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Business

Beijing renews Google's operating license

Text by News Wires

Latest update : 2010-07-09

After months of uncertainty due to tensions over government censorship, the internet search giant Google says Beijing has renewed the company's license, permitting it to continue web operations in China.

REUTERS - Google Inc has been given the green light by Beijing to continue operating its Chinese search page, averting a potential shutdown of its flagship search site in the world's biggest Internet market.
 
Google said last week that it would stop automatically rerouting users to its uncensored Hong Kong-based search page, explaining that Beijing had indicated it would not renew its Internet Content Provider (ICP) licence if it continued to do so.
 
That had prompted speculation that China might use the opportunity to shut down Google's China search page, which would have been a blow to its other business in the country.
 
"China has renewed our licence," a Google spokeswoman told Reuters on Friday. "We are very pleased that the government has renewed our ICP licence and we look forward to continuing to provide web search and local products to our users in China."
 
China Internet analysts and industry watchers welcomed the move as a positive sign but cautioned against heady optimism.
 
"It is good news for the Chinese consumer, good news for the Chinese Internet industry that Google is still available in the country in some shape or form," said Ted Dean, president of Beijing-based business advisory firm BDA.
 
"But many of the issues around why Google shut down its Chinese search page in the first place are still there," Dean said.
 
Google stunned markets and consumers in January when it warned it might quit the country, saying it did not want to comply any longer with the censorship requirements needed to operate in China.
 
In March, Google began to automatically redirect visitors to its China website to a search site in Hong Kong that provided uncensored results. Now visitors to the Google.cn page have to click once in order to visit the Hong Kong page.
 
"This doesn't really change anything about Google's position in China. The redirection to its Hong Kong site is ongoing so it is the same problem as before," said Elinor Leung, senior analyst with CLSA in Hong Kong.
 
Leung expects traffic from Chinese visitors to continue to drop for Google and for advertisers to turn to other domestic choices such as China search leader Baidu.
 
Google Chief Executive Eric Schmidt had told an industry gathering on Thursday in the United States that he was confident the company would secure the licence.
 
Google's current search business in China accounts for a tiny slice of the firm's $24 billion in annual revenue. Analysts estimate revenue in China to range from $300 million to roughly $600 million, but the long-term growth prospects are key.
 
As the world's largest Internet market with nearly 400 million users, China only has an Internet penetration rate of 25 percent with huge market opportunities in search, e-commerce and online gaming, analysts say.
 
Google has around 30 percent market share of China's 7 billion yuan ($1 billion) search market.
 
Mixing business with politics
 
Google's move to stop automatic redirection and its obtaining renewal of the licence are indications that relations between it and Beijing are thawing.
 
"In China, it is very common that you need to give the government face if you want to do business here. The double-click rule (not automatically rerouting users) shows that Google can compromise and give them face," said Edward Yu of technology research firm Analysys International.
 
Google's stock was up around 4 percent in premarket trading after the announcement, while Baidu's stock was down 5.3 percent.
 
The company's row with the Chinese government over Internet censorship and hacking attacks added to a burst of tensions between Washington and Beijing, which also saw diplomatic spats over China's currency, U.S. arms sales to Taiwan and Tibet.
 
But tensions have subsided in recent months.
 
On Thursday the Obama administration declined to label China a currency manipulator, and a decision to allow Google to keep its Chinese website could remove another source of friction.

Date created : 2010-07-09

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