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Originally published Saturday, January 30, 2010 at 10:01 PM

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On the Economy

Google's new approach to China unlike Microsoft's, not purely commercial

Google's stand toward China after cyberattack seems like an irrational business decision. But history doesn't often show business decisions as the sole compass for a good or free society.

Special to The Seattle Times

The official Google Blog is usually a bland setting for geeky tricks and marketing pushes by the wildly successful Internet search company. That was until Jan. 12 when a post was headlined "A new approach to China."

It told of "a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google." The attack also was aimed at Chinese human-rights activists using Gmail. Experts say as many as 30 international corporations were also victims of the cyberattack.

The accusation, along with a threat to shut down its Chinese Google site, was unusually blunt and public for businesses in China. It soon escalated into heated exchanges between Secretary of State Hillary Rodham Clinton and Chinese officials, who denied any role in the attacks.

Noticeably absent from the rumble was Microsoft, which has extensive business dealings with China and its Bing search engine is fighting to gain a beachhead. CEO Steve Ballmer was critical of Google's threat to leave China. In a speech before oil executives in Houston, Forbes reports that Ballmer said, "People are always trying to break into other people's data. There's always somebody trying to break into Microsoft."

Ballmer called America the most extreme when it comes to free speech. But even the United States, he said, bans child porn. If you subscribe to Ballmerian business logic, then it makes sense that he would say Microsoft would follow Chinese censorship demands in the same way it abides by the laws of every country in which it does business. He added for the Houston crowd, Saudi censorship doesn't keep the United States from buying Saudi oil.

Bill Gates also downplayed the controversy and scoffed at Google's maneuvers, which attracted big and positive media coverage in China. Never mind the Chinese citizens who have been arrested because they peacefully challenged the government online. One operated a site to help families whose children had been sickened by tainted powder milk from state-owned companies.

So, at the risk of being "extreme" in the exercise of my free-speech rights, there you have it. Microsoft comes off as an amoral transnational company happy to do business with any authoritarian regime, while Google can once again play the scrappy and even principled underdog.

Of course, no controversy involving America and China is ever as big or as small as it seems. In history's largest, most complicated and most fraught relationship — what some economists call Chimerica — one could quote Cormac McCarthy's "Cities of the Plain."

The cowboy Billy says to the Mexican gangster, "I know this country, too." The gangster responds: "No one knows this country."

Google and China may well work things out quietly — this often happened between America and China when the latter was a developing nation. Google may be entirely squeezed out of China to set a public example; this would be another sign of China's rapid emergence as an international power. Although Google's revenues from China appear to be relatively small, the country's 338 million online users are a highly sought market.

But this is not merely a commercial dispute. What happened to Google fits into a larger problem of cyberattacks against the West, including probing computers at the Pentagon that allegedly originate in China. Thus, the forceful response from Clinton, who fully understands the nuance and tensions of Chinese-American relations, is significant.

Where nations' once counted their battleships or intercontinental ballistic missiles as totems of national security, the Internet and intellectual property are rapidly assuming critical importance.


With China, tensions are already growing because of the high American debt and dollar reserves held by Beijing, which brings both strength and vulnerability to China. A new report by PricewaterhouseCoopers claims China could overtake America as the largest economy as quickly as 2020.

That means an America falling into relative decline, with all the attendant stresses — economic, political and social. Meanwhile, America's largest creditor has numerous dodges to keep from more fully opening its markets to American goods and a "come as you are" approach to intellectual-property protections.

Still, especially for the largest companies nominally headquartered here, China is a key and growing market. Their strategists see the same reports and data on U.S. decline. The equation becomes even more complicated for a state such as Washington, which actually sees a net benefit from Chinese trade.

A la Ballmer, Google's stand seems like an irrational business decision. But history doesn't often show business decisions as the sole compass for a good or free society.

On the other hand, Google appearing truly free might make it more appealing and credible to those Chinese Internet users who can find their way around Beijing's controls. This is a considerable advantage if the regime softens over time. American search engines are a small part of the Chinese market now, so Google has less to lose. Microsoft, with its Chinese products and research operations, has much to lose.

Whatever the outcome, the Google affair shows that we have one more imbalance on top of debt and trade: radically different interpretations of Internet freedom. All are unsustainable.

And as the late economist Herb Stein said, "If something cannot go on forever, it will stop."

You may reach Jon Talton at

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