For years, this was the typical view that ordinary people saw of Zhongnanhai, the government compound in Beijing used by senior Chinese leaders. Google maps, especially the Earth view option, has changed that. Photo source: beijing2007.wordpress.com

So, do you remember the recent Google in China row?

The one earlier this year in which the Silicon Valley-based search and technology giant made global news with reports of hacked email accounts and possibly stolen code? The company – which questioned operating a filtered site in the rapidly-growing country – later decamped its mainland China search engine operations to Hong Kong.

Well, in an interesting twist, it looks like the California technology wizards have scored a point (or two) for transparency regarding Zhongnanhai, the compound near the Forbidden City that many in the senior Chinese leadership call home.

How so?

Satellite images on Google maps permit viewers to see over the walls of the compound, where many in China’s leadership meet and reside.

In a way, it’s not a super secret that this complex exists. People living in and visiting Beijing know it’s there – right near the Forbidden City and Tiananmen Square.

The U.S. government posted images of former Commerce Secretary Carlos Gutierrez’s visit to Zhongnanhai in 2006. Chinese media outlets have published photographs.

Back in 1999, on the 50th anniversary of the founding of the People’s Republic of China, Time Asia ran an insightful article about Zhongnanhai, complete with palace intrigue, a black-and-white photograph of leader Mao Zedong rowing a boat in a lake behind the walls and notes about protesters standing outside at various times.

For the power elite in China, the article noted, Zhongnanhai has always been a coveted destination:

Getting into Zhongnanhai has always been hard work, and once you’re in, staying there has never been easy. Thinkers, economists and rebels have all vied to be received there by party leaders.

And I know international reporters have visited and likely have taken photographs to show others.

But as GlobalSecurity.org noted in its description of the Chinese government compound:

Although foreign visitors cannot enter the complex, they can examine it from the exterior.

There are guards around the entrances, such that once when I visited years ago, I saw one telling a person to put a video camera away.

The fact that almost anyone with access to Google maps – including users of Google.com.hk, the site to which mainland Chinese users are directed after they go to Google.cn – can now peer over the walls is, well, something that probably has come to the attention of the security detail responsible for keeping everything calm.

I’m sure, if given the choice, Chinese security officials would prefer that the aerial images not be available to, well, the public.

Think about it this way: Long before a satellite could hover in space and transmit images back to Earth so that Google could repurpose (to use that word) them for daily use by ordinary people, the Chinese government had essentially what was a moat around Zhongnanhai.

As we know, moats have long been a convenient way of telling someone in an unspoken, visual way that you’d like some space.

If you have never seen over the compound’s walls or the moat inside, have a look below:

View Larger Map

If the map is not showing up as an embedded image, click on “View Larger Map” to see it in a Google window.

Of course, some in China and other parts of the world might question whether Google’s use of these aerial photographs invade other people’s privacy.

I’m sure that if a company based in another country decided to post aerial images taken of the United States, well, there would be lively chatter about what was happening.

I suppose for the senior Chinese leadership – or at least their security officers - it could be much worse.

First, as we know, there are underground pathways under nearby Tiananmen Square. Google maps to my knowledge has not put those online for the world to see.

Second, Google actually could have add three-dimensional graphics to Zhongnanhai.

The technology giant did so with the nearby Forbidden City (scroll to the right in the Google map above) to give viewers a virtual sense of visiting one of the most famous places in China.

The Great Wall received graphic treatment from Google as well.

Google also added graphics to the White House in Washington, D.C.

I’m sure enough people, including students, were curious enough to see what the White House looked like with walls that Google decided to proceed with it.

By the way, the Grand Canyon takes on a fascinating look with Google Earth maps.

So does the Eiffel Tower in Paris.

Hong Kong’s skyscrapers certainly stand out with the Google Earth maps.

By the way, if you can at some point, it’s good to actually visit a place in person. You get a sense of the smell, the people, the noise, the lights, the vibe.

Virtual traveling is a great introduction. But it’s not until you’re physically in a place and realize that everyone around you doesn’t speak English that it sinks in how big the world is.

You also start to wonder how you’re going to order food.

Anyway, the Google maping system hasn’t always won fans around the world.

But the fact that you could see an aerial view of Zhongnanhai also has been possible since last year – even before Google went public with the hacking attempts, which were believed to have originated in China.

I noted the aerial view of the Forbidden City last year. At the time, the middle line that can be seen from above in the Forbidden City fascinated me – it still does.

Only recently did I think about the map system and Zhongnanhai in the context of the Google in China issue.

The images show that technology and its backers can sometimes push the boundaries of what governments want – or like.

As the Google in China issue unfolded earlier this year, company executives talked about running an unfiltered search engine in that country.

Some Chinese writers and government officials responded by saying that Google had to follow the law in China and that there is never a true free flow of online information.

But in the case of the satellite maps, though, the Google techies have proved a point – all you have to do is look.

One difference, though, is that when you use Google maps to view your own home, you know what time of day the camera took the picture.

All you have to do is see if your cars are out front.

UPDATE: I forgot to say that the International Forum in Tokyo is on Google’s list of graphically-enhanced buildings.

As I was looking for it and surveying Tokyo’s skyline, I realized that Google Earth maps remind me of what artist Rob Carter did on Vimeo.

Yes, Seattle’s Space Needle stands in 3-D glory on Google as well.

I’ve been trying to get my mind around Monday’s announcement from Google that it would shift its servers from mainland China and to Hong Kong - a move which it viewed as legal but would let them run a non-censored Google.cn site.

That site, as we all know by now, would redirect users to Google.com.hk.

China unleashed a volley of criticism and the fallout and analysis quickly took place.

At the risk of tossing out a simplistic answer to a complicated issue touching free speech, sovereignty in a country that has seen uprisings, instability and occupation and increasingly complex U.S.-China relations, there is the thought that revolves around a simple phrase that people in Washington, D.C. are all too familiar:

To get along, you go along.

If you’re a business and inclined to make a political point in China – a place in which its senior leaders want to maintain authority at all costs – it’s best to put your shingle out elsewhere.

From the view of a human rights activist or free speech defender, that thinking is, undoubtedly, hard to accept.

But multinational companies, wherever they operate, do need to follow the laws of their host countries. I suppose that’s true even if senior leaders of the host country don’t always follow the law.

And traditional corporate responsibilities are tied to shareholders, employees and customers. Governments and their leaders set policy and engage in foreign policy. 

That theme emerged in this conversationon CNBC, which featured Jack Welch, the former chief executive of General Electric.

It’s one interview that I found to be lively about the Google and China topic because you have a capitalist with decades of experience trying to come to terms with an ethical question regarding free speech and the flow of information.

It was a sobering one – and a peek inside business realism when you deal with a country, such as China, that has a remarkable economic market – including 384 million Internet users and online spending soaring $11 billion last year – but rules that you might find distasteful in your home country.

The talk looked at down the road in the time frame of the next 10 years or so.

Welch was explaining the difference between corporate decisions and government policies, when CNBC anchor Becky Quick noted that the Chinese government prompted Google’s reactions with its suspected hacking of Gmail accounts and stealing of code:

Said Welch:

Google has a right to do anything. Google has a right to be an agent of the U.S. government…and act as the U.S. government would want them to act at this terrible Chinese behavior. But Chinese behavior is Chinese behavior. It’s the way they act. It’s the way they control that society.

CNBC anchor Carl Quintinalla jumped in to say that if a company is unhappy with that style of government, a corporation can leave the Chinese market. Welch agreed and talked about a corporation’s responsibility to its shareholders, employees and customers.

Then, Welch considered the Google-China row in the long view and corporate flexibility:

What does it mean in 20 years? I don’t know….Let’s go back to a company’s responsibilities: Employees, customers and shareholders. They don’t carry out government policies. They’re told by their government what to do: ‘You can’t ship to Iran.’

 A third CNBC anchor, Joe Kernen, interjected:

I can see what you’re saying. For shareowners, and for customers and for everybody else, they might just suck it up and go ahead and go along with what China wants them to do because how big it can be in 20 years.

Later, Welch gave a realist’s view in this hard ball game with a nuance:

I don’t see how China can let Google win….Google may have a strong hand than people think.

Welch also turned the table and asked Kernen what he thinks China will do to Google. There was some discussion and Kernen noted:

I’m saying it’s impossible for Google to change China.

Welch continued to talk about if he ran a multinational company that was selling hardware, such as engines, there wouldn’t be much reason to pause:

If I was selling turbines, jet engines, medical equipment, I’d be in there just as we were 20 years ago, driving like hell. And living with all the punitive stuff they do to you. They do terrible things to you. They make life difficult. And when they get their own supplier with the same quality, you’re dead.

Kernen talked about an evil society and the price of business in a market economy:

As a businessperson, you do what you have to do. It’s not immoral but businesses have to be driven by something other than I guess…But there are times, I hate to use the word ‘whore’ but businesses have to ‘whore’ themselves certain times to stay in the money. And to stay in the marketplace, you have to look the other way in a distasteful situation.

Welch:

You’re playing in somebody else’s rules in somebody else’s playpen. And you want to make it the rules your rules. That doesn’t always go. China, they’re not making this rule up as a surprise.

Wow.

At least, if anything, it was a frank discussion which talked about the realities – and costs – of doing business in China.

As I wrote in January, there is ample reason for Chinese leaders to stress political stability at almost all costs – even if they let the economy, in some cases, roar and let activities unfold as if a new Wild West had been born.

The issue here, of course, is that Google is no ordinary corporation in the global marketplace.

Before it entered the China market, its founders and senior leadership debated the merits of its corporate philosophy of doing no evil and how, yes, Chinese leaders operate.

As this recent case illustrated, Google – in a sense – became somewhat of a “nail house”- a description used in China for people who don’t want to leave their houses but are forced out by government or business officials, sometimes with force.

The catch is that while you can subscribe to lofty, ethical principles at your home office, when you open your shingle in a different country with dramatically different rules shaped by an unstable past, you do lose control of some of your guiding principles in exchange for money, customers, market share and brand recognition.

So, which one do you want?

And how badly do you want that market share for your corporate leadership and shareholders?

Or as some in China say, do you keep one eye open and one eye closed?

Meaning: You acknowledge what you like and what is politically safe to accept and ignore what is bad, corrupt or threatening.

Kernen described the same idea but with different words.

It’s no wonder that so many middle class Chinese citizens have found a path to economic success by sticking only to education, career and economic goods.

In The New York Times, reporter David Barboza quotedXiao Qiang, a China Internet researcher at the University of California at Berkeley, putting it another way:

Internet companies in China have to work so closely with the government. And that means the government’s political agenda can become the company’s business agenda.

But whether it’s impossible for a government to change, as discussed in that CNBC interview, strikes me as a bit fatal.

That never seemed to be the attitude of U.S. capitalists in world history – at least going into a project.

Yes, operating in the People’s Republic of China is nearly a completely different context.

But keep in mind that China has changed – dramatically since the late 1980s – especially with architecture, ownership and global events.

The late paramount leader, Deng Xiaoping, ushered in a new era of pragmatic economic policies.

I recognize that soft power is what senior Chinese leaders are talking about now – that the country’s rise can be done without being seen as a global threat to developed countries, such as the United States.

The question becomes whether that change will ever include the inclusion of greater free expression and the distribution of criticism aimed at the central government.

As I said when all of this surfaced:

The Chinese government also dislikes others touching their political affairs….They’ve used power in a very real way and are willing to interfere when they want.

Business is business. Internal politics is a matter for the leadership in Beijing.

The most fascinating part of this is which group will truly win in the long run – Government leaders in Beijing or those who have a deep faith in the power of the Internet and all the information that flows.

Eventually, as history has shown us, people in the world are smart enough to get around restrictions.

For now, Google has left some of its operations in China, including staff to work on entertainment.

And what you have today might not be yours tomorrow.

Google on Monday started to operate Google.cn without filters.

One fallout from the highly-watched spat stemming from hacked Google Gmail accounts and reports of stolen code is that Chinese and Hong Kong companies are ending relationships with the California company, or at least halting them for now.

From The New York Times:

China’s biggest cellular communications company, China Mobile, was expected to cancel a deal that had placed Google’s search engine on its mobile Internet home page, used by millions of people daily. In interviews, business executives close to industry officials said the company was planning to scrap the deal under government pressure, despite the fact that China Mobile has yet to contract with a replacement. Similarly, China’s second-largest mobile company, China Unicom, was said by analysts and others to have delayed or killed the imminent introduction of a cellphone based on Google’s Android platform. One major Internet portal, Tom.com, already had ceased using Google to power its search engine.

Bloomberg reported that Tom Online – a business of Hong Kong billionaire Li Ka-Shing – is no longer using Google’s search engine.

On Monday – the same day that Google followed up on its January pledge to change the way it operates in China – the U.S. Chamber of Commerce in China reported that the view of U.S. businesses in the most populous country has dimmed, according to media reports.

Yet also on Monday, Chinese Premier Wen Jiabao told a group of visiting U.S. business leaders that China remains open to international investment and that it would begin to accept more imports, according to CCTV, the Chinese television network.

And Chinese media outlets are running stories talking about how the issue will not affect U.S.-China relations – that is, unless “someone” decides to make it a political one.

The People’s Daily offers this article about how its writer thinks the world views China, including this opening passage:

China and the world are getting closer. The world is having a more vivid and clear understanding of China. A long history, brilliant cultures, diligent people and full vitality all compose the beautiful landscape of China in the world.

The BBC has interviews with technology watchers, both in the United States and China.

NOTE: Events are changing fast. I’ll try and update this blog with news and commentary as often as I can.

Nuance and diplomacy are important in any state-to-state or business relationship. The only catch with China is that there is a true tradeoff when entering its business market. That is, to gain market share, international businesses need to adhere to the country’s rules and laws and what senior Chinese leaders want.

At times, those rules and laws can be unclear – and open to interpretation.

As one observor pointed out, there’s a diversity of Chinese government leaders.

If Chinese authorities welcome visitors and businesses without being clear about what can and cannot be done in the beginning but change their minds once operations become established, then tensions can bubble up.

I should say that I offer that sentence in a general context. Google was well aware of the guidelines of entering the China market and the events unfolded only after the company learned of the hacking cases.

But my sense is that the ordinary Chinese person recognizes the issue of authorities being vague.

These pandas were part of a museum exhibit last year in the United States. The exhibit looked at change, specifically in the design field. Image source: Portland Art Museum

Consider Google’s decision to stop censoring its Google.cn site and shift its servers to Hong Kong, both of which were announced Monday, as just a point on a very long line.

This is fascinating. But it is, by no means, the end point.

The Associated Press, in its report, called it a way around censorship. The New York Times moved a version of this historic episode regarding the Internet.

If there’s anything to remember about the epic view of Chinese history in this wave-making incident, it’s that, well, senior leaders have a good memory.

Just as leaders in any country like to win, they also are happy when they get their way.

Not everyone in China is enjoying the benefits of staggering economic growth in that country.

But the country is expected to become the world’s second largest economy, one with an Internet market of an estimated 384 million people.

Certainly, that number could grow in the coming years.

And the elite in China are chasing brand names, owning multiple homes, traveling the world and leading remarkable companies, such as Baidu, the Internet search engine leader in that country.

But consider that while the British ruled Hong Kong for about 150 years – and actually instituted some reasonable policies and procedures there – senior Chinese leaders achieved their goal of having the former colony return.

And interestingly enough, it’s in this former colony that the Mountain View, Calif. company will run its unfiltered Google.cn.

It’s only a few hours after Google posted its move on its corporate blog. Chinese news outlets are running with the basics.

(UPDATE: The Chinese government has responded, saying Google’s decision is wrong. The White House issued a statement, too.)

But Xinhua, a state-run news agency, is noting that Chinese Premier Wen Jiabao might be looking for some middle ground on contentious U.S.-China issues, including trade and currency, in a May meeting.

But who knows?

That meeting needs to take place and actions must follow words.

And in regards to this specific incident: The people who work at Google are pretty bright, too. 

Here are actions or issues that I’ll be watching in the Google-China issue, which shook the online world and global capitals in January:

1. CHINESE CENSORSHIP REMAINS POSSIBLE

Even though Google has moved its servers to Hong Kong, a bustling free port, censorship can still take place.

Google knows this.

From the Monday announcement:

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.

Google certainly had to follow through on its January announcement – which many in the United States praised.

But it’s always eye-catching when corporate leaders publicly use the word “hope” in conjunction with the reaction from senior Chinese leaders.

I think corporate and government leaders often like to know – with a high degree of certainty – things and reactions before they publicly comment on them.

I also realize that censorship can occur because years ago, I was resting in an inexpensive guesthouse in Guangzhou.

I was watching English-language news from Hong Kong and the report was about human rights or democracy, when I saw a few seconds of the dispatch.

A gray screen popped up for a few minutes. It disappeared after that report ended.

2. CHINESE REACTION – BOTH OVERT AND COVERT

It could surface quite fast or take form in smaller, but noticeable, ways over the coming days and weeks.

(UPDATE: See first update above. The Chinese government is critical of Google’s move and the response was swift).

Did senior Chinese leaders lose face in all of this?

Already, they were saying that all countries don’t allow a true free flow of information on the Internet. Therefore, according to this logic, China doesn’t have to do so, as well.

The Chinese government could, as some reports have noted, put pressure on Google’s partners in China.

Even before this announcement, Chinese leaders were talking about how a Google exit really would not affect international investment in China, according to Xinhua.

The message was clear: Google might be upset.

But China remains a powerful enough draw for other companies and countries to do business in the Middle Kingdom.

One illogical argument that I’ve seen from Chinese leaders is this: They say Google is trying to impose its values and ideas on China and its people.

Yet, if this were true, shouldn’t senior Chinese leaders have rejected Google’s efforts to enter the country years ago, before it even planted its logo on China’s soil and the hacking news surfaced?

And if senior Chinese leaders are truly upset with Google, what type of actions will they take to return the favor to the corporate officers in Mountain View, Calif.?

After all, why didn’t the leaders of those 20 other U.S. companies take their concerns public?

3. WHO HACKED GOOGLE?

This still remains a mystery – at least to most people.

After Google announced the attacks in January, I wrote that this key question – central to any crime, besides motive – would be pushed aside in a wave of rhetoric.

The Chinese government has denied involvement and so have the two Chinese universities that U.S. authorities suspect might have been involved.

Senior Chinese leaders probably have noted – many times over, in their minds – that the National Security Agency worked with Google in investigating the cases.

If these hackers were so brave and bold to hit Google – in addition to about 20 other U.S. companies, which have to my knowledge, remained silent – do they have the gumption to truly up this chess game?

As in: Go after Google again – to prove a point.

Isn’t that part of the motive of hackers?

4. BOAO FORUM

This is a prestigious forum for world leaders, academics, analysts and other movers and shakers.

Well, the organization will have its next meeting from April 9 to 11 on the Chinese island of Hainan, which is near Guangdong province.

The topic will be on sustainable growth and China has made news for its efforts to play in this economic space.

But in the hallways or in hushed conversations, I wonder what government and corporate leaders will say – if they even do so – about Google and China and overall tensions between the United States and the People’s Republic of China.

They might stick to polite talk and just watch people’s facial reactions and body English and parse what was said in public to gauge a sense of reality.

5. GOOGLE’S APPROACH

Google’s approach is more of a nuanced, middle step – if that’s actually possible to say, given all of the rhetoric in this case.

They could have pulled out completely.

But the company was probably smart enough to know that there are many brilliant people in China – who make for some terrific employees.

From the company’s blog:

In terms of Google’s 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. Finally, we would like to make clear that all these decisions have been driven and implemented by our executives in the United States, and that none of our employees in China can, or should, be held responsible for them.

Clearly, company leaders in California wanted to give their employees in China enough protection – at least in words – so that they can continue to work in that country.

Since the news broke in January, I have heard from a source – and the company reiterated this in its Monday announcement – that the cyber attacks were “sophisticated.”

They were so sophisticated that Google’s employees had to take extra security steps before they could do their work.

One question I often wonder about:

In the 1990s, senior Chinese leaders opened their doors and the country to international investment and global friendship.

There were huge banquets. Western business leaders were treated to lavish dinners, five-star hotels with staff workers swirling about and meetings with speeches, banners, handshakes and smiles for the camera.

What happened?

Why the change?

I should note, too, that relatives of senior Chinese leaders have come to the United States to enjoy opportunities in education and work.

And U.S. and international citizens have traveled to China to do the same.

There is nothing wrong with that, though some have been caught up in a messy life that high stakes can bring.

What is noteworthy, though, in the case of relatives of senior Chinese leaders is that they actually enjoy the benefits of a more open society in the United States – one with a much more open information flow. Yes, I understand they probably contribute to this country, as well.

But yet, senior Chinese leaders have decided that an open society in that country should apply largely to economic and business matters.

But Google might be right in a sense: That the Internet is changing China.

In recent months, my mom has taken to watching epic Korean soap operas – full of good and bad characters and stylish clothing.

I think, though, that watching U.S.-China relations is so much more compelling and intriguing.

Did I remind you that Chinese President Hu Jintao is scheduled to visit President Barack Obama in Washington, D.C. this year?

Stay tuned.

If you’re interested, here are my previous posts on Google in China.

And here’s a guest post I did for TechFlash about the topic in January.

Those schools are Shanghai Jiaotong University, a prestigious institution, and Lanxiang Vocational School. Experts who are investigating the hacking include specialists from the National Security Agency.

The Chinese government has denied involvement in the attacks in which Google code reportedly was stolen and the Gmail accounts of people critical of Chinese leaders were compromised.

Reporters John Markoff and David Barboza used careful wording in their article as to whether the Chinese government actually had a role in the much talked about attacks:

If supported by further investigation, the findings raise as many questions as they answer, including the possibility that some of the attacks came from China but not necessarily from the Chinese government, or even from Chinese sources.

They included information that raises the possibility that an instructor from the Ukraine might have ties to the attacks:

Tracing the attacks further back, to an elite Chinese university and a vocational school, is a breakthrough in a difficult task. Evidence acquired by a United States military contractor that faced the same attacks as Google has even led investigators to suspect a link to a specific computer science class, taught by a Ukrainian professor at the vocational school.

Still, U.S. officials are looking at all sources of the attacks, the newspaper reported:

Within the computer security industry and the Obama administration, analysts differ over how to interpret the finding that the intrusions appear to come from schools instead of Chinese military installations or government agencies. Some analysts have privately circulated a document asserting that the vocational school is being used as camouflage for government operations. But other computer industry executives and former government officials said it was possible that the schools were cover for a “false flag” intelligence operation being run by a third country. Some have also speculated that the hacking could be a giant example of criminal industrial espionage, aimed at stealing intellectual property from American technology firms. Independent researchers who monitor Chinese information warfare caution that the Chinese have adopted a highly distributed approach to online espionage, making it almost impossible to prove where an attack originated.

Keep in mind that Chinese President Hu Jintao is expected to visit the United States this year – with one media report noting that it might happen in April.

Google announced that it might leave China because of the attacks and wants to operate an unfiltered Google.cn in that country. But the Silicon Valley-based company has been in talks with Chinese leaders and has not released any updates since last month.

Some have speculated that Google’s move is a calculated strategic business move to gain more market share in a country that has a reported 384 million Internet users. Baidu, a Chinese company, is the search leader in the world’s most populous country.

What’s that old phrase used in television in the United States?

Stay tuned.

My previous posts about Google in China can be found here.

Flowers rest on Google's sign in Beijing. Photo source: hunxue-er's photostream on flickr

I thought I’d give the Google-China news hours to pass from Thursday’s developments before I typed my thoughts.

My initial ones: The dramatic twists continue, the rhetoric fascinates and with everything in life, it’s best to remember that what you think might be the core of the debate, the center of the action could just be a diversion to the main attraction.

Or it really could be the center.

We also know that much face has been lost in this brouhaha. By the way, senior Chinese leaders don’t like to lose face – that’s why closed-door meetings with them are preferred.

Given that Google brought its charges – that Gmail accounts were hacked and intellectual property was stolen – so publicly how will Google and the Chinese government save face?

While articles in the Chinese press have talked about hopefully keeping Google’s charge – which followed a threat of a market exit – a corporate matter, it’s been elevated to a government one with Secretary of State Hillary Clinton’s speech Thursday about Internet freedom.

On the same day, Google chief executive Eric Schmidt talked with financial analysts, confirmed the Internet company is talking with Chinese government officials and that the business is “quite committed” to the China market, according to U.S. media reports.

Huh?

Dow Jones Newswires moved these quotes in this story:

We wish to remain in China. We like the Chinese people and our Chinese employees. We like the business opportunities there and we’d like to do that on somewhat different terms than we have, but we remain quite committed to being there….We continue to follow their laws, we continue to offer censored results, but at a reasonably short time from now we will be making some changes there.

So changes are afoot with some of Google’s operations in China.

If those changes, though, involve removing filters from content on Google.cn, then conceivably the company would no longer be following China’s laws – which would continue to upset Chinese senior leaders.

So, it would become moot whether or not Google’s executives like the Chinese people and its employees in the country.

But his words were a bit more nuanced – which can been seen in a way of tamping down the tensions as talks in China are underway - than last week’s message, which was much more direct, from the Mountain View, Calif. company.

Yet, on the same day, Secretary of State Hillary Clinton gave a speech on Internet freedom which likely pumped up tensions.

Add that to the digital stew (or delicious Mongolian hot pot full of technology, history and U.S.-China relations, if you like).

The words she employed, as quoted in this New York Times article, were direct and she skipped diplomatic politeness and named China directly (Note to younger generation: It’s kind of like a shout out but the words are much more pointed and might not be interpreted as nice):

a new information curtain is descending across much of the world.

Those words weren’t just a theoretical idea for academia.

She included China in her remarks and, as the Times wrote:

She also praised American companies such as Google that are ‘making the issue of Internet and information freedom a greater consideration in their business decisions.’

In a way, Google is in a tight spot, as I’m sure many already realize.

If Internet freedom, this intellectual property theft and the hacked Gmail accounts are key issues for the company, then senior executives could just announce that they will leave China on a certain date – which as I type this, they have not.

But China’s Internet market of 384 million people – which saw online spending grow by $11 billion in 2009 – remains an alluring market, even if you don’t have that much of that market share (yet).

Talk about a conundrum.

As you might imagine, the Chinese media, including this China Daily article, were filled with reactions to Clinton’s speech.

From The Global Times, which earlier had a gentler, diplomatic tone, came this:

The hard fact that Clinton has failed to highlight in her speech is that bulk of the information flowing from the US and other Western countries is loaded with aggressive rhetoric against those countries that do not follow their lead. In contrast, in the global information order, countries that are disadvantaged could not produce the massive flow of information required, and could never rival the Western countries in terms of information control and dissemination.

I like how this statement uses the phrase “global information order” which is similar to the “new world order” thinking prevalent in the United States years ago.

I should say that I have never underestimated Chinese leaders, especially after the Communist Party ascended to power in 1949 and the era of a New China started.

I have questioned many episodes in China’s history. But Chinese leaders since 1949 have helped bring many people in that country out of poverty, improved overall health conditions and made strides in education.

Its economic development in recent years is truly seismic – I don’t think the world will ever be the same. This year, China is expected to become the world’s second largest economy.

Given the rapid clip at which China is growing – which I think is good because I’ve met ordinary people in China who do need higher incomes – I question whether the adjective “disadvantaged” applies to China in producing information and its roaring Internet market.  

Yes, a free flow of information does mean that criticism can be tolerated. You always can refute that criticism.

If you believe that there is no criticism in China’s Internet, visit chat rooms and bulletin boards and you’ll see thoughts from commentators – many of whom question and criticize the U.S. government.

The Global Times article also discussed a poll of Chinese people, who reportedly opposed by a large margin of 81 percent Google’s demand for an unfiltered Web site.

From that story:

It is not because the people of China do not want free flow of information or unlimited access to Internet, as in the West. It is just because they recognize the situation that their country is forced to face.

So what situation is China, as a country, forced to face on a regular or historic basis?

Try stability, sovereignty, the loss of power and influence. Territorial integrity, as professors who study China like to say, remains a top priority.

I am not justifying anything that the Chinese government has done in the past.

But many people in China recall the days when other countries occupied their land, when internal disputes sprouted from roving bands of people who spread their ideas, when relationships with other countries – including the United States – depended on realism and power.

Many in the Chinese government remember Mikhail Gorbachev, the former leader of the Soviet Union.

In 1989, he became the executive president of the Soviet Union and he ushered in an era of openness. In 1991, he resigned as general secretary of the Communist Party and president. The Soviet Union dissolved that year.

This is not lost on senior Chinese leaders, as evidenced in a recent People’s Daily article, which talks about the People’s Republic of China opening up to the world in recent years:

At that time, even in China, some people raised doubts about the Chinese government’s choice. However, when looking back, we now can find that the government’s choice is correct. In contrast, Gorbachev was once widely praised by the west and his political reform even won much admiration in China. But, it was Gorbachev that finally ruined the Soviet Union. Therefore, China must not follow the western world’s practice on crucial issues such as Internet control and supervision. Of course, China is progressing and its Internet industry should advance accordingly. 

And at the risk of overusing that famous phrase from the Chinese classic, The Three Kingdoms:

Here begins our tale. The empire, long divided, must unite; long united, must divide. Thus it has ever been.

As I’ve said before: All the issues that Chinese government leaders and Western businesses operating in China wanted to keep separate have been thrown together – striking some tender nerves.

What I haven’t heard at least publicly is whether Chinese law enforcement officials have been able to track down leads on who might have actually hacked those Gmail accounts of people critical of the government and took Google’s intellectual property.

In Crime Reporting 101, as we know, there are always the questions of motive and the clues to solve the case.

I’m certain if the reverse occurred – a large Chinese Internet company with a big reputation and operations in the United States had been hacked – senior Chinese government leaders in Beijing and Washington, D.C. would be asking for answers from their U.S. counterparts.

Why?

Well, someone broke the law.

UPDATE: James McGregor’s essay in Time is worth reading. McGregor is a former journalist who is a public relations executive with decades of experience in China.

There is no doubt that tensions exist, especially as the Chinese economy rises. I recall the days when Western businesspeople often defended their involvement in the China market, especially when human rights and democracy activists raised questions.

McGregor noted disillusionment among Western businesspeople and a creeping arrogance of the new elite businesspeople and government officials in China.

As a former chairman of the American Chamber of Commerce in China, McGregor used sharp words in his essay:

But more than a few foreign business leaders are asking themselves if they have been bamboozled by the system. Multinationals have been solid citizens in China, handing over heaps of capital, technology, training, source code, best practices and proprietary products to joint-venture partners they were forced into bed with….now that the China market matters more to them, it appears that China couldn’t care less. Increasingly difficult China-market access is the immediate worry. But many are looking ahead and losing sleep over expectations that their onetime partners are morphing into predators.

This, of course, is more evidence that the context of “friendship” – so prevalent in China during the 1990s – is eroding.

As I’ve noted before, recall how Liu Bei gained all those arrows from Cao Cao in the classic, The Three Kingdoms.

In history, I don’t think that arrogance has served anyone well – no matter your citizenship.

UPDATE 2: Here’s another story from The New York Times, talking about how high the Google-China issue is becoming, especially with the State Department.

Google is no doubt huge. But this issue could turn out to be larger than the Internet giant.  

But I’m glad I read The New York Times article by John Markoff and Ashlee Vance about hackers and safety concerns of software companies because it reminded me of information swirling in the Google in (or possibly out of) China drama.

That is: Exactly what was the target of the hackers from China who broke into Google?

I asked that question a few days ago after I watched a CNBC interview with analyst David Garrity who covers the Mountain View, Calif. company.

Garrity told CNBC that a “fair amount of core source code” had been “misappropriated” from Google. The way he said it, without attribution even to sources, led me to question it.

I figured journalists would chase that angle since it can raise the eyebrows of many people with large amounts of responsibility in Silicon Valley and Washington, D.C.

In the day or so after the news broke, it was easy to focus on the angle of someone snooping in the Gmail accounts of activists to find out their contacts and their criticism of the Chinese government.

It turns out, both issues – theft and privacy intrusion – appear to be true.

Markoff and Vance reported and filed an insightful story that talks about source code – which is the key to the kingdom for many online and computer companies.

The passage from their story that I like:

The fear of someone building such a back door, known as a Trojan horse, and using it to conduct continual spying is why companies and security experts were so alarmed by Google’s disclosure last week that hackers based in China had stolen some of its intellectual property and had conducted similar assaults on more than two dozen other companies.

When David Drummond, Google’s chielf legal officer, talked on CNBC last week, he led off the interview with the hacked Gmail accounts.

But I just reread Google’s blog account from last week and realized I had overlooked this wording:

In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google.

I don’t know whether the type of intellectual property that was taken will come up when Google executives are scheduled to talk with Wall Street analysts on Thursday.

I’m sure shareholders would like more information.

The question also becomes whether Google executives can really talk about the theft openly without jeopardizing its overall security or intellectual property.

Markoff and Vance quoted a computer security specialist who helped Google investigate the December attacks:

Originally we were saying, ‘Well, whoever got it has the secret sauce to Google and some 30 other California companies, and they can replicate it,’ said Rick Howard, director of security intelligence at VeriSign iDefense, which helped Google investigate the Chinese attacks. ‘But some of the more devious folks in our outfit were saying, ‘Well, they could also insert their own code — and they probably have.’

Considering that possibility alone – even if it remains unclear to the public now – is reason enough to hit the alarm bell.

Read the article by Markoff and Vance.

They included past cases, for example one around 2004, in which a hacker or several of them inserted code into telephone computer programs and were able to listen to the conversations of the Greek prime minister, the Athens mayor, military leaders and journalists.

Markoff also has this article about the method that might have been used in the cyber attacks.

I’m sure senior Chinese leaders like the fact that the two New York Times reporters pointed out that cyber attacks come from countries all over the world.

But if words are carefully selected when used in international business relations, there is the question of who in the Chinese government decided to go with the idea about arrogance and the West - especially when the U.S. public is now aware of the possibility of intruders inserting code into software.

That being said, I’m sure there is some type of backdoor conversation going on – or on the agenda – for Google executives and senior Chinese leaders.

And the person or group that was responsible for the Google cyber attack probably realize a different career bell of sorts has been rung.

When I covered crime as a journalist, there was always the possibility that the person who committed the illegal act was going to talk about it – to friends, relatives, classmates, to someone with some degree of trust.

The goal was to talk with as many people as possible who might have information about the crime.

But I think with this one, silence – at least with people outside a tight circle - might be the order for a very long time.

Yes, I’ll let this topic rest – at least for a few hours.

UPDATE: Yes, a few hours later. Nuance is everything. Google executives, as the Gray Lady reported, might want to keep a business unit in the soon-to-be second largest economy in the world.

But earlier, there were reports that Google’s investigation of the cyber attacks involved whether its own employees in China were involved. Some staff members apparently were transferred. Others reportedly were cut off from the home office.

So, um, here’s another unintended consequence out of all this: China has bright engineers – smart enough to work for Google. Because of the security breach, Google reportedly had to investigate all possible angles – um, which might actually have upset this group of bright, China-born engineers.

But if Google goes for a nuanced end to this chapter and closes Google.cn but maintains a business unit in China, then it seems like executives from Mountain View, Calif. would have to fly over to patch up any morale problem and get that Google ball rolling at full speed.

But a quick visit to the People’s Daily revealed an article about Google investigating whether its own employees in China had participated in what executives have described as sophisticated attacks on the Internet giant, including hacked Gmail accounts of activists critical of senior leaders in Beijing.

The article is from the Global Times, posted Tuesday in China, and includes a quote from a Chinese analyst who questioned Google’s motive and announcement.

Here are the key paragraphs, which refer to a Reuters article about Google’s investigation:

Li Zhi, a senior analyst with Analysys International, a leading market research firm, told the Global Times that the latest development appeared to be Google’s last-ditch effort to keep a grip on China’s huge Internet market. ‘Google’s decision to withdraw from China was hasty,’ she said. ‘Reuters’ report seems like a PR stunt by Google to manage the crisis. The company has realized how important China’s market is. It has worked hard to find a reason not to say goodbye to China.’

I am going to put stock, at least to an extent, into Li’s comments because she might have special insight into this issue that we in the West might lack.

For me, the noteworthy comment from her is this: “The company has realized how important China’s market is.”

I think businesses and governments around the world recognize the importance of China’s market in the 21st Century. There is no doubt about that.

The BBC reported that online spending in China soared nearly $11 billion last year. This year, online spending, including games, shopping and advertising, in the world’s most populous country – which is expected to become the globe’s second largest economy – could jump to nearly $16.5 billion.

On Friday, China told the world that its Internet users had grown to 384 million people. True market access for international companies has become an issue.

So, given that there’s probably widespread agreement that China’s market is hot – and hotter than the U.S. economy – Google’s announcement can be translated this way: Even though you’re the best right now, we still might leave.

Well, you know, when you’ve worked for years on earning the “best” title in any category – let alone organizing a 2008 Summer Olympics with dazzling opening and closing ceremonies and cultivating foreign investment with the promise of stability – you probably don’t want to hear that one of your high-profile guests might leave the table over something you might have done.

You probably hope it’s something small in the big picture, especially when companies in your country are buying brands such as Hummer and Volvo, as well as technology used in older Saabs.

Google and the Chinese government are discussing differences, including the issue of censorship on Google.cn.

But the Mountain View, Calif.’s transparent message about the reasons why they might leave sent a wake-up jolt to face-conscious Chinese leaders in Beijing.

In other words: If our economic market is so important, why do you want to leave? Just please keep in mind that we maintain our sovereignty.

Face is important to leaders in parts of Asia.

Recall in 2006 that there were two diplomatically-embarrassing occurences (description of the world’s most populous country and an outspoken person at a meeting) during President Hu Jintao’s state visit at the White House with President George Bush.

At the time, heads shook because, obviously, one party had made mistakes.

Here is the other part of that Global Times article worth noting:

Three days after threatening to withdraw from China, the company seemingly reversed its attitude. Google CEO Eric Schmidt told Newsweek on Friday that ‘we had come to the conclusion that operating in China was better for everyone – us, the Chinese people – than staying out of the country.’

This is noteworthy because sentence tense and context always can be tricky.

The question is this: At what point did Google executives come to the conclusion that “operating in China was better for everyone?”

The quote comes from an exclusive interview that Newsweek’s Fareed Zakaria conducted with Google chief executive Eric Schimdt. Zakaria asked how Google came to its decision about possibly leaving.

Here’s Schimdt’s answer:

Google is a different kind of company than many others. The issue of operating in China was always complex for us. We were asked to accept a system of censorship that we were very uncomfortable with. But we had come to the conclusion that operating in China was better for everyone—us, the Chinese people—than staying out of the country. We have decided that we cannot participate in censorship anymore.

So, he used the past tense, indicating that executives had come to the conclusion around the time they were “asked to accept a system of censorship.”

I haven’t checked whether this Global Times article also was posted in Chinese. But the English version leaves the impression to the reader who skips the original Newsweek interview that the Internet giant’s attitude had somehow changed.

But the last sentence of Schimdt’s statement answers that question.

In the Newsweek interview, he also acknowledges a willingness to resolve differences with the Chinese government and his audience in the United States and China:

And please understand, we will still have engineers, programmers, and others in China. We love China and the Chinese people. This is not about them. It’s about our unwillingness to participate in censorship.

If anything, his comments certainly show keen market awareness.

UPDATE: Speaking of awareness, if you didn’t see these New York Times stories, Google is going to delay the release of its Android phones in China, Chinese film officials are going to limit the film Avatar and authorities there are going to begin scanning text messages.

This graphic illustration was part of a U.S. art show last year about design changes in China. It also captures business change, too. Image source: Portland Art Museum

I thought that kicking off 2010 with a video of California jellyfish moving gracefully in the water would be a colorful, neutral and fun way to begin the New Year.

Well, the sound you heard emanating from China in recent days, including Monday, was the popping cork from the Google-Chinese government brouhaha getting louder and more dramatic – in numeric terms, words being used and ensuing actions.

The number of Internet users in China had rocketed to 384 million by the end of last year, an increase of 86 million people or 29 percent from 2008, according to a Xinhua news article from Friday.

If you’re any Internet or technology company thinking about China, your potential market just added tens of millions of people.

Not only does China have more Internet users than the total U.S. population of 308.5 million but it increased by about 28 percent of that number. China also has more Internet users than the combined populations of the United States and Canada.

Economies of scale – as well as population numbers – have benefits.

But I’m certain one thought floating in the minds of U.S. executives who do business in China is that even with an eye-popping increase, challenges remain in getting a share of China’s Internet market even with that dramatic growth.

Market entry is possible. Market access to please the home offices in the Silicon Valley suburbs of Mountain View or Sunnyvale becomes the question.

Take for example that Baidu remains China’s search engine king and that Google only has about 30 percent of the Chinese Internet market.

Still, I wouldn’t be surprised if U.S. technology executives caught the news about Internet users in China on their iPods or smart phones - especially if they were out of the office and enjoying the holiday weekend with their families.

They likely have been reading online articles that have been moving Monday.

Xinhua on Monday posted this article in which the message was this:

A split between Google and China will hurt both sides. And the Internet giant would lose further ground among its supporters if it is made a political football. Conciliatory negotiation may help in solving any issue. The West’s arrogance will not work.

So, Chinese leaders indicate they are willing to talk.

But have firm lines already been drawn? As I noted below, heat can return to any situation.

The Chinese news agency also posted an online article a few days ago with the title, “Inappropriate to play up Google China’s withdrawal threat.”

An article link remains on Xinhua’s site the last time I checked but it could not be accessed this weekend. According to a cached version on Google, the article shifted debate terms and included this passage:

There is no sense blowing things out of proportion and turning a business issue into a political or diplomatic dispute.

This article, intriguing for its posting and then apparently being removed, is another volley in this unfolding drama – that surpasses the tear-jerk factor of televised soap operas from Asia. And Asia has some great, epic soap operas.

But what Chinese government officials also are sticking to are ground rules for operating in their country: Obey the law.

Here are key passages from the article:

For overseas businesses, including Google, they should respect laws and regulations as well as relevant policies of their host countries, which is a standard international practice for multinational companies….The world Internet giant has been blamed by the Chinese government for showing too many links to pornographic contents in its search results and thus breaking the Chinese law. Currently, Google is also handling a case with Chinese writers over online books copyright disputes. According to a list provided by Google at the end of 2009, its on-line library involves some 80,000 categories of Chinese books, 10 percent of which were works of 2,600 members of the Chinese Writers Association. On the other hand, cyber attacks are a commonplace issue across the globe even if countries have been making every effort to combat hackers.

In debates, such as these, the issues can quickly and easily be reframed or pushed aside – particularly with the power and influence of online chatter.

So, a quick recap: Google on Tuesday publicly said they were victims of sophisticated cyber attacks, including attempts to access Gmail accounts held by activists critical of the Chinese government.

Google Chief Legal Officer David Drummond said the company wants to run an unfiltered Google.cn site for Chinese users. He also explained in a CNBC interview that revenues from Google’s China operations were “immaterial” to this position. 

The Xinhua statement employed a very nice editorial touch in this diplomatic-corporate round by arguing that the Google concern should not be blown out of proportion.

But yet, if you believe what Google is saying that these cyber attacks originated in China, breaking in and entering someone else’s property – even if it is virtual – is usually frowned upon no matter what part of the world in which you live.

When international powers used troops to occupy parts of China decades ago, especially in Shanghai, rage and anger erupted especially among scholars. A call for national strength in China is partially because of that country’s past.

I’m not privy to inside conversations at Google – which reportedly is looking at all aspects in the security breach, according to articles posted Monday on CNET and the Wall Street Journal.

My quick reaction to these two articles: Ouch.

Some Google staff in China reportedly were transferred to other offices or temporarily cut off from the company’s main operations. 

In terms of days this week to watch: Keep an eye on Thursday when Wall Street analysts are scheduled to question Google executives. ZDNet reported Monday that meeting will take place.

Other media reports, including this article from the Los Angeles Times, said that Google co-founder Sergey Brin’s family is from the Soviet Union.

He reportedly had questions about entering the China Internet market, knowing that censorship was part of the business operation.

So, what’s the best way to think about the Xinhua articles and the unfolding events?

Here are some topics and thoughts that I think are worth considering:

1. WAS THE INTERNET NUMBER ENOUGH?

The underlying issue of the 384 million Internet users is how many of them can become true customers of international companies, such as Google, in China. The New York Times has an article with some reaction from Google users in China.

U.S. media companies and executives have talked about restrictions and the competitive nature of Baidu, China’s largest Internet search engine, can make for a rough go of it.

Yes, China has many bright and competitive people to participate in any market.

In September, Yahoo chief executive Carol Bartz gave an interview to CNBC. Her comments included the China market – in which Yahoo owns 40 percent of Alibaba – and are remarkable in hindsight given the Google news.

She became Yahoo’s top executive in 2009.

Her comments about China come around the 9-minute mark. The question was about whether Yahoo would sell its stake in Alibaba.

Her answer:

Alibaba is an investment. And frankly…when I first got here, I thought, ‘Oh, my gosh. We’re not in China…Everybody’s got to be in China.’ But you know, we all know that China is a tough market to be in, especially in media….My firm belief is the Chinese government is much more interested in media companies being Chinese media companies. And so I view this as a way to profit from the China Internet market through Alibaba. So, I view it, frankly, as a very good investment for the future….We have no running power in Alibaba….We have an investment only in them….I went from thinking, ‘Oh, my God. No Japan’ (sic) to saying, ‘Hey you know what, we can ride the Chinese Internet without the hassles of, um, operating in the country.’ 

2. FOLLOW THE LEADER

If you’re an international company that wants to do business in China and that 384 million usage number is convincing enough to enter or remain in the market, there are key questions you and other executives will certainly need to ask:

Who is leading here? Who is following?

Are you able to meet your revenue or market penetration goals even if you have to follow guidelines and laws with which you disagree?

If you’re a founder or president and chief executive of a U.S.-based company operating in China, what is your level of tolerance – in all aspects of the word?

Case in point: Look at the Reuters photograph that The New York Times reprinted in recent days of Yahoo co-founder Jerry Yang at a Congressional hearing in 2007.

The free market certainly breeds competition. Competition can breed innovation and revolutionary breakthroughs, which can lead to many rewards in life.

But how competitive are you? 

3. YAHOO IN THE GREATER CHINA MIX

Another twist in all of this is that Alibaba, Yahoo’s partner in China, issued a public rebuke after the Sunnyvale, Calif. company offered support of Google.

From The New York Times article:

John Spelich, a spokesman for Alibaba, said executives at the company were angry because Yahoo, which owns 40 percent of the Chinese Internet company, appeared to follow Google in suggesting the Chinese government was behind the cyberattacks. Alibaba’s statement reads: ‘Alibaba Group has communicated to Yahoo! that Yahoo’s statement that it is ‘aligned’ with the position Google took last week was reckless given the lack of facts in evidence. Alibaba doesn’t share this view.’

Read the entire article because it includes more details about Yahoo’s relationship with Alibaba.

It looks like – but is not clear to me – that there might have been updates in that relationship since Bartz’s CNBC interview in September.

The key part of that article that caught my attention:

In September, Yahoo cashed out its investment in Alibaba.com, the publicly traded e-commerce site which is partially owned by Alibaba Group.

Alibaba’s statement also shows that just because companies are business partners does not mean that they are automatic allies with the same views.

Now, did Google actually suggest or say publicly that the Chinese government was behind the cyber attacks on Gmail?

Drummond, the Google executive, said in a CNBC interview in response to whether the attacks were from the Chinese government:

I want to be very careful here and be very clear….We’re not saying one way or the other whether the attacks were state sponsored or done with any approval of the state. We can’t speculate on that at this point. What we do know is that they are highly organized.

4. CHANGING THE TOPIC

I expect the topic in this debate to be shifted to divert attention from what Google executives originally raised.

But people throughout the world – and especially in corporate and academic America – are smart and wise enough to know the meaning behind a statement and what signifies what.

5. MICROSOFT IN THE GOOGLE-CHINA MIX

Of course, corporate executives in the United States still have short- and long-term China objectives in mind. They’ll probably argue that there is an interest to remain engaged in the Chinese market to be part of the solution.

Upsetting the apple cart, as the saying goes, in China is really something that ought to be avoided, at least from a corporate perspective.

I don’t know if Microsoft public relations executives have seen the Xinhua article – the one that was posted and apparently removed. But it includes comments from Microsoft chief executive Steve Ballmer.

Here are his quotes with other paragraphs that the Xinhua writer used to frame the article:

On Tuesday, China’s largest Internet search engine Baidu, which is also Google’s major rival in the Chinese market, suffered an (sic) hacker attack that paralyzed its website for more than three hours. Microsoft’s CEO Steve Ballmer has said that ‘There are attacks every day …We’re attacked every day from all parts of the world and I think everybody else is too. We didn’t see anything out of the ordinary.’ So it’s far-fetched to blame China as a scapegoat for cyber attacks just because Google said something about that. In addition, it’s quite natural for a multinational company to shift its market strategy or even pull out business from a certain area.

So, victims of cyber attacks include: Google, Baidu and Microsoft.

Also: Here’s a definition of scapegoat.

6. PLACES WORTH BEING – AT LEAST AS AN OBSERVER

I doubt that the bright minds behind the cyber attacks on Google are welcoming any outside visitor right now to enter their nerve center to see how the action went down.

But I wonder whether any high-profile, highly-connected U.S. journalist, such as Ken Auletta, is trying to see – as an outsider – how Google’s smartest Internet security employees are now watching if any other, more sophisticated cyber attack hits the Internet giant.

Why do I say this?

Well, my sense is that hackers do what they do not only for the objective to extract information but also to find out whether they have the brain power to logistically pull off what nearly everyone else deems as impossible.

It’s the challenge factor.

If these hackers have managed to circumvent Google’s brightest employees and enhanced security firewalls, then the clear message to the Internet world in the West would be: “I’ve done it to you again.”

It’s the stuff out of movies.

My sense is that Google’s top minds are sitting in an office or complex that focuses on global security and watching anything out of the ordinary. 

Like I’ve said before: This entire incident far surpasses the dramatic plots that any writer of a soap opera out of Asia can come up with for mass audiences.

The big question mark that everyone is watching is whether Google will actually pull out of China.

If it doesn’t, it will be fascinating to see the explanations Google executives give that justify continuing their presence in China – given the facts that they’ve told the public.

Keep in mind that in any situation, there can be heat and fire, followed by a detente of sorts.

But after you think the detente is in effect, life can change and strategic moves can reappear. 

I’ll reiterate my position in all of this: I actually want warmer, improved relations between the United States and China.

Escalating economic tensions can lead to other types of conflict - conflict that I think business and government leaders in both countries will regret.

As we know, enhanced economic conflict can penalize large groups of innocent people on both sides of the Pacific Ocean.

But do you remember what your parents told you when you were a kid?

That you can’t always get what you want.

Also on the agenda: Chinese President Hu Jintao has accepted an invitation to meet this year with President Barack Obama in the United States.

They met last year in Beijing with what many people, including myself, believe were bolder actions and thinking on the part of Chinese leaders.

If the two leaders meet this year, the question of what exactly pops up in their private conversations, especially given the Google news, will be interesting to know – if its contents are ever made public.

Politics aside, what else can I say about this right now?

Well, if you’re a playwright or screen writer anywhere in the world, your new project is unfolding before your eyes.

Remember, you have creative license.

Just try and read as much history about China and Internet pioneers in the West for nuance and insight.

And if you’ve read to the bottom of this post, thank you.

There is a real – and sad – possibility that U.S.-China relations this year might become tenser.

Tensions have been lurking about for years on a variety of issues, including trade and currency valuation. The Google news this week – announcing that the company wanted an unfiltered search engine in China and sophisticated cyber attacks against Gmail – marks the first cork to pop for 2010.

For the most part, China - including its economy and the nation as a whole – is ascending. Its leaders are using their new economic, political and global clout in many noticeable ways.

There have been reports out of Greater China about whether that country has entered a housing bubble and its growth is sustainable.

As for the United States, the country is trying to leave its Great Recession and find firm financial footing for the new decade. People also are questioning the country’s overall place in this post-Great Recession world. And businesses continue to eye the roaring Chinese market.

On top of all of this, Chinese President Hu Jintao is scheduled to visit the United States this year. President Barack Obama invited him during their meeting in Beijing last year.

That makes the Google-China issue involving cyberattacks, censorship and a true free flow of information one of the best and, likely, most prolific dramas to watch.

Google’s market share is a reported 35 percent with Chinese officials noting there are about 338 million Internet users in the country.

Almost all of the issues that parties in China wanted to keep separate are, in some way, touching.

That includes: politics, commerce, technology, online searches, investments from a U.S. company and the sensitivity of Chinese officials in maintaining stability given how new leaders historically have gained their titles.  

David Drummond, Google’s chief legal officer, laid out his company’s concerns Tuesday, including a sophisticated cyber attack on Gmail users – including activists who are critical of China – and concerns about the limit and censorship of information of Google.cn, which operates in China. 

The Chinese government responded by saying that the Internet is open in China and that international Internet companies in China need to abide by Chinese law, according to articles in the People’s Daily and China Daily.

Chinese Foreign Ministry spokeswoman Jiang Yu explained:

China has tried creating a favorable environment for Internet….China welcomes international Internet companies to conduct business within the country according to law….China’s law prohibits cyber crimes including hacker attacks.

The China Daily printed an article saying that Google essentially was trying to “pressure” the Chinese government.

Whether this remains just a blip or bellwether of a moment remains to be seen. But even if it’s just a blip, it’s big.

Nicholas Kristof, a long-time New York Times writer and well-respected China watcher, weighed in with praise for Google in his recent column. A few days earlier, the Times ran an editorial about China, arguing that leaders there might want to consider how their economic strategy is affecting the globe.

Of course, Chinese leaders have the right to do what they want as they guide their country.

But blowback can take form in many ways. A modern era also means that technology will bring about change.

There’s also the idea of opportunity costs – and this is a real one for Google in China: In order to gain something, you have to give up something.

Given this context, here are some categories that I think are worth watching:

1. KEY WORDS TO WATCH

The fact that the Chinese government is seeking “more information” regarding the Google news means that communication lines are open.

Chinese government officials could have quickly condemned Google’s move. Just what type of middle ground the two sides might broker, if any, is up in the air.

But reporter Joe McDonald of The Associated Press identified some key language from the Chinese media in his report:

The Global Times, published by Peoples Daily and known for a fiercely nationalistic tone, took an unusually conciliatory stance Thursday, warning that Google’s departure would be a ‘lose-lose situation’ for China. ‘Google is taking extreme measures but it is reminding us that we should pay attention to the issue of the free flow of information,’ the newspaper said. It said China’s national influence and competitiveness depend on access to information and added, ‘We have to advance with the times.’

2. FOLLOW THE LAW

In China, what does that mean?

Who should follow the law and the rules? Should all people in China follow all the laws and rules all the time? If you live in China or do business there and you find the law objectionable or a nuisance, is it permissible for you to ignore it?

If you live in a competitive society and victory is the ultimate goal, why should you follow rules?

3. GOOGLE’S MOTIVE

I’ve seen online comments already saying that Google is pulling a publicity stunt, partially to generate more momentum for its search engine in China, which only has about 35 percent market share.

The argument is that Google wants money, that it’s a business. Baidu is the big player in China’s search engine market.

But in the CNBC interview above, Drummond explained that it was not a financial strategic move and that revenues fail to account for a large portion of money for Google.

“This was never really a financial move for us,” Drummond said. “…Our revenues from the China business are truly immaterial.”

4. UNINTENDED CONSEQUENCES

If Google actually shuts down its search engine in China, people living in that country might find other ways to access information from the Mountain View, Calif.-based company.

People living in China – and many other countries – realize that if barriers go up, someone out there is smart enough to go around them – especially in the case of information that floats in the ethers.

5. FOREIGN DIRECT INVESTMENT

Presuming that Western companies have money to invest, especially in the future, would they want to invest in China should the Chinese government actually make or enforce rules which produce an unfriendly business climate?

If the Chinese government and Google maintain their respective positions, what type of message would that send to the various international companies that want to remain in China to do business?

The Times has an article talking about reaction from international businesspeople in China. Many people declined to be identified because they feared action from the Chinese government.

It also discusses whether international companies will revisit their policies of operating in China, given Google’s public stand.

China might have enough capital these days such that foreign investment has dropped as a priority.

But international companies in China do, as Chinese government officials know, employ a large number of Chinese citizens. The companies also spend money.

6. WHAT WAS THE TARGET OF THESE CYBER ATTACKS?

In his CNBC interview, Drummond pointed to evidence that Gmail accounts of activists who are critical of the Chinese government were the targets.

He also said it was much bigger, explaining that it went just beyond Google and extended to other companies.

But in a different CNBC interview, David Garrity, an analyst who covers Google for GVA Research, said the prize was actually substantial source code – and that the attacks amounted to intellectual property theft.

One gaping hole in Garrity’s comments was that he failed to state, or at least allude to, his sources or give evidence. I know stock analysts often talk to people at the companies they cover and present the information as solid fact.

That said, this is what Garrity asserted on CNBC:

What is actually going on here isn’t so much the fact that you have Gmail email accounts that are being broken into. You actually had a fairly substantive series of cyber attacks taking place in mid-December, which actually ended up in a fair amount of core source code from Google being essentially misappropriated from the company. This isn’t a matter of essentially upholding privacy. This is a matter of intellectual property protection. And when you start going after the source code for a software company such as Google, you’re going after what basically are the crown jewels for the company.

I have no idea if what Garrity said is true.

The CNBC journalists who were interviewing him failed to ask for more evidence – because if this is true, it’s raises the severity of this incident to higher levels.

If it is true, I’m sure major business journalists in the United States are racing to their sources to confirm and shed light on the information. That core of smart technology bloggers is probably beating the bushes to get their sources to confirm and expand upon this.

If this is true, why did Google not come out and tell the public?

What Google has told the public is that the Gmail accounts of activists were the “primary” targets and that security fixes have been made.

So, if Garrity is right, then Google needs to return again to address the source code angle because shareholders are probably clamoring to know.

Again, if Garrity is right, I’m sure U.S. government officials have been briefed.

It is a huge charge but it is puzzling.

I’ll wait and see if more developments and evidence surface on this front – especially from national news outlets which probably want to advance this serious allegation.

7. DOES GOOGLE HAVE TO PHYSICALLY BE IN CHINA TO BE IN THAT MARKET?

This is connected to the other question that people are asking: Will Google actually leave China?

Obviously, the answer falls on the co-founders and highest executives.

But the Google executives were the first ones to raise it publicly.

To maintain their credibility – or what credibility you put into the company – they’re in a tight spot. But like I’ve said before, it is possible that they’ve said, “We’ll take that risk.”

If they do want a Greater China presence, there are places outside of mainland China where Google executives can set up operations.

I’m sure executives are reviewing their viewership in China and how that relates to advertising dollars it brings the overall company, among other topics.

Finally, Siva Yam, president of the United States of America-China Chamber of Commerce, was absolutely correct in comments to the AP:

As long as you aren’t involved in politics, the media or pornography, the government will leave you alone.

That is true.

In this case, though, one of the world’s leading companies, Google, actually deals with media and information which can be political.

And the issue about the flow of information, whether it’s free or filtered, in the world is this: It can move in surprising ways.

NOTE: If you didn’t see it, I wrote an analysis about the subject for TechFlash. I also posted a blog entry on Wednesday stressing the importance of warm, long-term U.S.-China relations.

I know both countries have brilliant, visionary and ethical people who really can revolutionize the world in many ways.

But nearly everyone can feel an externality.