Google's announcement that its moving its servers to Hong Kong, along with China's harshly worded response, is indicative of a brewing trade war between open, Western countries and China.
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.
Well, if you didn't think economic and policy actions in China were driving the markets, look again. Nearly all the market activity this morning revolves around China, whether it be stock markets, commodities, foreign currency, Google, Baidu, or whatever.
Take a look:
- Markets are off on fears that Chinese officials will tighten policy further to cool off inflation, says da Bloomberg.
- Baidu shares are flying -- up more than 6% -- on reports that Google is close to shuttering its China site (Wall Street Journal).
- Word is that China is talking tough on censorship (Washington Post). Did you expect anything less?
- Chinese Premier Wen Jiabao is pushing back on calls to let China's currency rise (Reuters). Hmm, yet he's worried about inflation? Unpeg your currency, dude!
- Chinese energy company Cnooc is gobbling up oil resources in South America (New York Times). That's a hungry monster, that China!
- The Apple blogs are reporting that orders for the iPad are slowing down (Apple Insider).
- Flurry reports that the iPad has boosted app developers, who are excited about the platform (Fortune).
- Here's a daily news wrap from the SXSW show (Billboard). Billboard? Yes, billboard. You know, SXSW was supposed to be a music show.
- ABBA and Jimmy Cliff have been inducted into the Rock and Roll Hall of Fame (CNN). Now that is one interesting combo. I would like to see a concert with them playing together.
- Colorado is ground-zero for Amazon's fight to stave off state taxes (MSNBC). Note to Amazon: Have you noticed that the states are, like, broke?
- FBI details most difficult Internet scams (NetworkWorld).
