Business Maverick

Business Maverick, Politics

China vs Google: Two 800-pound gorillas in a battle that may just define China’s future

China is the world's fastest-growing economy and, according to many, will soon be its most powerful country. It’s also squaring off against one of the world's most innovative and dominant Internet companies. One could be forgiven for thinking this is a unique, revolutionary, world-changing moment in global history.

For thousands of years, China has been in a commanding, central position in Asia. One of the most frequently used names for China, “The Middle Kingdom” – means the heart of civilisation. While this may not be unique to China, of course, it was closest to reality.

For China, this hierarchical notion of the superior and the subordinate has deeply permeated international relations and commerce for millennia. China’s relations with nations on its perimeter, like Vietnam or Korgyo (the ancient kingdom located on the Korean peninsula), were always those of ruler and tributary. Emissaries were supposed to bring their tribute to the Chinese imperial centre, pay obeisance, give gifts, swear allegiance, make the required deep bows to the throne and then retreat slowly from these audiences with their imperial betters. Not surprisingly, this thoroughly unequal political relationship had its deep-seated analogues in trade and commerce. In 1793, the Chinese actually broke off diplomatic relations with Britain when the leader of a British trade mission, Earl Macartney, refused to give that traditional deep bow, the kowtow, to the emperor in Beijing, though some sources dispute it.

As western nations eventually began efforts to open large-scale trade relations with China in the 17th and 18th centuries, it was because western consumers craved high-quality Chinese products such as silk, porcelain and tea. From the Chinese perspective, however, the foreign merchants offered little the Chinese actually wanted. About the only thing they wanted was payment in silver. This constant drain on silver to China was contributing to currency fluctuations in the West, and so western merchants searched for any other product they could offer the Chinese. They eventually found one – opium. There was one small problem. Since imperial Chinese decrees totally banned its sale or use in China, those respectable western merchants with their chests of smuggled opium, made them the 19th century moral equivalent of the Cali cartel.

For the Chinese, of course, the 19th and 20th centuries were a continuing, cautionary tale about the overlap of power and economics. There was an unending litany of embarrassments and humiliations: unequal treaties with the west, the foreign spheres of influence, western military expeditions into China, Japan’s “21 Demands”, a decade of warlords and foreign invasions. One major lesson the China drew from these events after the communist revolution, of course, was obvious: a strong state is able to ward off national division and disgrace.

But a second lesson – drawing from historical experience – was that trade is definitely not a neutral concept. Instead, it is integrally linked with the notion of a strong state and how a state organises its relationships with other states.

Fast forward to the 21st century: when the questions are, first of all, how to organise production of steel ingots, Christmas-tree fairy lights, running shoes, T-shirts, energy efficient refrigerators, air conditioners or the guts of audio-visual gear, and then how to export and sell all this stuff to eager consumers around the world, the old top-down model still does pretty well. In fact, this boom in production and exports eventually brought China thoroughly into the world’s economy which, in turn, responded with growing pressures for thorough revisions of China’s commercial code towards joint ventures, investment and other measures. This is giving more opportunities for growth as outside investors feel increasingly comfortable with their relations with China.

But, as veteran China watchers have observed, it is one thing to manage the relatively straightforward process of pumping capital into an export-driven manufacturing explosion that fuels domestic growth and a rising wave of improving living standards in China. But it is quite another when this logic begins to be applied to the borderless, free-and-open cyber-landscape – something China and Google are now discovering.

Google originally entered the Chinese market because it saw the great, growing market of the 21st Century, even as several of Google’s senior managers, including CEO Eric Schmidt and co-founders Larry Page and Sergey Brin, were ambivalent about tackling China in the first place. In fact, things almost came to an end two years ago when the Chinese government asked Google to censor information during the Beijing Olympics on both its Chinese site,, and the main English language search engine, Google refused to follow orders, and after the Olympics, the Chinese dropped the issue – for the time being.

Google had created the site in Chinese, as well as email accounts, to challenge indigenously developed Web services like market leader, Baidu at China is one of the world’s fastest growing Internet environments with some 300 million Internet users already. With maybe nearly a billion potential users still to come, the proponents of the project must have felt they were about to enter cyber-heaven.

However, there was a true Faustian bargain woven into the deal. As the price of admission, the Chinese government insisted that Google, like Yahoo and everybody else, co-operate in limiting access to certain sites – such as overseas sites dealing with Chinese human rights, religious freedom campaigners like the Falun Gong and minorities like the Tibetans or the Uighurs. Since it began operations in China five years ago, though Google had agreed in theory to filter those sensitive searches, it repeatedly clashed with the Chinese government on what material was covered by this ban. The company regularly found its service blocked when it defied its hosts.

It also clear, now, that Google email accounts have been repeatedly hacked for months – especially through phishing expeditions for information about account user activity. According to the company, these attacks originated from somewhere in China and were part of an effort that exploited Microsoft’s Internet Explorer browser’s security flaws in email attachments to gain surreptitious entry into the internal networks of some major financial, defence and technology companies and research institutions in the US.

Sources in the US Congress say more than 30 companies, including Yahoo, Symantec, HP, Adobe, Dow Chemical and Northrop Grumman, were attacked. Google has also acknowledged that hackers penetrated the Gmail accounts of Chinese human rights advocates in the US, Europe and China, as well as those of people at Washington-based think tanks active in congressional policy debates about China.

James Lewis, a cyber-security expert at the Centre for Strategic and International Studies, says, “This is a big espionage programme aimed at getting high-tech information and politically sensitive information – the high-tech information to jump-start China’s economy and the political information to ensure the survival of the regime…This reflects China’s national priorities.”

While it is still not clear who carried out the hacking, the most likely candidates using phishing tactics are somewhere in the Chinese government. In these cases, an individual opens a message purportedly from someone he knows and then opens an attachment that carries a sleeper program that takes up residence in his computer. This illegal program allows an outside attacker to access the host’s emails and even send confidential documents from that computer to another email address, without detection. In some cases, the illegal program can even turn on a Webcam or computer microphone to record what is going on in the room, all without the victim’s awareness. Ouch.

University of Toronto specialist Nart Villeneuve has examined the earlier GhostNet cyber-spying operation that apparently also originated in China. With GhostNet, the attacks targeted the Dalai Lama’s offices, as well as foreign embassies and government offices. In Villeneuve’s opinion, these earlier efforts parallel what Google account users have now experienced.

These Google attacks also raised the Obama administration’s hackles, touching on some of the most sensitive issues in US-Sino relations: human rights, censorship, trade dispute, intellectual property concerns and access to high-tech military technology – the modern version of the debate over a kowtow? A White House spokesman said this “recent cyber-intrusion that Google attributes to China is troubling” reminding listeners that Internet freedom was “a central human rights issue” for Obama during his 2009 trip to China – even as he declined to meet the Dalai Lama before his East Asia trip to allay Chinese irritation.

The weight of these events has now prodded the “Googleplex’s” conscience into taking a firm, public stand for commercial and intellectual freedom, provoking increasingly shrill Chinese responses. Instead of the right to smuggle opium into China and get the population hooked on a dangerous drug, this time the question is the equally addictive nature of free speech and open access to information. Google has now told the Chinese it will no longer help block websites on the government’s behalf. The Chinese government in turn has said Internet activities “in” China must follow Chinese laws on censorship – and Google has said, well, in that case, it may just pull out of China entirely.

In an ironic twist, inside China itself news of Google’s complaint ended up being heavily censored, save for a disdainful op-ed in The People’s Daily that called Google a “spoiled child” that will not make good on its threat to close down. Or, translated: “Our market is simply too big – and rich – for you to follow your principles rather than hunt for profit.”

As I was thinking about what these events mean, naturally I used Google to read how some of the arbiters of the international political zeitgeist are parsing this still-evolving story for deeper meanings. The New York Times’ Nick Kristof has enthusiastically applauded Google’s principled approach, in contrast to the Obama administration’s kowtowing to the Chinese over that meeting with the Dalai Lama (Hey, I almost forgot – “kowtow” is a Chinese word too). Kristof adds that as word of Google’s statement of principle reached ordinary Chinese Internet users, they started showing up with flowers and cards at Google’s Beijing headquarters in support of the company. And he reports on Twitter messages like one that said, “It’s not Google that’s withdrawing from China, it’s China that’s withdrawing from the world”.

Kristof’s conclusion is that China’s netizens will, eventually, overcome the so-called “Great Firewall of China” by using virtual private networks and American-based proxy servers like Freegate. As he wrote the other day: “I think, a combination of technology, education and information will end the present stasis in China. In a conflict between the Communist Party and Google, the party will win in the short run. But in the long run, I’d put my money on Google.”

Commentators are starting to see this event as a “hinge moment” in China’s future. China is at a crossroads: does it want to continue to open its society to the world (and the world to its society), or does it hope – like King Canute wielding his broom against the ocean – to stem the tide before anyone who wants to can access anything and anybody? Or, as columnist Roger Cohen also wrote while he was in Chongqing: “One blogger, Xu Caixing, cut through such obfuscation, saying the issue was ‘censorship and human rights.’ He concluded: ‘who is afraid? What are they afraid of?’ ”

China’s uneasy relationship with the Internet and Google, its insistence on censorship, the phishing of Google and other accounts forces attention on how any new information and communication technology shows the odds at which their political system is with the modern world of free-flowing information. After all, books were the new high-tech communications gear of the 15th century in the west. The church and many rulers were loath to let too many people gain access to them . The great religious arguments of the Reformation hinged on whether people should have direct access to the Bible in their own languages or needed an intervening filter of priests and Latin. It was that time’s rough equivalent of restricting the range of their Internet browsers.

A decade or so ago, the cellphone became ubiquitous around the world, and the so-called colour revolutions in the new republics of Eastern Europe and found the cellphone to be the perfect technology to distribute information and call adherents to rallies. Each recipient of a message is asked to send that message on to the recipient’s global address book and the distribution grows exponentially. In the Philippines too, the cellphone was central to the toppling of then-president Estrada, once he became a public embarrassment. Further back, in the Soviet Union and its dependent regimes, the fax machine and photocopier required government licenses, so powerful did governments view the potential impact of these tools.

And so China is on the cusp – will it break with the past and embrace the dangers and possibilities of an open Internet, or will it reach backwards for inspiration. But make no mistake: China may or may not banish Google from its digital shores, but information will find a way to be free.

By J. Brooks Spector

For more, read the New York Times here and here, the AP here, here and here, or go to Google’s corporate blog

Photo: A local Google user places a pack of cigarettes together with gifts from other supporters outside Google’s Hong Kong office January 14, 2010. China showed no sign of giving ground on censorship after U.S. Internet giant Google threatened to quit the country, telling companies on Thursday to cooperate with state control of the Internet. The entire banner reads: “For saying no to network monitoring, Google well done!”. REUTERS/Tyrone Siu