Google's Eric Schmidt on China and Censorship

Google CEO Eric Schmidt has long defended his company's decision to do business in China despite the restrictions that Beijing imposes on Internet freedom. Nevertheless, last week the company abruptly threatened to pull out after suffering hacker attacks believed to have originated in China. Schmidt explained why to NEWSWEEK's Fareed Zakaria in an exclusive interview. Excerpts:

Why did you make this decision? It surprised many people and many companies.
Google is a different kind of company than many others. The issue of operating in China was always complex for us. We were asked to accept a system of censorship that we were very uncomfortable with. But we had come to the conclusion that operating in China was better for everyone—us, the Chinese people—than staying out of the country. We have decided that we cannot participate in censorship anymore.

What happened over the last months to come to this decision?
We came across a lot of evidence of the monitoring of Chinese dissidents through the Web. We do not have clear evidence as to who was doing the monitoring, but you can draw your own conclusions.

Is there a lot of such monitoring?
There is probably a lot more than what we found.

Why did you announce this publicly rather than go to the Chinese government and try to work things out?
We are going to the Chinese government, and we hope we can work things out. But we want to be transparent. We don't want to keep secrets. So we decided to first make a public announcement and now we are having discussions with the Chinese government.

Are they going anywhere?
It's much too early to tell; they really have just begun.

Won't some people say that you have a fiduciary responsibility to your shareholders to maximize profit?
When we filed for our IPO, we attached to the document a statement about how we wanted to run our business. We said we were going to be different. We said that we were going to be motivated by concerns that were not always or strictly business ones. This is an extension of that view. This was not a business decision—the business decision would obviously have been to continue to participate in the Chinese market. It was a decision based on values. We tried to ask what would be best from a global standpoint.

Do you believe that China can still globalize while maintaining its censorship system?
China's embrace of globalization has been a great boon for China and the world. It has lifted hundreds of millions of people out of poverty. But China is placing restrictions on information that few countries place. China is the only country in the world where Google was willing to offer a local site that followed the regime's censorship laws. We haven't done this anywhere else. Other countries sometimes block, say, YouTube for a few weeks. But then we talk to them, point out that they were offended by one video out of literally hundreds of millions. And we work things out. So, China places unique limits on information.

And this will hurt them economically?
I believe it will in the long run. You're much better off with a system in which people can be free to imagine, invent, and connect with one another. The more people who can speculate, the better. The more human-to-human connections, the better. Everything we do at Google empowers the individual. And we want to empower the individual.

What's the likely outcome here? That [Chinese search engine] Baidu will totally dominate the market?
That's one possible outcome. The other is that we can work out an agreement with the Chinese government and continue to operate. Or that some other company moves in. And please understand, we will still have engineers, programmers, and others in China. We love China and the Chinese people. This is not about them. It's about our unwillingness to participate in censorship.