China replies to Google threat to pull out of China(update)

SAN FRANCISCO: China's government gave little indication Thursday that it is willing to loosen its control over Internet search results, pushing Google Inc. closer to the brink of closing up shop and leaving the country.

In the government's first official statement since Google issued its ultimatum two days earlier, a Chinese official endorsed the country's current rules governing Internet content.

"China's Internet is open," said Jiang Yu, a foreign ministry spokeswoman.

"China welcomes international Internet enterprises to conduct business in China according to law."

Google is still hoping that it can persuade the Chinese government to agree to changes that would enable its China-based search engine to show uncensored search results.

"We are optimists," Google spokesman Scott Rubin said.

If a compromise isn't worked out within the next few weeks, the company intends to shut down its search engine at and pull out of China completely.

Rubin said Google hasn't set a deadline for breaking the impasse.

Google has been in touch with the Chinese government to alert officials about its plans, but Rubin didn't know whether the two sides have scheduled additional meetings on the matter yet.

Images from the 1989 Tianamen Square cropped up in's search results Thursday, leading some Web surfers to conclude that Google had begun to defy the government's rules requiring censorship of many politically sensitive issues.

But Rubin said is still censoring its results to comply with China's law and protect its employees in the country.

Google is prepared to abandon the Internet's biggest market because of computer-hacking attacks that pried into the e-mail accounts of human-rights activists protesting the Chinese government's policies.

The assault also hit at least 20 other publicly traded companies, according to Google.

IDefense, the security arm of VeriSign Inc., issued a report saying the attacks hit at least 34 companies, including Google. In a separate report Thursday,

computer security experts McAfee Inc. said its investigation determined the hackers exploited a flaw in Microsoft Corp.'s Internet Explorer browser.

Google traced the attacks on its computers to hackers in China, but so far hasn't directly tied the chicanery to the Chinese government or its agents.

IDefense says its anonymous sources in the intelligence- and defense-contracting industries have determined the attacks originated from "a single foreign entity consisting either of agents of the Chinese state or proxies thereof."

Jiang said China prohibits e-mail hacking.

In the United States, the White House applauded Google for confronting China about its censorship after discovering the hacks.

"The United States has frequently made clear to the Chinese our views on the importance of unrestricted Internet use, as well as cybersecurity," White House spokesman Nick Shapiro said.

"We continue (to) look to the Chinese for an explanation."

The State Department tried to get some answers Thursday. David Shear, a deputy assistant secretary of state who deals with China, met over lunch with a high-ranking representative of China's U.S. embassy.

The Chinese ambassador to the United States is likely to be summoned to the State Department in the coming days, agency officials said.

One of the human-rights activists whose e-mail was hacked said she was notified of the intrusion on her account in a Jan. 7 call from David Drummond, Google's top lawyer.

Tenzin Seldon, a Tibetan rights activist and sophomore at Stanford University, said she allowed her laptop to be inspected by Google's security experts, who found no viruses on the machine.

Seldon, 20, has a new Gmail password and a new hope for free speech in China now that Google is taking a stand against the Chinese government.

"They are trying to give more freedom of expression to people in China and Tibet," Seldon, whose parents are Tibetan refugees.

She believes the Chinese government may be willing to compromise on its censorship rules because "Google is like the Internet, and the Internet entrepreneurs in China will need it there to succeed.

Being without Google would be like trying to build airplanes without steel."

Also Thursday, a Beijing law professor and human-rights lawyer, Teng Biao, wrote on his blog that someone broke into his Gmail account and forwarded e-mail to another account.

Teng said he did not know whether he was one of two Chinese activists mentioned by Google as hacking targets.

"Google leaving China makes people sad, but accepting censorship to stay in China and abandoning its 'Don't Be Evil' principles is more than just sad," Teng wrote.

Another Beijing human-rights lawyer, Jiang Tianyong, said his Gmail account was hacked in November and important materials were taken, the Hong Kong-based China Human Rights Lawyers Concern Group announced.

Jiang has represented Tibetan activists and advised people with AIDS who are seeking government help.

Outside Google's China offices, people continued to mourn the possible loss of the world's most popular search engine.

Some people even poured small glasses of liquor, a Chinese funeral ritual.

The Global Times, known for a fiercely nationalistic tone, took an unusually conciliatory stance Thursday, warning that Google's departure would be a "lose-lose situation" for China.

"Google is taking extreme measures but it is reminding us that we should pay attention to the issue of the free flow of information," the newspaper said.

Saying China's national influence and competitiveness depend on access to information, the newspaper wrote, "We have to advance with the times."

A Google departure could give a boost to local rival Baidu Inc., allowing it to pick up Google users and advertisers, analysts said.

Baidu, launched in 2000, is a standout in the global search industry - a local competitor that beats the Internet search leader elsewhere around the world.

Baidu has 60 percent of China's search market and has held onto that despite Google's launch of a local site and its relentless efforts to tailor services to Chinese tastes.

Baidu's stock has surged 20 percent since Google announced its potential departure from China.

Meanwhile, Google's stock is down by just 63 cents in the two trading days since the announcement, closing Thursday at $589.85.

Meanwhile in Brussels the woman to become the EU's top Internet official said she backed Google Inc's threat to quit China over the government's Web censorship.

"We have to have freedom of speech, we have to have the possibility to put things on the net," Neelie Kroes said Thursday.

Kroes said these allegations, if proved, were "particularly worrying as targeting of human rights activists in China and elsewhere" violated fundamental rights such as the freedom of opinion.

Kroes is currently the EU's antitrust commissioner and will likely switch to her new post next month if she receives the backing of the European Parliament later this month.

EU lawmakers quizzed her at a three-hour hearing on Thursday.

She called for technology companies to take privacy concerns seriously, saying failure to do so could prevent people from using the Internet frequently.

Her predecessor threatened to regulate social networking sites like Facebook unless they tightened data storage and privacy standards.

"If Europeans fear for their privacy, worry about fraud or are concerned about threats to their children, then information and communication technology is held back," Kroes said.

She also said governments should support open software standards to encourage their adoption - a possible swipe at Microsoft Corp., which was engaged in a row with other technology companies over a word processing standard it developed that rivaled another industry format.

Kroes also said she did not favor Google's book scanning project from working closely with a similar EU-backed program,

Europeana, saying it would be against competition rules and Europe needed to put online content in other languages than English. - AP

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