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Google and the Middle Kingdom

Google’s decision to leave China over Internet censorship may be admirable from a Western point of view, but it’s unlikely to sway other companies from doing business in the largest country on earth.

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The ripple effects from Google’s decision to stop censoring its China search service and move to Hong Kong are being felt in industries from telecom to other Internet companies.

But do they mean change for China? Or will businesses continue to look at what is potentially the largest market in the world and play ball with the various government authorities that are part of the business landscape in the Middle Kingdom?

Motorola may have provided a partial answer. The Schaumburg, Illinois, cell-phone maker is building its business around Google’s Android mobile operating system.

But for handsets in the China market, Motorola has dropped Google’s search engine from its Zhishang device shipped to China Telecom Corp. Instead, it will add China’s largest search engine, Baidu, on its handsets, and preload Microsoft’s Bing search engine and maps on the phones.

So Google’s power to lead a change in a nation where its footprint is much smaller than it is in the West is definitely limited. And its move has its partners looking for other ways to work in the Chinese market without the company that’s become so ubiquitous just about everyplace else.

“If you were partnering with Google in China, your business plans have just fallen apart,” Bertram Lai, head of research at CIMB-GK Securities in Hong Kong, told Bloomberg. “You need to scramble and find new partners.”

Mark Lee, CEO of DeviceVM Inc., which sells its software in China through bundling deals with computer makers like Hewlett-Packard, Lenovo, and Acer, said Google’s move had created a vacuum in the search-advertising market and headaches for handset makers like Samsung and Motorola that use Google’s Android operating system.

And into the search-advertising vacuum steps Baidu, a company owned by Chinese nationals that has the reputation of being the most restrictive online censor on the Internet. As to whether Google’s decision would have much effect on other businesses' relationships with China, it’s unlikely, Lee said.

China, for instance, is Dell’s second-largest market after the United States, and HP is the fastest-growing computer seller in that nation. Those companies aren’t likely to change their strategies just because Google has left the market.

As for his own company, which is headquartered in San Jose and has offices and Beijing and Shanghai, Lee said he didn’t expect to change.

“It does come down to every company's founding executive management team deciding how they want to operate within China,” Lee said. “I view this as specific to Google.” His own company has 250 employees working in China and 25 at its headquarters in San Jose.

Lee suggested that quiet negotiations might have been a better route for Google to go, rather than its public complaints about a hacking attack and its decision to stop complying with Chinese search censorship.

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