In Google-China Fight, an Unstoppable Force Meets an Immovable Object

China's decision today to block access to Google's search sites represents a dramatic, but perhaps inevitable, escalation in the conflict between the open search service and the closed government. (UPDATE 12:35 p.m.: Google spokesperson Christine Chen said in an email to NEWSWEEK that while the full site is not currently blocked, "certain sensitive queries" are. The special status page that Google set up to monitor the China situation will be updated soon, Chen said.)

The situation is still fluid, but here's a recap of what's happened so far. Yesterday Google announced that it was moving traffic to its Chinese search engine to uncensored servers in Hong Kong; if one of China's 400 million Web users attempted to access, he would have been redirected to instead. China permits freer access to the Internet in Hong Kong under its "one country, two systems" philosophy. "We believe this new approach of providing uncensored search in simplified Chinese from is a sensible solution to the challenges we've faced—it's entirely legal and will meaningfully increase access to information for people in China," David Drummond, Google's chief legal officer, wrote in a post on the company's official blog announcing the switch. But Chinese officials reacted angrily, and as of Tuesday morning, would-be Googlers in the country's mainland appeared to be blocked entirely.

Google's action came after more than two months of speculation that the search giant would pull out of China. That began on Jan. 12, when Google made the stunning announcement that it had "detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China." China has long been a vexing market for Google—it has 30 percent or less market share there instead of the near-monopoly status that it enjoys in other parts of the world. And just to get to that also-ran point, Google had to agree to censor users' search results to comply with China's regime. The practice was a glaring caveat to the company's mission statement ("to organize the world's information and make it universally accessible and useful") and, together with privacy screw-ups like Google Buzz, it allowed critics to make the case that Google's friendly, force-for-good image went only so far as its financial interests. Many of these critics cheered yesterday's decision, including Amnesty International.

Google's bottom line won't be greatly harmed in the short term, as only an estimated 1 to 2 percent of the company's revenues currently come from China. But if Google departs China for good, the losses are incalculable. With 400 million Web users and climbing, China is far from a fully tapped market Baidu, Google's biggest Chinese rival, today has roughly 65 percent market share, and will now lengthen its lead even more. (There are always ways to access even a completely blocked Web page, via proxy sites.) Both companies' stocks are traded on the NASDAQ exchange, and after Monday's drama, Baidu was selling at 579.72 to Google's 557.50. Beyond the dollar amounts, of course, there is the lost social impact of having a fundamentally democratic search engine insinuate itself into Chinese culture.

"The story's not over yet," Sergey Brin, Google's cofounder, told The New York Times in an interview. An understatement, to say the least. But if Google is unwilling to play by China's rules—it's noble to back free speech and search, but ultimately, corporations have to obey sovereign countries' laws—then an outcome is actually easy to predict. China has repeatedly demonstrated the ability to create its own Internet companies when Western ones fail to work out, as The Economist notes, citing Taobao (eBay), Renren (Facebook), QQ (IM, games, and social networking). If Google is in fact kaput in the mainland, can Baidu pick up where it leaves off? It already has.