Experts says, the row between Google and China is damaging for the development of the internet in the country and it would be a major blow to the world’s biggest online market if the US firm were to leave.

Both sides have much to lose if the dispute over cyber attacks which Google said were launched from China and state censorship is not resolved, they say, while warning that finding the acceptable middle ground will not be easy.

An analyst at Analysys International, Li Zhi said, if Google does decide to withdraw from China, it will have a considerable negative impact on China’s search engine market,” currently dominated by home-grown provider Baidu. Competition is the main driver for any market’s healthy development, he added.

Baidu’s share of the search engine market stood at 58.4 percent in the fourth quarter of 2009, ahead of Google at 35.6 percent, according to figures from Analysys.

Ted Dean, managing director of telecom and technology consultancy firm BDA, agreed, saying “in any market, competition is a good thing.” He told AFP, if you end up with one dominant player in the industry, the victim will be the Chinese consumer and innovation.

Google has threatened to abandon its Chinese-language search engine google.cn, and perhaps end all operations in the country, following the hack attacks it says targeted the email accounts of Chinese human rights activists. Related article: The cyber arms race

It has also said it is no longer willing to bow to Beijing’s army of Internet censors — and will stop filtering search results soon, a move China says would violate its laws.

US and Chinese officials have discussed the issue at length, with US Secretary of State Hillary Clinton qualifying her latest talks with Chinese Foreign Minister Yang Jiechi as “open and candid.” Related article: Clinton candid on Google talks

According to Francis Cheung, an analyst with Credit Lyonnais Securities Asia in Hong Kong, they have to come to some sort of compromise. He said, “I think the potential for China’s Internet is huge and Google can do well as they have a leading-edge technology, are pretty popular and are gaining market share.”

But Cheung admitted winning concessions from Beijing would be difficult, especially on the censorship issue.

“I don’t think any government will negotiate laws, especially with an individual company.”
Lu Bowang, managing partner with China IntelliConsulting Corp, agreed, saying one possible outcome is for Google to abandon google.cn but maintain a research institute and its business in Android-powered mobile phones.

Lu said, the Chinese government would save face because people would think Google is withdrawing from China for commercial reasons — that would be a convenient understanding.

Whether it stays or goes, Google will find it tough to operate in China, said Shaun Rein, managing director of China Market Research in Shanghai.

If they axe google.cn, “they could still have research and development in China but the government won’t make it easy for them and why would the top engineers want to work for them?” Rein said.

“If they stay in China with the search engine, a lot of companies won’t want to do digital marketing with them because you can’t launch a campaign and expect to get a certain number of hits when Google might threaten to go out again.”

Despite the hurdles facing both sides, analysts said it was too early to write off Google in China.

A spokeswoman for Google declined to comment on its plans for China.

Source: http://news.yahoo.com

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