Microsoft CEO Steve Ballmer says Microsoft has no plans to uncensor its search engine in China, even if Google does so. Microsoft currently owns less than 5 percent of the Chinese search market, while Google owns over 30 percent.  (Source: Business Week)

Google is reportedly in talks with China to potentially back away from its threat to stop censoring its search results. Google is angry about a recent data theft that was linked to a former Chinese government security consultant.  (Source: Technology News)
Talks between Google and the Chinese government quietly continue

Censorship is the name of the game in China's media market.  If you aren't willing to filter out content the government finds unacceptable, you aren't allowed to do business with the nation's over 1 billion people.  For most companies, that's too tempting a target to miss.  Blind compliance has been a typical precedent in the past.

However, Google, far and away the internet's largest search provider, is hardly your average company.  When Chinese hackers stole information from Google in mid-December, the search giant's simmering frustration boiled over and it announced on January 12 that it would begin uncensoring it Chinese search.  Currently the company complies with local laws and filters out banned topics like the forbidden Fulun Gong spiritual movement and Tibetan independence.

Now the company has cooled slightly and is in talks with the National People's Congress, China's parliament, in Beijing according to 
Reuters.  News of the talks was released by Li Yizhong, minister of China's Ministry of Industry and Information Technology (MIIT).

Google is still quite unhappy with China.  The results of its investigation concluded that the attack in December originated from two Chinese schools and used malware written by a Chinese security consultant in his 30s, a man who reportedly had deep government links.  Google is also trying to reconcile the idea of continuing to obey China's censorship edict with its policy of internet freedom and equality.

China, meanwhile insists censorship is essential for maintaining a healthy society.  They point to current U.S. child pornography laws and pending legislation in the U.S. that would monitor citizens' online activities for copyright infringement as proof that it's not the only major nation with plans to filter objectionable traffic.  As to the claims that the Google attacks originated in China, a Chinese official called them "groundless."

It's important to bear in mind that Google is not the top search engine in China.  Google China, which launched in 2006, currently holds about 31.3 percent of the market, while Baidu, a Chinese search firm, owns a whopping 63.9 percent of the market.  A third company, Chinese firm, takes up much of the remaining share.

Google's U.S. rival Microsoft has been eager to get a piece of the Chinese search revenue pie that last quarter amounted to 2 billion yuan ($293M USD).  In June, it launched a beta version of the Chinese localized version of its search engine Bing complete with the required content filtering.

According to 
Reuters, Microsoft's at times boisterous CEO Steve Ballmer says that his company has no plans whatsoever to uncensor its search engine or pull out of China even if Google does so.  Zhang Yaqin, chairman of Microsoft's Asia-Pacific R&D Group states, "Regardless of whether or not Google stays, we will aggressively promote our search and cloud computing (in China). We hope to achieve a relatively important place in the China search market.  But we must be very patient, we still need a lot of time."

Microsoft is advancing with an ambitious design to increase 2010 investment in China that includes $150M USD in outsourced software projects and $500M USD in new search investment.  Aside from search, Microsoft is also hoping to gain ground in China's mobile market, in which Google also competes.  Microsoft recently unveiled its Windows Mobile 7 smart phone operating system, which will debut on select handsets later this year.

At the end of the day, despite moral objections, even Google may relent and accept the cost of doing business in China.  After all, the country has more wired users than any nation in the world with an estimated 350 million internet users.  Figures on cell phone usage vary wildly, but tend to place the total user base at over 700 million subscribers.  China also reportedly has close to 155 million smartphone users.

"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein

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