way to go goog





Google has sent China a critical message

The internet search giant reminds the growing superpower that it cannot have everything its own way





Ruth Sunderland

The Observer,      Sunday 17 January 2010

Article history

THE interesting question about Google’s confrontation with the Chinese government is to what extent the internet search giant is acting as a proxy for the US government. Underlying the issues of hacking and censorship is unease over the inexorable increase in China’s business clout and whether its ambition to become an economic superpower is compatible with its political system.



In the past few weeks alone there has been a string of contretemps with the west, including the execution of Briton Akmail Shaikh, the imprisonment of dissident Liu Xiaobo and ill-feeling over China’s behaviour at the Copenhagen climate change summit, where it appeared to snub Barack Obama.



Google is not the only company to clash with the Chinese: its travails are preceded by those of mining group Rio. Beijing became involved with Rio when a threatened takeover by rival BHP Billiton would have given a combined mining group huge pricing power over iron ore. But a proposed $19.5bn investment in Rio by state-controlled aluminium company Chinalco fell apart; Rio and the others played hardball over iron ore prices and four of its employees were arrested on bribery charges.



Episodes such as these tap into deep disquiet about doing business with China. Its potential is vast: with its population of 1.3 billion, many becoming newly affluent, the market is a covetable prize for western companies. By the same token, the Chinese are keen to build muscle overseas: in the early stages of the credit crunch Beijing took stakes in a number of banks including Barclays. Last year there were $46bn worth of overseas deals, mainly in energy and resources, and here we have welcomed Chinese operators such as Nanjing Automobile, which took over MG Rover, as saviours. But businesses do have to worry about human rights and ethical concerns, and about the long arm of the Chinese state interfering in their commercial operations.



The backdrop to the Google row is one of mounting trade tensions and the long-running grudge in the US over the pegging of the Chinese currency at a low level against the dollar, keeping cheap imports flooding into America. We have two economic superpowers, one declining, the other emerging, locked together through China’s financing of the mighty US deficit. The message from Google is that China cannot have things all its own way.