Words totally fail me. And I won’t say another word. Just go and see for yourself.

Am I really reading this?

Absolutely not. James Fallows, in another splendid update on the Google drama, notes the various reports coming out that it’s business as usual at Google’s Haidian headquarters – which in no way contradicts anything Google has said about the situation.

{The latest reports] indicate that Google has not pulled up stakes from China and is still operating as if it might have a future there. Is that hypocritical? I don’t think so: I think it’s in keeping with the initial announced intention to reconsider all options. As I mentioned the first time around, I think this situation is likely to turn out either lose-lose-lose — for Google (outside the Chinese market), for the Chinese government (publicly embarrassed, which will bring out worse rather than better tendencies), and for the Chinese public (symbolically cut off that much more from the mainstream of modern development, and with an internet ecology worse than it could be, with the absence of a major innovative competitor) — or win-win-win for the same parties, if the government can address Google’s complaints in a way that allows the company to remain. I assume that off-stage action toward that end is underway now.

My trolls have already started blasting Google as if it suddenly realized it made an awful mistake and is changing its mind. Not true. That may happen; I don’t know. But Google never said they were leaving China.

Fallows also posts a moving letter he was sent from a non-Chinese reader living in China. I just want to paste the powerful closing lines.

I recently showed a friend what it was like to surf the internet on the other side of the chinese firewall (thank you for your long ago recommendation of witopia). After showing sites with pictures and info regarding topics such as Tiananmen Square, the Dalai Lama, Falun Gong, etc my friend was in tears. She had been very aware that China was censoring information and putting its own spin on events, but she never grasped its extent. The next day she said to me “I hate what my country has done and feel very sad. But I also still have a love for China. I don’t know what it is I really feel.” I told her that in this case I might be able to appreciate exactly what she was feeling and welcomed her to the world of far from perfect countries.

I remember at my office in Beijing when I showed my Chinese colleagues photos of Tank Man, a photo that practically none had ever seen. They told me the only photos they’d seen of June 4 were of Chinese soldiers murdered and burned by angry workers. They were amazed when I told them about Tank Man and why he captured the imagination of the world outside of China. And I remember one of them arguing with me that he should have conformed and not meddled in affairs that weren’t his business. But hey, at least we were having a dialogue about it.

This all brings back to mind a conversation I had with one of the very first friends I had in China back in 2002. I asked about how she felt about her country, and she said how much she loved China. “I love my country,” she said, “but my country doesn’t love me.” (I think she told me that was a popular saying, but honestly I don’t remember so well.) Very powerful words. The girl referenced in the letter above who suddenly realizes all that her government is hiding from her, she is actually saying the same thing. She loves her country, but her country doesn’t love her. They don’t trust her enough to know and learn and think for herself.

“I love my country, but my country doesn’t love me.”

[UPDATE: Rein has once again outdone himself. Check the comments and the links to the original blog post by Modern Lei Feng. Yikes.]

I’ve been wondering for a couple months now how Shaun Rein got one of the sweetest deals in China – a column in Forbes that lets him link to and plug his own marketing company in nearly every column as he tells readers how great business is in China and how rosy things look there. In one recent column, modestly titled, Yes, China Has Fully Arrived As A Superpower, he takes James Fallows to task for pointing out that while China is rising fast it is still far too poor and wracked with internal challenges to be considered a true superpower along the lines of the US, a not-so-outlandish assertion. These are the lines from the article that jumped out at me:

“China is certainly not altogether as wealthy as the US or Japan, as Fallows correctly observes. But it is emerging confident and relatively unscathed from the financial crisis.

Not altogether as wealthy as the US?? As if it’s almost as wealthy as the US? China’s great. I love China. But hundreds of millions of Chinese are still dirt-poor, and while China is improving and getting wealthier, to compare its society’s wealth with that of the US and Japan, even with all of their problems, is irresponsible. “Not altogether as wealthy as the US”?? But let’s get back to Google.

If Rein’s column on China emerging as a great superpower was awful, his new column on Google with the provocative title Google’s Act Of War Against China is way worse. Like all of Rein’s columns, it echoes the party line and is resoundingly “pro-China,” always playing up the great market potential of China, (where, coincidentally, Rein heads a marketing company). It’s fine to be pro-China. I consider myself to be pro-China. But we expect to read stuff like this on Chinese BBS’s, not in Forbes:

Has Google really thought through the implications of its actions, beyond just giving up the world’s fastest growing digital advertising market and the welfare of its employees and legal representatives in China? Or is this the impulsive move of an arrogant and immature leadership team used to getting its way?

Looking beyond the implications of what is, in effect, a new mode of statecraft, we should ask whether Google isn’t using censorship and cyber terrorism as an excuse to get out of China because of business failings there. If Google were making more money in China, would it necessarily have taken this stand?

Here’s what James Fallows, a real journalist who writes consistently great posts on China, has to say about the argument Rein is embracing (that Google was creating an excuse to leave China because it was trailing in market share).

Sky Canaves of the WSJ in Beijing has saved me a lot of time (and done readers a favor) by producing a catalogue of the biggest “misstatements and misunderstandings” people have promulgated about this situation.She starts with the most preposterous: that Google deliberately picked an extremely public fight with a notoriously thin-skinned government, merely to distract attention from its commercial struggles in a market where it enjoys “only” a 35% share. That Chinese officials and “netizens” would claim this is understandable. The Westerners who took it up reveal their preference for the counter-intuitive and “clever” rather than the believable.

Rein goes on to wag his finger at Google, as if he has a better grasp of their situation – as though Google is stumbling and bumbling and screwing up, with no idea how they’re damaging themselves. He almost makes it sound as if they need a good China marketing company.

Its mistakes may have long-term effects on its bottom line. Beyond giving up search for China’s 380 million netizens, the company may now find handset makers being pushed not to carry its Android operating system. That could mean a serious long-term loss of revenue in a country with 720 million mobile phone users.

Google’s China experience also illustrates that anyone operating in China needs to empower local employees to make decisions early and fast. You also need a head of your business in China who has the credibility and headquarters support to champion such decisions.

I assure you, Shaun, Google has taken the possible loss of potential revenue from its Android phone into account, but I’m sure they appreciate the free advice.

Earlier on in the article, Rein tells us, ominously,

If other foreign firms and activist investors in companies conducting business in China banded with Google, they could launch a serious threat to the stability of China, or of any country.

You see, this is Google “declaring war on China.” There is one bad guy here, the one declaring war, and other companies might follow suit leading to a potential crisis for China (which would be bad for marketing companies in China, no?). But has China no say in this matter? Why is there not a single word about what foreign companies need to go through to enter the China market? Not a word about the actual reasons Google spelled out for its decision? Instead, we are fed pablum like this:

They [China’s leaders] have also seen how 30 years of economic growth brought happiness to the Chinese population. Let’s not forget that the Pew Center has found that 86% of Chinese are happy with the direction the government is taking the country.

Normally I wouldn’t bother writing a post like this about an article that’s so blatantly one-sided and suck-uppish. But this is Forbes, and they have such a great Beijing bureau chief and the quality of most of their articles is so outstanding – I am at a loss as to how self-advertising puff pieces like this are allowed to run. I read it with disbelief.

Updated with cosmetic edits, January 17 1PM Mountain time.

Google’s jaw-dropping announcement is not about finding an excuse to leave China because it’s failing there. That and other rather ridiculous myths are exploded over here. I’ll just quote what the article say about that myth; read the whole thing for all he other myths. A fine piece.

Google’s China operations contribute a small fraction of the company’s overall revenue – the company doesn’t disclose the amount, but analysts estimate it was a few percent of its total $21.8 billion in 2008 revenue, or several hundred million dollars. But Google has made significant progress in China in recent years, raising its share of the Internet search market to roughly 36% in the fourth quarter of 2009 from 13% when it started its Chinese-language google.cn site in early 2006, according to data from research firm Analysys International.

Many other foreign companies doing business in China would gladly forgo big profits in the short term for comparable market-share growth in China—especially in an industry where China has more users than any other country (384 million according to the latest statistics). Google has also been particularly popular among the highly sought-after demographic of young, educated, white-collar urban professionals. The company’s powerful brand of business and ethics (“don’t be evil) has also earned it a fair amount of good will among Chinese Internet users, many of whom are now mourning its (still uncertain) fate. While rival Baidu still has a much larger 58% share of the search market, its brand has suffered as a result of scandals involving paid results and allegations of censorship of sensitive news stories.

Google doesn’t say if it’s profitable in China, but there’s certainly no reason to assume it’s not. Baidu, its chief rival, reported net profit of about $153 million on revenue of $468 million for 2008, when it said it had 6,387 employees. Google’s revenue would have perhaps half or two thirds that amount, but it likely has a much lower cost base in China than Baidu, since Google is believed to employ well under 1,000 employees in the country, and can use technology developed by its U.S. headquarters.

To make this kind of decision because business is poor at the moment makes no sense (though I am not convinced of the 36 percent market share figure, which seems awfully steep). Google knew this would be a long-term commitment with a lot of risk. They knew it might take many years, and it maintaining its operation in China meant very little skin off Google’s back.

James Fallows, as usual, is offering the sanest, most clear-headed and balanced opinions on the subject. Sample:

Two of the developments to date should not be surprising: the silence of the Chinese government, which is at its weakest in decision-making under time pressure; and the jubilation among some in the West, which I think reveals a pent-up reaction to endless stories about China’s rise and perhaps to recent Chinese government overreach. To me the more surprising — and significant — reaction is the clearly divided reactions within China, with some people reacting with nationalistic anger at Google’s insult but others taking the daring step of bringing flowers to the Google office etc.

Go to his blog and keep scrolling. Balanced, clear-headed and free from neurosis. How refreshing.

This is a contributed article from my friend in Taiwan Bill Stimson. It does not necessarily reflect the opinions of The Peking Duck.

China Can Outgoogle Google

by William R. Stimson

What if they gave a dictatorship and nobody came? This is what we’re seeing happen in Iran now, and with Google it’s apparently also beginning in China.

The Chinese authorities dangle profit in front of the greedy eyes of Western firms but then as those firms rush in and struggle to establish themselves in the very different (so-called) “business” climate of China, these same authorities keep changing the rules, demanding a little bit more every few years, altering the structure of the business environment and changing the rules some more, until they themselves are firmly in control of the firms and own the technologies. To China’s leaders it must seem like such a winning game that already they can’t help strutting and posturing about their own superiority as a race, a nation, and a system of “government” that, unlike the liberal democracies of the West, works against the recession.

Only, like the populace of Iran, Google looked the big boys in the face, decided it wasn’t worth playing their cheating game, turned around, and walked out on their party. This is the opposite of the Americans going into Iraq for its oil. This is America coming of age. The greatness of America, whatever superiority it may have, as it turns out, isn’t what so many in the West, or even in China, might suspect. Rather it’s the simple freedom to innovate and to try to be real – it’s the “tangle and bother” freedom that the Chinese leaders now deride for its slow and stumbling economic recovery.

America has what China can’t steal. It can finally produce a company that is true, that places human values above dollars – a company that can win our hearts and so, of course, earn our dollars in a big way.

Google does right to step out of China because by doing so it is preserving its one priceless asset. This is not the secret computer codes the Chinese want to steal. It’s something the Chinese cannot steal from Google or any other company. Legitimate authenticity, genuineness, call it what you will – this is the commodity that will be selling in the marketplace of the future, and that not just America but Taiwan and so many free countries around the world are now perfecting. This is the commodity that will end the destruction of ecosystems, the exploitation of labor forces, the extinction of species, the stealing from future generations, and, yes, that will end poverty too; and overpopulation. A genuine company is one that gives away for free far more than it ever even attempts to sell, it is a company that spins a fortune out of thin air, and it is a company that the China we know today will never understand because it is a company that “does no evil.”

China can have all Google’s secrets, yes. But to get them it’ll have to set free its captive 1.3 billion, let them read and think and write what they want – and let them self-organize as they wish. Only then will the greatness of the Chinese culture and the superiority of its many peoples and inner nations rise up and show the world what can outgoogle Google.

This is certainly outspoken, not to mention cynical.

Here is my very crude and cynical (Eastern European) reading of the situation: Google was in need of some positive PR to correct its worsening image (especially in Europe, where concerns about privacy are mounting on a daily basis). Google.cn is the goat that would be sacrificed, for it will generate most positive headlines and may not result in devastating losses to Google’s business (Google.cn holds roughly 30 percent of the Chinese market).

All the talk about cybersecurity breaches seems epiphenomenal to this plan; it may simply be the easiest way to frame Google’s decision without triggering too many “why, oh why?” questions. Besides, there is no better candy for U.S. media and politicians than the threat of an all-out cyber-Armageddon initiated by Chinese hackers. I can assure everyone that at least a half of all discussions that Google’s move would spur would be about the need to make America more secure from cyberattacks. No better timing to throw more terrorism-related meat to the U.S. public (“what if they read Obama’s email?”).

Now, if you believe that Google was wrong to censor the Web in China in the first place, I doubt you’ll suddenly become a fan of their work — they still don’t seem to recognize that censoring the Web in China may have been wrong for ethical reasons and frame it simply as a business decision (based on new security threats). You’ll probably think that they are now doing the right thing for the wrong reasons.

If, on the other hand, you believe that they did the right thing in China by offering their limited service (rather than no service at all), I don’t see how this move could make you feel good either: all it took to get Google to shut down their “public service” was to launch a bunch of cyberattacks (so, should we expect that, instead of direct censorship, authoritarian governments would now simply launch cyberattacks on their targets and force them to leave under psychological pressure?). Thus, you’ll probably think that they are now doing the wrong thing for the wrong reasons.

Could Google be this cynical, in direct definace of their Don’t Be Evil mantra? If so, if this guy is right, it just may be working. After all, the Web was saturated today with columns and posts congratulating Google for its moral fortitude and asking, “What took them so long to do the right thing?”

But I remain cautiously skeptical. They weren’t “winning” in China but they still had more than 20 percent market share; most US companies would be thrilled if they could fail that miserably in China. I can easily imagine that they had a big blow-up with the government and found they had irreconcilable differences, and the cyber-attacks were the last straw. I actually find that more than believable. I don’t believe they’d just pick up and leave China because Baidu was ahead and leaving makes them look good in Europe. I guess the truth will come out at some point. It usually does.

If this is accurate, it is quite a story. A sophisticated, large-scale cyber-attack from within China is causing Google to overhaul its Chinese operations and possibly stop censoring the search results on google.cn. The story has everything – human rights, censorship, America’s leading brand, cybercrime, intrigue and an unprecedentedly open statement from Google.

You can read a good summary of the breaking story over here.

Google is releasing information about a “highly sophisticated and targeted attack” on their corporate infrastructure that occurred last month. The attack originated in China and resulted in the “theft of intellectual property from Google.” In light of the attack Google is making sweeping changes to its Chinese operations.

Google is releasing some information about these attacks to the public. The company says that a minimal amount of user information was compromised, but has come to the alarming conclusion that the attacks were targeting the information of Chinese human rights activists. Google found that these attacks were not just going after Google’s data, but were also targeting at least twenty other major companies spanning sectors including Internet, finance, chemicals, and more. Google has also discovered that phishing attacks have been used to compromise the Gmail accounts of Chinese human rights activists around the world.

In light of the attacks, and after attempts by the Chinese government to further restrict free speech on the web, Google has decided it will deploy a fully uncensored version of its search engine in China.

At first I didn’t believe it. Then I saw it from the horse’s mouth, Google’s own blog:

We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.”

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. 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.

The decision to review our business operations in China has been incredibly hard, and we know that it will have potentially far-reaching consequences. 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. We are committed to working responsibly to resolve the very difficult issues raised.

This is kind of slapdash; I wasn’t supposed to be blogging today as I’m on deadline. But this story is totally unbelievable, off the charts.

Thanks to the reader who alerted me to this.

Update – From the NYT

Google threatened late Tuesday to pull out of its operations in China after it said it had uncovered a massive cyber attack on its computers that originated there….

Google said that a primary goal of the attackers was accessing the Gmail accounts of Chinese human right activists, but that the attack also targeted 20 other large companies in the finance, technology, media and chemical sectors.

In a blog posting by David Drummond, the corporate development and chief legal officer, Google said that it had found a “highly sophisticated and targeted attack on our corporate infrastructure originating from China.”

“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,” Mr. Drummond wrote in a blog post.

He wrote that Google was no longer willing to censor results on its Chinese-language search engine and would discuss with Chinese authorities whether it could operate an uncensored search engine in that country.

“We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China,” Mr. Drummond wrote, adding that the decision was being driven by executives in the United States, “without the knowledge or involvement of our employees in China.”

Yeah, a very big story. I’m waiting for the conspiracy theorists who claim this is google’s creative strategy for exiting China, where things never went quite the way they expected, while making them look like the victim instead of the loser. (And no, I don’t necessarily believe that. I just know how the minds of some of my more strident commenters work. Being a PR guy, it was the first thing that crossed my mind when I heard the story – I couldn’t help it.)

Update 2: The Wall Street Journal is featuring this as their top story today, and they state:

Much of the data stolen from Google was its “core source code,” Mr. Mulvenon [director of a national security firm] said. “If you have the source code, you can potentially figure out how to do Google hacks that get all kinds of interesting data.” Among the data, would be the information needed to identify security flaws in Google’s systems, he said.

The attackers used at least seven different types of attack code to identify and steal data from Google, said Rafal Rohozinski, a principal at the SecDev Group, a Canadian security consulting firm that discovered a major Chinese spying operation on the Dalai Lama last year.

I bring this up because it calls to mind a comment I left in the earlier thread:

[D]on’t fool yourself about google. They may let you download a song for free. Would they hand you the source code for their search algorithm? No, because then they wouldn’t be Google anymore. They’d just be one of a trillions of other companies offering the same thing.

This was in response to a commenter praising Google for not caring about intellectual property and being a proponent of open-source technology (you can actually do both – be a proponent of open source and value IP). Obviously Google does care about IP, a lot – as it must. Its core source code is its bread and butter.

Post updated at 8:24pm Arizona time. Is it all a PR stunt?