Google's license renewed in China: At least Wall St. is happy

Google announced early today that the Chinese government had renewed its license to operate in that country after it made serious concessions on self-censorship. Instead of automatically redirecting users of google.cn to an unfiltered, simplified Chinese language site based in Hong Kong, the company simply offered a link on the google.cn homepage to the Hong Kong site. While there was some question about whether this would be enough to satisfy the Chinese government, this morning's announcement confirms what I suggested a couple weeks ago: China needs Google.

According to BusinessWeek,

“This is a reasonable move by the government,” said Jake Li, an Internet analyst at Guotai Junan Securities in Shenzhen. “Google has brought itself into compliance with regulations, so there’s no good reason to deny them the license.

As Google's major competitor in China, Baidu, has been able to charge higher prices and command a greater market share in the face of Google's struggles with the government, Google's stock prices have dropped on Wall Street. Although China only accounts for 1% of the company's revenues, the fact that China already has more Internet users than the US has people suggests that the potential for income in that country is quite extraordinary. Wall Street certainly knows that and Google stocks are on the rise this morning at the news.

So Wall Street is happy. The Chinese government is happy. Google says they're happy. Clearly, ZDNet's Dana Blankenhorn is not happy. But does this really represent a win or a loss for anyone, whether Google, investors, Chinese users, human rights activists, or China itself? It looks, in fact, like a partial victory for everyone involved and like the detante I suggested would result from all of the posturing and wrangling.

Long-term, Google should clearly be a part of the Chinese market. Long-term, China must open its doors to ensure that the knowledge economy to which it is slowly transitioning remains globally viable. Put these two factors together, and Google stays in China, even on compromised terms. Chinese users, though still lacking in the freedoms of speech and information access so many others enjoy, maintain a competitive market for search and Internet services, rather than having their Internet content dominated by Baidu. And investors know that Google's long-term prospects for growth in the largest Internet market on the planet are secure for a while longer.

Is it a perfect situation? No, not at all, but this is an imperfect world. Competition beats monopoly any day and Google keeps its foot in the door in China to ensure that it's ready to capitalize on future reforms and a changing economy.