But his comments appeared to leave little room for compromise over the fate of Google.cn if the Mountain View, Calif., company does stop censoring, and he noted pointedly that China's Internet would continue to develop with or without Google.

With nearly 400 million people online, China is the country with the most Internet users. Google had 35.6% share of the Chinese search market by revenue in the fourth quarter, while homegrown Baidu Inc. had 58.4%, according to research company Analysys International.

Many analysts who follow Chinese Internet policy have said since the Jan. 12 statement that it is highly unlikely that Beijing would let Google.cn operate unfiltered. Censorship—which covers content ranging from pornography to criticism of Communist Party leaders to unauthorized religious material—is a core policy of the Chinese government, which has been tightening controls over the Internet in recent years.

Negotiations between U.S. companies and the Chinese government aren't often as public as this dispute. It will be hard for Google and the Chinese government to reach an accord while publicly taking such opposite positions, said James Lewis, director of technology and public policy at the Center for Strategic and International Studies in Washington, D.C.

"I think both sides want it to go away," Mr. Lewis said. "I think they want to drag it out until it submerges [from the public] again and then come to some sort of understanding."

Google's challenge to Beijing stunned the business world. It is unusual for a company to publicly take issue with China's policies—particularly something as sensitive as censorship—and even rarer for one to talk about the possibility of scaling back its business or leaving a market that is so important.

Google's spat with China has come at a time of rising concern among some veteran China observers about the environment for foreign business in China, over issues ranging from policies favoring domestic companies to hacking attacks to the government's detention last year of four executives from Anglo-Australian mining giant Rio Tinto—which was involved in tense negotiations with China over iron ore prices—on accusations of commercial spying and bribery.

For other Internet businesses that do business in China, Google's fate could also spell out the choices for their own engagement.

"If Google does indeed get shut down, it is not the end of the story—it is the beginning," said Xiao Qiang, the director of the China Internet Project at University of California at Berkeley. OIt is the beginning of the 'Chinternet,' which is under Chinese government regulation. It will control so much that even Google cannot exist. ther companies will have to face the same choice of whether to continue to operate under China's heavy regulation or leave the country.

—Jay Solomon and Ben Worthen contributed to this article.