When Google was targeted by Chinese hackers at the end of last year, the company threatened to end its search operations in China. At issue were both the ongoing requirements from the Chinese government to censor search results on Google's Chinese language search sites (google.cn) and attacks on Google's properties from within China seeking information on human rights activists, both inside and outside the country. Now these issues have come to a head and several sources are reporting that Google will most likely shut down google.cn shortly.
Although Google appeared to be going about business as usual in China (posting openings for engineers, managers, and sales staff in China), behind the scenes negotiations between Google and the Chinese government over protection of Google intellectual property and, more importantly, ongoing censorship have exposed irreconcilable differences. According to the Wall Street Journal,
[Talks between] Google and Chinese authorities...increasingly appear deadlocked, and Google's hopes for being able to operate Google.cn without filtering results—which were always thin—have all but disappeared.
While some services like Gmail could continue to operate in China, it is unlikely that they would be left unfettered by the government. Similarly, Google News would only be able to feature official government-approved news; Blogger and YouTube are already blocked. Thus, it is becoming quite unlikely that Google (or any major foreign competitors) would be able to get a piece of the incredibly lucrative Chinese market. China is adding almost a quarter million users a day to the Internet; these sorts of numbers, along with China's booming economy, will be very difficult to leave behind.
However, as ZDNet's Larry Dignan explains, protecting their intellectual property is even more important as Google woos Western businesses and pushes its cloud-based services to the enterprise market:
What happens in China can hurt Google’s other businesses. It’s no coincidence that Google launched a blog about enterprise security to ride shotgun with its primary riff about China. A coordinated attack on Gmail is a blow to cloud computing.
Nobody will come out of this unscathed, though. Whether it's the Chinese users who no longer have any competition driving domestic search engines to improve their services or it's Google shareholders who don't get a piece of the China pie, Google's imminent exit from the country will have far-reaching effects. With Wired reporting that Google sources are "99.9% sure" of a pullout, all we can do is wait and see if this will spur the Chinese government to action, incite effective public outcry, or simply further isolate Chinese citizens in what is otherwise a very flat world.