At the same time, Google's decision to no longer censor Web search results in China does allow the Internet giant to realign itself with the principles of its founders and the company motto of "Don't be evil," they said.

While China is yet to make its intentions fully known, Beijing reacted angrily to Google's announcement on Monday and the California company risks seeing itself shut out of the world's largest online market.

In strict financial terms, a closure of Google's operations in China would not have a significant impact on the company's bottom line, analysts said.

Youssef Squalie of investment bank Jefferies said China is "not material to Google's revenue" of some 24 billion dollars a year, the vast majority of which is drawn from advertising placed alongside search results.

"We estimate that China accounts for 250 million dollars to 350 million dollars, or one to two percent of Google's net revenue," Squalie said.

"Right now, it's not a lot," agreed technology analyst Rob Enderle of Silicon Valley's Enderle Group.

"But it would be like a major company exiting the United States because they feel that they can't compete and doing it in such a way that they may not be allowed back in," Enderle said.

"That makes a statement about the company and the company's future and that statement clearly is not positive," he said.

"Google has kind of slapped China in the face and China is likely to stew on this a bit and then slap Google back," Enderle said.

Unveiling the plan to shift traffic to its China search engine, Google.cn, to an uncensored site in Hong Kong, Google chief legal officer David Drummond acknowledged the company was at the mercy of the Chinese government.

"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," he said.

Drummond made clear that Google would like to continue to have a presence in China, which has an Internet population of nearly 400 million and where Google has embarked on a number of ventures besides search.

"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," Drummond said.

Besides blocking Google's Web services, China could retaliate against Google on other fronts, Enderle said.

"They can block things like the Android platform which is increasingly and broadly used by handset manufacturers, a number of whom manufacture in China," he said. "They'd already delayed the release of Android handsets in China because of concerns that China would block them."

Michael Gartenberg, a partner in Altimeter Group, a California-based technology research and advisory firm, said "what's at stake is the whole Chinese market for Google.

"At the end of the day they weren't getting very far relative to the local competition," Gartenberg said in a reference to Chinese search engine Baidu's 60 percent market share in China to Google's 30 percent.

"But I don't think in the long term anyone can ignore China both because of the scope and the number of Internet users there," Gartenberg said. "Search is their core business so if they're blocked in search that's a huge problem."

Gartenberg cautioned, however, that "we're in the early stages, the very opening moves of what's going to be a very long chess match between Google and China."

Justin Post, an analyst at Bank of America/Merrill Lynch, said Google apparently balanced the financial losses against benefits on other fronts.

"Google management likely considered the need to operate within the company's guiding principles, the political capital gained elsewhere, and the potential of never getting long-term traction in China as part of its decision," Post said.

"On a positive note, Google should get some political goodwill from this move," Post said.

Google's defiance of the "Great Firewall of China" was lauded by human rights groups, members of the US Congress and others although it has been unable to get other Western technology companies to rally to its cause.

Google shares were trading lower on Wall Street on Tuesday, shedding 2.15 percent to 545.62 dollars at 1:30 pm (1730 GMT). Baidu for its part was up 3.68 percent to 601.80 dollars in New York.

earlier related report
China slams Google's bid to defy censors
Beijing (AFP) March 23, 2010 - The "Great Firewall of China" appeared intact Tuesday as the government lashed out at Google for refusing to bow to strict censorship in the world's biggest Internet market.

While angrily attacking Google, the authorities in Beijing said there should be no broader fallout on tense Sino-US ties provided there was no political meddling in the United States.

"I don't see it influencing Sino-US relations unless some people want to politicise it," foreign ministry spokesman Qin Gang told reporters, describing the Google situation as "mainly an individual commercial case".

"If you link this to China-US relations or politicise it, or even link it to China's international image, this is mere overkill," Qin said, adding: "China's market is fully open."

Google said Monday it would no longer filter results on China-based Google.cn and was redirecting mainland Chinese users to an uncensored site in Hong Kong -- effectively closing down the mainland site.

The announcement came after two months of tension sparked by Google's revelation of coordinated cyberattacks on the Gmail accounts of Chinese dissidents. The firm had warned that it could leave the country altogether.

However, Google said it was "business as usual" at its China headquarters on Tuesday, as a fierce debate erupted online between Chinese defenders of free speech and nationalist-minded netizens denouncing foreign interference.

Google spokeswoman Marsha Wang said she had no information about lay-offs or a possible transfer of staff to the US giant's Hong Kong offices, saying only that "adjustments" could be made "according to business demand".

Despite Google's promise of uncensored results, searches of politically sensitive key words generated the browser message "cannot display the web page" -- suggesting that China's "Great Firewall" of Internet control remained erect.

The futile search results applied for terms such as "Falun Gong", "Tibet riot" and "June 4" -- referring to the pro-democracy protests in 1989 on Beijing's Tiananmen Square.

Google's top lawyer David Drummond said the firm hoped China would respect its decision "though we are well aware that it could at any time block access to our services" and that the company would carefully monitor the situation.

The White House said it was "disappointed" that Google could not reach an agreement with Beijing and reiterated that US President Barack Obama is "committed to Internet freedom and... opposed to censorship".

"The US-China relationship is mature enough to sustain differences," added National Security Council spokesman Mike Hammer, hours before China announced that high-level strategic talks with Washington would go ahead in late May.

The talks will be the highest-level meeting between the two sides since ties broke down earlier this year, over US arms sales to Taiwan, the value of the yuan and a visit by the Dalai Lama to the White House -- and Internet freedom.

Chinese authorities concentrated their fire on Google itself.

Google had "violated its written promise" to block controversial search results, an official in charge of the Internet bureau of the State Council Information Office said.

The world's search leader was "totally wrong" to stop censoring its Chinese-language engine and to blame Beijing for the alleged hacker attacks, the official said.

Google launched Google.cn in January 2006 after agreeing to censor websites for content banned under Chinese law. Google.cn is the second-largest search engine in China after Chinese search engine Baidu.com.

Despite Monday's decision, Google said it plans to maintain its sales, research and development teams in China, which has the world's largest online population at 384 million.

Leading Chinese dissident Wei Jingsheng, who spent nearly two decades in prison and now lives in the United States, said he knew China "would not back down".

"But we also knew that Google's motto was 'Don't be evil'. So there was no point on which to compromise," Wei said.

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