Another rumbling of perhaps not-so-distant thunder. Google’s threat to pull out of China is a significant development in increasingly confrontational relations between China and ‘the West’ (which in my definition is not really west because it includes Japan, as well as Europe and the US). Google’s move ratchets up another notch the political pressure that has been rising over market access for foreign firms, the question of the Renminbi exchange rate, negotiations over China’s vast iron ore imports and the arrest (initially on espionage charges) of Rio Tinto employees, and the handling of Chinese political dissidents, not least ones involved in the new-ish Charter ’08 movement.
Note that most of these are commercial and economic disputes. A simple metric has been at work in relations between China and the West since the Tiananmen massacre of 1989. It can be summed up as a Western bottom line of: ‘Your money or your freedom’. In the early 90s, in the first months of Bill Clinton’s first term, there was a momentary clamour for China to mollify the West by becoming freer. This did not last very long, mainly because China offered the West a different prize: money (or at least the strong smell of profit via Chinese market opening). Everyone has their price, and in the golden years between the 2002 start of the last Chinese credit cycle and the 2008 global financial crisis, the West was paid in money.
The situation — or at least perception of it — began to change in the past two to three years as China recycled vast amounts of foreign exchange earnings into (mostly) foreign government bonds. The main result was to maintain an artificially depressed exchange rate which helps China-based exports. Everybody else in Asia has done this over the years but, as China’s currency management continued against a backdrop of global economic recession, and as more and more multinational companies started to complain that China is finding new ways to block their market access, Western governments have gotten increasingly miffed. Throw in the arrests of Rio Tinto employees, initially on charges of espionage, and you have the beginnings of a Western consensus that China is no longer paying enough for us to overlook its unpleasant human rights record. At least, I think, this is a useful way of viewing the situation.
Google’s threat to quit, interestingly, is more a human rights/morality position than a commercial one. It has, it says, been the subject of orchestrated attacks (using Microsoft’s Internet Explorer as the point of access) seeking to obtain information about human rights activists and campaigners dealing with China. Lots of other human rights lobbyists, lawyers, journalists and so on have had their Gmail accounts hacked, not via assaults on Google itself but through direct attacks on email users themselves. Google has not pointed the finger directly, but it is hard to imagine who would attempt to do these things on a regular basis beyond agents – at whatever degree removed – of the state. There have been various attempts in media coverage to spin the story such that Google, which has about a 30% share of the China search market compared with more like 60% for Baidu, is really willing to walk away because it is not the market leader. This is crude and unfair. The reality, surely, is that Google is putting up (morally) with way too much in return for what it is getting out (financially) from China. Everyone has their price, and Google’s is too high for China. That does not mean Google is bad, it means it is far better than most. The firm was willing to run censorship (albeit a bit less than Baidu) on its Chinese search engine in order to get a .cn presence, but having its systems attacked in a quest for information on political dissidents is too much. Compare that with Yahoo! which in 2004 voluntarily provided information to Chinese authorities which led to the jailing of a journalist for 10 years.
It will be interesting to see how the commercial fortunes of Baidu and Google are affected, long-term, if Google does quit China. Baidu’s share price has shot up around 15% since Google publicly stated its position, presumably on the assumption that it can now get a virtual monopoly position in search. Google’s share price is unaffected. I am making a note to check where they are at in five and ten years.
Meanwhile, for your delectation, here are some of my favourite word search terms that Baidu uses to censor and block web pages in China. These are my own (doubtless flawed) translations from documents leaked by a Baidu employee in 2009.
don’t love the party
the current government
China human rights
princeling [refers to children of political leaders]
the party now
freedom of speech
defend legal rights
government official drives the people to revolt
mother and son incest
a night of passion
cheating in examinations
the sale of the answer
Rebecca Mackinnon, who knows far more about this stuff than me, writes a spirited op-ed in the WSJ and seems to have a similar opinion.