By now, the news of Google publicly chastising China via their official blog has made its way around the Internet.  Google, citing attacks on themselves and at least 20 other large corporations, has decided to ‘rethink’ their business strategy in China, starting with removing filters from their search engine results:

These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all.

While Google acknowledges that removing themselves from doing business in China is a decision not to be made lightly, I think they are making the correct decision for three main reasons:

1.  China violated a good-faith business relationship -

When Google opened its products to China in 2006, it decided that “the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results.”  The cynical part of me thinks that Google couldn’t resist showing ads to 1.5 Billion pairs of new eyeballs (which is far less noble), but taking them at their word, they were willing to take an incremental step towards influencing social change in China.   By all accounts, Google has been filtering results as agreed upon by the Chinese government.

Given the specificity of these server attacks in attempting to access email accounts of human rights activists, it’s clear that China is attempting to re-write the rules as they see fit.  In the view of these hackers (if they are truly a proxy for the Chinese government), not only should Google be censoring search results, but they should also serve as a central location for providing information about Chinese citizens.

As an advertising, technology, and information company, Google has to credibly respond to these attacks.  That the attacks stem from the Chinese government is irrelevant; no matter the source of the attacks, if the integrity of the databases that Google are ever in question, users will flock to other avenues of communication.  China may be the biggest untapped market in the East, but Google cannot afford to lose sight of their dominant market position and trust in the West.  Thus, just saying “stop it, China” is not enough.  By showing that Google is willing to put their money where their mouth is by retaliating, Google is following through on their original promises made when entering the country:

At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.”

2.  Someone has to be the first company to stand up to China-

Google enjoys a relatively unique position in the U.S. as a company that is not only highly profitable, but credibly philanthropical and ethical as well.  As hokey as it may be, having an unofficial motto of “Don’t be evil” and actually following through on it is difficult feat.  That’s not to say that other companies that donate large sums of money and time to the community aren’t helpful; rather, few companies can match Google in truly looking to affect positive change on the world.

Certainly, other companies have stood up to China in the past.  From the tainted dog food scandals, to unsafe tires and clothing sweatshops, companies that source their products stand up to China…after someone gets hurt or the company gets embarassed in the marketplace.  In that, those companies are doing their natural duty to the customer to fix or react, to save themselves.  In Google’s decision, they are standing up to China at the detriment to themselves.

It has been said that ‘Character is what you do when no one is looking’, and this decision by Google fits the mold.  Google didn’t have to tell anyone about this (other than the other attacked companies), but they did.  By publicly standing up to China and saying “You’re not going to be abusive with us”, Google has drawn the first line in the sand.  Hopefully other companies will join them, realizing that they don’t have to tolerate human rights abuses, IP theft, and anything else they “tolerate” just to make next quarter’s earnings.  They are plenty of ways to make money in this world, and plenty of other developing countries willing to transact in an ethical manner (India especially).

3.  China needs the West as much as the West needs China

This is somewhat an elaboration on the end of my second point, but it can also stand-alone.  China does not hold all of the leverage in East-West business relations.  Yes, China is the largest market in the world, and in the case of the U.S., they produce a lot of our goods.  But as is clear from the current economic downturn, when the Western world stops buying, China gets hit hard.

One of the issues that Ian often brings up when we discuss China and human rights is the population bomb that China has, that you can’t just unleash all these Western ideas on the Chinese population all at once.  Perhaps…but this is exactly what gives the West the leverage it has.  China’s got a BIG problem with the population; as citizens have seen their wealth of their neighbors increase, they start demanding opportunities and the consumption that goes along with it.  China needs to maintain rapid economic growth just to maintain relative order, and that rapid growth is predicated on doing business with the West.

Of course, I’m not advocating that the West cause civil unrest in China to prove an academic point about human rights.  What I am saying is, for companies that can see past next quarter’s earnings report, there are big opportunities for leadership on the world stage to improve the human condition around the world.  The West needs China as much as China needs the West;  neither party should be abusing the other in business dealings.

Summary

Google’s recent announcement about hacking from China is no surprise, but their reaction to this behavior is.  While they stand to lose access to the largest market in the World, I think Google is right to draw the line on this type of behavior from the Chinese government.  By showing that they are willing to take (or at least, risk) a huge monetary penalty in order to maintain their principles, Google is leading the way towards a more ethical business environment around the world.  In an era where trust in big business is at an all-time low, Google is showing a different way.

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