There is a buzz in the market today after Google’s rare threat of defiance in China.
Google’s shares have dropped (GOOG: 484.85 -0.03%), but the shares of Baidu (BIDU: 81.41 +2.79%) have jumped more than 10% on the news.
“Google’s threat to pull out of China over censorship is a rare display of defiance in a system where foreign companies have long accepted intrusive controls to gain access to a huge and growing market.”
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But, analysts don’t believe Google will leave China. China is a huge market and growing market. Pulling out of her right now will cost Google in the long-term.
Leaving China would cost Google long term
Any decision by Google Inc. (GOOG: 484.85 -0.03%) to get out of China would cost the Internet search giant in the long run, though it would, of course, be praised on the ethics front. Google threatened yesterday to pull out of China, citing a “highly sophisticated” cyber attack on its e-mail service it believed was aimed at human rights activists. Google also said it would begin defining censorship restrictions.
A move by Google to actually cease operations in China, where it is not the leader among search engines, would give local competitors, and companies such as Microsoft Corp. (MSFT: 25.81 -0.85%) a leg up just as the Chinese market is surging. But some analysts think Google’s announcement yesterday was really aimed at setting the stage for talks with the government. “We believe Google will probably stay as China is a vital market,” one analyst said in a research note, according to Reuters. “Any China Internet veteran understands the need to work within the system and the Chinese preference for gradual change.”
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