Last week’s news that Google may completely pull out of China has surprised many, but not me.  In a previous blog, “It Is the Best of Time, and It Is the Worst of Times” (November 11, 2009), I pointed out that Google “has faced difficulties in doing business in China.  Some of these difficulties have arisen simply due to business competition, while others have involved political concerns.  The company has been censored and censured from time to time.”

But at that time, despite suspicion, I was unable to prove the connection between the departure of Google China’s chief executive Kai-fu Lee two months ago and the ordeals that the company had experienced, from “pornography gate” to censorship.  In light of the new development, I have every reason to believe that is the case and that Lee’s remarks on “next big advances in China’s Internet” are misleading and somewhat insincere.

Aside from the political implications that are still evolving, Google’s China saga could represent a big setback for foreign investment in China.  China’s business environment is not as friendly to foreign companies as it appears to be; even if the companies are renowned and successful outside China.  Look at how many Internet companies have run on the rocks in China, including Ebay, Yahoo!, MySpace, Facebook, and Twitter.  Google is just one more on the list!

It is true that Google lags behind Baidu, its competitor, in the China search market.  Compared to google, Baidu though provides less outcomes for each search and it even manipulates the placement of search outcomes based on how much a related advertiser pays, which has been condemned as unethical.

The difference in search outcomes may come from their different business strategies.  Baidu is more consumer-oriented, especially for handling user needs in the areas of music and entertainment, while Google targets the business and technical community with a focus on relevancy of search.

But this difference also reflects no less the sophistication in search technology and innovation.  There is no denying that many of the Chinese Internet companies are followers, rather than genuine innovators.  Just as Chinese news portals have their origins in Yahoo!, and Youku.com, China’s leading Internet video website, mimics YouTube, Baidu is a copycat with its home page a “shanzhai,” or imitation, version of Google.

Therefore, as China still depends upon foreign investment for its spillover of technology and innovation, a Google withdrawal may mean more than making the playing field in China’s Internet space less flat.  It could jeopardize the pursuit of innovation, on which China has betted its future.

Indeed, according to the so-called “indigenous innovation” (zizhu chuangxin) approach, spelled out eloquently in China’s Medium and Long-Term Plan for the Devleopment of Science and Technology (2006−2020), innovation based on the assimilation and adaption of foreign technologies is at least as important as original innovation and innovation of integrating existing technologies.

Google’s departure from China also will send a trouble signal to China’s Google users, many of whom are returnees from overseas.  They got acquainted with Google’s various products from Gmail, Maps, Scholar, YouTube, and Translations, while they were abroad, and continue to use these services to enhance their business and academic activities in China.  To them, Google is a manifestation of a cosmopolitan and forward-looking life style.

Two months ago, in the blog mentioned above, I quoted a sentence on China and Google by Thomas Friedman, the columnist of The New York Times.  Here, I would like to cite the entire paragraph in which the comment appeared – his comments three years ago painted a scenario of who would win if China were to lose Google:

No question, China has been able to command an impressive effort to end illiteracy, greatly increasing its number of high school grads and new universities.  But I still believe it is very hard to produce a culture of innovation in a country that censors Google – which for me is a proxy for curtailing people’s ability to imagine and try anything they want.  You can command K-12 education.  But you can’t command innovation.  Rigor and competence, without freedom, will take China only so far.  China will have to find a way to loosen up, without losing control, if it wants to be a truly innovative nation.