Risking both billions of dollars in potential revenue and the prospect of triggering an Internet fault line, the world's biggest search engine is threatening to cease operations in China.
Citing a "highly sophisticated" cyberattack on its corporate infrastructure that appeared aimed at stealing intellectual property and spying on human-rights activists, Google said on Tuesday it will no longer censor search results on the Chinese version of its site, and may shut down its operations altogether in China, one of the fastest-growing markets in the world.
"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," wrote David Drummond, Google's senior vice-president of corporate development and chief legal officer, on the company's blog .
"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.
"We recognize that this may well mean having to shut down Google.cn and potentially our offices in China."
Google claimed the cyberattack also targeted 20 other companies, but would not name them.
For cybersecurity researchers, human-rights activists and investors, the move is of massive significance. By tying the cyberattack to Chinese state censorship - and in the process indirectly admonishing the Chinese government for both - Google is sure to incur Beijing's wrath. In addition, the search firm has alerted U.S. authorities, including the State Department, about the cyber-attacks and its intentions, turning its frustration with Beijing into a potential political maelstrom.
Google saw the Chinese market as so lucrative - and the prospect of delivering the Web, in any form, to the Chinese population so inviting - that the firm agreed to censor search results when it opened its Chinese site in 2006. Indeed, a search for the Tiananmen Square protests turns up very different results on Google's Chinese site than on any of its pages elsewhere in the world.
"I think it's a stunning announcement that they've taken such a bold move to stop censoring their search engine - no doubt this will be applauded by human-rights activists the world over," said Ronald Deibert, director of the Citizen Lab at the University of Toronto's Munk Centre for International Studies, and one of the researchers who last year uncovered GhostNet, a large-scale effort, based mostly in China, to infect and steal data from computers around the globe.
In fact, Human Rights Watch issued a statement praising Google's move, which it said "underscores the need for governments and companies to develop policies that safeguard rights."
Because Google says it will stop censoring results in China, Beijing may well begin to filter Google sites entirely, Mr. Deibert noted - a move that could have serious impact on the Internet landscape.
"It creates the haunting prospect of a much more territorially defined cyberspace than we've seen in the past," he said.
Should the Chinese government react to Google's announcement by prohibiting the site from indexing Chinese pages, the Internet would become a much more segmented medium, said Rafal Rohozinski, CEO of the Ottawa-base SecDev Group and another of the researchers who helped discover GhostNet.
"Suddenly we're in a new era," he said. "We're used to thinking of the Internet as a single cloud, but rather we start having Internet clouds that are sovereignized."
Although China is believed to account for a small portion of Google's revenue, the market is important because of the country's more than 300 million Internet users. For the same reason, companies such as Yahoo and Microsoft have also put up with myriad government restrictions to establish a presence in the country.
Google shares dropped a little more than 1 per cent during after-hours trading Tuesday. Shares of Baidu, a Chinese search engine considered Google's primary rival in the country, jumped about 2.5 per cent.
But as a note in the Google blog post implies, the company may well fear much more sinister consequences should it choose to follow through on its threat.
"We want to make clear that this move was driven by our executives in the United States, without the knowledge or involvement of our employees in China who have worked incredibly hard to make Google.cn the success it is today," Mr. Drummond wrote.