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on Sunday, 30 September 2018
in Business in China

Google May Return to the Chinese Market

The background

Censorship of internet content is something that can be seen all over the world at varying levels. China is also well known for its restrictive internet.

In 2000 Google launched the first version of their search engine in China. By 2006 it launched its first censored version, when it officially entered into the mainland market. The search engine operated with reasonable success during this period, up until 2010 when Google announced that it would no longer censor material and would withdraw from China completely. As a result, Google closed its services in mainland China.

More recently, Google has demonstrated an interest in returning to the Chinese market, announcing a $550 million investment in the Chinese online retailer JD.com and the possibility of opening up an AI research center in Shanghai. Meanwhile Google now has more than 700 employees in China working on various apps, which shows signs of its dedication to return to China.

The number of Chinese internet users has dramatically increased in the past 5 years, with the number at almost 800 million. Google can clearly see their potential market prospects, as their current user numbers across the globe stand at 700 million. To better understand the potential of the digital market, it should be noted that from 2016-2017 China added 40.7 million new internet users. With all the current users in China amounting to 55.8% of the population, there is still large room for growth.

The number of internet users in china

What has been rumored with regards to Google is that they will create a censored search engine that will filter out the blacklisted websites and other results that do not fit into the Chinese government’s restrictions. This alone has stirred controversy, as Google who previously protested censorship, could be going back on their word.

Impacts of Google’s return

Digital information in China, legally needs to be stored within a domestic data center on the Chinese mainland. This means that if Google were to set up a search engine in china, they may need to partner with a local company that provides such services, such as Tencent Holdings Ltd and Inspur Group, which would presumably create a large number of job opportunities, not only with the international Alphabet Inc, but also domestic companies for Chinese nationals.

With Google, Chinese companies will have to learn how to use new marketing tool such as Google SEO, Ads etc. This may initially deter consumers that have already become accustomed to the unique Chinese digital strategies, so Google will need to enter the market both carefully and strategically.

The effects of Google’s announcement can already be seen in the market. The stock of Alphabet Inc rose to 1,232.99 when the first rumors of it opening up to China were made, while the stocks at Baidu dropped dramatically by 7.7%. If Google were to tackle the Chinese digital market, it would face extremely tough competition from some well-established competitors.

 

sources:

http://fortune.com/2018/08/07/china-peoples-daily-google-censorship/

https://www.reuters.com/article/us-china-google/google-plans-return-to-china-search-market-with-censored-app-sources-idUSKBN1KN09C

https://theintercept.com/2018/08/01/google-china-search-engine-censorship/

https://www.washingtonpost.com/business/why-chinas-great-firewall-bans-google-and-pooh-bear-quicktake/2017/11/30/d4ab9f34-d646-11e7-9ad9-ca0619edfa05_story.html?noredirect=on&utm_term=.bde85e4b20cd

https://www.nytimes.com/2018/08/01/technology/china-google-censored-search-engine.html

https://www.theverge.com/2018/8/3/17647716/google-return-to-china-censorship

http://www.chinadaily.com.cn/a/201808/06/WS5b67db98a3100d951b8c8d72.html

https://www.emarketer.com/content/five-insights-on-how-china-s-internet-have-grown-in-the-past-year

 

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