With Baidu (BIDU) stock pushing toward $600, it’s pretty clear who the main beneficiary is here: the leading Chinese portal. Meanwhile, Google is losing influential business partners in China. Billionaire Li Ka-shing’s Tom online shopping service pulled Google search from its Web site, and many others are following suit, according to BusinessWeek.
The media is describing this as a technology soap opera with implications for other Internet companies in China, but I’d look at it in even broader context: This is a watershed moment in relations with China for global business. With Chinese trade being one of the main drivers of International commerce, this means trouble. It could be the beginnings of a crippling trade war.
The Google-China row is just the latest in a series of warning signs that a trade war is brewing. U.S. Congress has been stepping up its complaints about the Chinese currency peg. It’s clear to many business executives, including those in the automobile industry, are worried that China is accelerating its protection of national markets.
And now the Google moment, which is de facto protectism on behalf of China, which refuses to back down on censorship.
It leads me to ask: How can this have a happy ending? Western companies are trying to negotiate with Chinese authorities on Western terms, where the markets are open and the human rights more universal. But the rules are lopsided, as China is still a totalitarian state using a command-and-control economy. Do we really think this can end well for Western business. Beijing will continue to do what’s good for Beijing, and they can, because their the ones with a billion people and the fastest growing markets in the world.
Google’s move is probably just the first in a series of trade disputes that are likely to heat up.