Google Unveils Another Surprise Twist in China Drama

For the first time in two months there is a new development in Google Inc.'s (Nasdaq: GOOG) feud with China. The search engine today (Monday) began redirecting traffic from its China page,, to its uncensored Hong Kong page,

Google said the move is "entirely legal," and said it will continue research and development activities in China. Some market observers had expected Google to announce its total withdrawal from the country today, as the company's disagreement with Beijing had reached a standstill. But Google's new approach is another surprise development.

Google first shocked investors and analysts on Jan. 13 by saying it would leave China for good after its Web site was allegedly hacked by the Chinese government. Google claimed that China targeted at least 20 overseas firms and hacked into the e-mail accounts of at least two human rights activists. The company said that it would no longer comply with China's censorship policy as a result.

Since then, Google has been talking to Chinese officials about the possibility of continuing its operations sans censorship - something to which Beijing has not been receptive. Chinese authorities earlier this week warned Google's business partners that that they should prepare contingency plans in case the Mountain View, CA-based company stopped censoring its searches.

The company said in its blog-post that it "very much hopes" that the government will respect its decision, though it is "well aware" that Chinese authorities could block access to its services for users within the country's borders.

"Figuring out how to make good on our promise to stop censoring search on has been hard, the company said on its blog. "We want as many people in the world as possible to have access to our services, including users in mainland China, yet the Chinese government has been crystal clear throughout our discussions that self-censorship is a non-negotiable legal requirement. We believe this new approach of providing uncensored search in simplified Chinese from is a sensible solution to the challenges we've faced-it's entirely legal and will meaningfully increase access to information for people in China."

Google will continue its wider business operations in China, including its ad sales business, its Android mobile phone operating system, and its Chrome browser business. However, the size of its sales workforce will be dependent on the ability of mainland Chinese users to access

"If I were a Google shareholder, I would encourage Google not to censor but to pursue any business not related to censorship in China," Whit Andrews, Google analyst at Gartner, told CNNMoney. "Does not censoring also mean they can't put Chrome OS on a netbook? I don't see why it would."

China, which is the world's fastest growing cell phone market, has about 700 million customers, according to the China National Bureau of Statistics. That's about double the number of Internet users.

In terms of search, Google may choose to focus more on other Asian markets, such as Korea and Japan. The company handles less than 50% of searches in Japan and 8% in Korea, according to ComScore Inc.

"Japan is clearly a large market and they are gaining share," Aaron Kessler, an analyst at Kaufman Brothers LP, told Bloomberg. "That's a key market for them."

Beijing did not immediately release a statement on Google's decision to shut down its Chinese language Web site.

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