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C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 000105 

SIPDIS 

NSC FOR MEDEIROS AND LOI 

E.O. 12958: DECL: 01/13/2020 
TAGS: ECON EINV PGOV PREL CH
SUBJECT: GOOGLE DAY 2: BALL STILL IN GOOGLE'S COURT 

REF: A. BEIJING 104 
¶B. BEIJING 86 

Classified By: Economic Minister Counselor Weinstein for reasons: 1.4(B 
), (D) 

¶1. (C) Summary. Google's Beijing headquarters continued 
business "as usual" today as it still provided the 
China-based version of its search engine. Google emphasized 
its filtering of that search engine remained "unchanged" and 
"compliant with Chinese law." Google has not yet engaged the 
Chinese government in discussions about continuing its 
operations here. The Chinese Government provided the first 
official reaction to Google's January 14 announcement, with 
the MFA spokesperson and other PRC officials rejecting 
allegations of Chinese responsibility for the recent, alleged 
cyber attacks on Google and other companies' internet 
architecture. Local industry experts and American 
businesspersons here almost unanimously expect Google will 
withdraw from the market, despite its claims to still be open 
to resolving its problems with China. Local media coverage 
included numerous business articles on Google's travails, 
with at least one Chinese website claiming to have conducted 
an opinion poll showing a large majority support China not 
making concessions to Google. End Summary. 

¶2. (C) Google China's Beijing HQ remained relatively quiet 
January 14, with Google employees continuing to work. 
Spectators, press, and well-wishers continued to visit, 
according to XXXXXXXXXXXX. XXXXXXXXXXXX
 explained Google has still not  engaged with PRC authorities
to reach a solution to the  current impasse, but noted China's
State Council Information  Office (SCIO) did contact Google
China's government relations  staff January 13 following a
several-hour suspension of  Google.cn's search filtering
mechanisms, which XXXXXXXXXXXX explained 
were due to technical issues. XXXXXXXXXXXX explained
that SCIO asked  Google's government relations team if this was
a deliberate  modification of its filtering. XXXXXXXXXXXX
 said Google had not disabled its filters, and SCIO accepted
Google's explanation.  At present, according to a U.S.-based Google
representative,  Google "continues to comply with the law in
China and is  filtering Google.cn as (it) has been." The U.S.-based
rep  did concede that Google's filter is undergoing changes, but 
publicly Google is not "explaining the changing nature of 
(its) filter" and maintains the filtering remains in 
compliance with Chinese law. 

GOVERNMENT REACTION COOL 
------------------------ 
¶3. (C) XXXXXXXXXXXX reports that the PRC still has not 
directly addressed the firm's announcement with Google. 
However, MFA spokesperson Jiang Yu addressed the Google 
matter in a regular January 14 MFA press briefing (reported 
Ref A), during which reporters barraged her with questions on 
Google. Jiang stated the Chinese government has made its 
position clear to the U.S. and asserted Chinese law 
prohibited cyber attacks, including hacking. Jiang also said 
China's internet is "open and the Chinese government 
encourages its development." State Council Information 
Office (SCIO) Minister Wang posted a web statement January 
13, which, while not directly addressing Google, stressed 
that the internet should be used to shape public opinion and 
should comply with state control. Yao Jian, Spokesperson for 
the Ministry of Commerce (MOFCOM) on January 13 said only 
that MOFCOM would follow the Google matter closely. A MOFCOM 
specialist on multinational investment policies was quoted in 
the press as arguing that the Google case is unique and 
should not be seen as relevant to other multinational 
investments in China. Officials at the Ministry of Industry 
and Information Technology (MIIT) declined to comment on the 
case, claiming that they do not have enough information. 

SPECULATION ON NEXT STEPS 
------------------------- 
¶4. (C) XXXXXXXXXXXX spoke January 13 with
XXXXXXXXXXXX, who opined that the Chinese
government was likely surprised  by Google's
announcement of its potential withdrawal, and the 
PRC would be unlikely to seek out talks with Google. 
XXXXXXXXXXXX anticipates we will see a slow,
perfunctory attempt to engage  between U.S.-based Google
representatives and the Chinese,  but that, in
XXXXXXXXXXXX opinion  the PRC has already
likely decided 

BEIJING 00000105 002 OF 003 

that Google is a company that "does not understand how to 
work with China." Only if Google continues to accept China's 
mandates would an accommodation be possible, according to
XXXXXXXXXXXX. XXXXXXXXXXXX also predicted that,
failing an agreement, the Gmail  accounts of Chinese users would
suffer sporadic interruptions  of access, and the potential for a
complete blockage of  Google.com is also not out of the question. 

¶5. (C) A highly-regarded long-term local industry analyst
XXXXXXXXXXXX, also saw Google's actions as  leading
quickly to its withdrawal from the Chinese market. 
XXXXXXXXXXXX speculated to Econoff that Google may
have an extremely limited window to seek a solution, given
the increasing  "maniacal" posture of elements of the Chinese
bureaucracy  with respect to information control and discriminatory 
policies and practices toward foreign elements. XXXXXXXXXXXX
 also  opined that Google's withdrawal from the market would 
undermine competition here and therefore innovation in 
China's internet industry. He saw Baidu's success as a 
direct result of competition with Google and other western 
companies; without that competition, Baidu and other Chinese 
companies would likely lose their competitive edge in the 
long run. Separately, XXXXXXXXXXXX was quoted in the
media as  saying "there has been this received wisdom tha
 no one can  afford not to be in China, but that is being
questioned now." 

BUSINESS COMMUNITY REACTIONS 
---------------------------- 

XXXXXXXXXXXX

¶7. (SBU) XXXXXXXXXXXX told XXXXXXXXXXXX
 January 14 that logistics  had made it impossible for its Board to
clear and release a press statement January 13 XXXXXXXXXXXX
The Committee has drafted a statement on the security and 
free flow of information that it now hopes to clear and 
release within twenty-four hours. XXXXXXXXXXXX noted
that  in seeking to remove all filters from its China-based search 
engine, Google has firmly positioned itself publicly and will 
not be able to back down. XXXXXXXXXXXX believes
Google's China  exit is imminent, and would only at the
margins affect  information flows, IT services, and the
development of  competition in China. He did hope that
this matter would  force the PRC to use greater caution
before implementing  policies harmful to the business climate. 

¶8. XXXXXXXXXXXX thought Google,  however, had backe
 itself into a corner from which it could  not likely exit, given
the Chinese reputation for  non-compromise in such matters. 

¶9. (SBU) Jack Ma, Chairman of Chinese internet giant Alibaba 
(with ownership links to Yahoo China, which has faced its own 
difficulties in China) struck an exhortatory chord in media 
interviews: "Giving up is the biggest failure. Nothing is 
easy. It is admirable if one can still do well no matter how 
many difficulties are on the way." 

XXXXXXXXXXXX

HUNTSMAN