Looks like Google is leaving China...

Larry Dignan reports: China to Google: Censor or 'pay the consequences' | Between the Lines | ZDNet.com

According to a bevy of reports, Li Yizhong, the minister of Industry and Information Technology, said Google has to obey China’s laws—and that means censoring search results.
The Associated Press has the money quote:
“If you want to do something that disobeys Chinese law and regulations, you are unfriendly, you are irresponsible and you will have to pay the consequences.”

Looks like there is no room for negotiation here.

Yet Eric Schmidt, CEO of Google, earlier this week was reported by Jerry Dicolo at the Wall Street Journal, saying, "We are in active negotiations with the Chinese government." He added that "something will happen soon."

What are they negotiating over? The Chinese position is crystal clear: we're not budging.

It looks as if Google has painted itself into a corner in China. By saying it will stop censoring its results and that it may have to leave China, it has left itself with no options. Negotiations with the Chinese government have produced no compromise from the authorities.

It's interesting to speculate what those negotiations could have been about. What could Google offer in return for being allowed to stay in China but not censor its search results? What have they been talking about for two months?

The Chinese authorities are far more skillful in these types of situations than Google's leadership.

Will Google still maintain research, and sales operations in China, but withdraw its search service? What about its other products such as GMail, etc? Will Google's spiderbots still index Chinese web sites?

Leaving the world's largest and fastest growing Internet market is a serious blow for Google, especially if it turns out that the hacker attack was not of Chinese origin.

I can't see how Google can get out of its promise to stop censoring results and still stay in China. It would be a huge loss of face.