What’s Next in the Google/China Struggle?

Someone at Google must be watching the March MadnessNCAA basketball tournament, because that was quite a good head fake move the company made on the Chinese government.

After declaring it was prepared to shut down its Chinese search engine rather than adhere to continued censorship restrictions on search results, Google surprised everyone by taking a different path. On Monday, Google (NASDAQ: GOOG) announced it was redirecting search trafficat its Google.cn site on the mainland to Google.com.hk in Hong Kong, where China doesn’t enforce the same censorship rules.

The move was immediately blasted by Chinese officials. In making the announcement, Google said it realizes the Chinese government may respond by blocking access to the Hong Kong site. In fact, the government wasted no time blocking results and links to what it considers objectionable content, just as it had for Google.cn.

Separately, Google also launched a site where users can check the status of online services it operates in China. The site already shows several services including YouTube and Bloggeras being blocked.

“We expect Google.com.hk to be blocked at least as forcefully as Google.com itself has been blocked historically, and there is a chance that blocks will be more aggressive for Google.com.hk and all Google sites in the future,” said Broadpoint AmTech analyst Ben Schachter in a note to clients.

“It’s shocking to me China hasn’t already completely blocked the redirect. It’s a very confusing situation,” Schachter told InternetNews.com.

A Google spokesperson sent the following statement to InternetNews.com:

“We very much hope that the Chinese government respects our decision, though we are well aware that it could at any time block access to our services. Given that this service is entirely legal, we very much hope that the Chinese government will not block Google.com.hk using the Great Firewall.”

What’s next for Android?

Some observers think Google’s move was designed to give China a face-saving gesture while helping the company maintain its other interests there, particularly in mobile with its Android mobile operating system. The reasoning goes that once Google decided it wasn’t going to abide by China’s censorship rules, it knew the government wouldn’t allow it to offer uncensored results – as Google itself noted, China’s position on this has been crystal clear.

With the Hong Kong redirect, Google has put the ball in the Chinese government’s court. If it decides to completely block access to Google’s search engine, the government will be able to reassert its control and authority in the matter. But Google has also isolated the issue with the redirect and may be able to salvage its other interests there by giving China a single target.

“To me it looks like Google hopes that’s what will occur,” business consultant and veteran tech analyst Amy Wohl told InternetNews.com. “Google’s decided it can’t allow censorship on its search engine, but on the other hand it doesn’t want to lose whatever business advantages and investments they have there, so it’s trying to separate out the two things. If Google doesn’t challenge them, I think China will treat them fine.”

However, analyst Tim Bajarin said he has little doubt China will block the Hong Kong redirect.

“They will shut it down. China has a well-established position on censorship that it’s not going to waver on. I’ve traveled to China many times and if there’s something the government there doesn’t want me to see on the Internet, I can’t get to it,” Bajarin, president of Creative Strategies, told InternetNews.com.

Google said in a blog post that in terms of its wider business operations “we intend to continue R&D work in China and also to maintain a sales presence there, though the size of the sales team will obviously be partially dependent on the ability of mainland Chinese users to access Google.com.hk.”

Broadpoint’s Schachter said that on a personal level, he thinks “Google’s actions are very courageous and admirable. But from the financial point of view, you don’t want to see them locked out of such a huge market.”

Bajarin said Google’s taking a high stakes gamble. “Android is very important to China because they need a world class OS for handsets and Google wants to be that supplier. The diplomatic aspects of this will have to be handled very carefully, but I don’t think you need the U.S. government involved at this point, that would only stir things up.”

On Android specifically, the Google spokesperson said “Android is an open source mobile platform, so anyone — including operators in China — can bring Android-powered devices to market.”

Bajarin said that at a minimum, China’s fast-growing population of Internet users, estimated at close to 400 million, is going to lose out. “The Chinese who are tech literate understand the value of what Google brings and the Chinese search engines aren’t close to Google’s search capabilities. Ultimately this is a very bad development for the Chinese people who are caught in a political chess game.”

A “steady stream” of employees at Google China have left the company since Google first announced it might withdraw from the market, according to a Reuters report that cited local media. The article said some of those leaving were concerned about the future of their jobs and others about potential liability if Google was found to be in violation of Chinese law.

Google has made a point of making clear in its blog postson the issue that its decisions regarding China have all been made by its U.S. executives. Google employs about 600 people in mainland China and its operations there reportedly generate between $300 million and $600 million annually.

David Needle is the West Coast bureau chief at InternetNews.com, the news service of Internet.com, the network for technology professionals.