Crux Strategies.com and Media Inc.

Case Study: Google in China

P.J. Worsfold, 9/18/2006

Contents

Case Background

As of July 2006, the People's Republic of China (PRC) was home to 123 million internet users. While the size of China's online population is currently second to the United States' 204 million web users (CNN), there exists a second and more important statistic to consider. In the U.S., nearly 70% of the total population is online, whereas in China, fewer than 10% of its 1.3 billion people use the web. With 20, 18, and 34% growth in web users for the years 2005, 2004, and 2003 respectively (Comrade 18), the PRC will soon make up the world's largest block of internet users.

Helping to fuel China's web boom is a steadily rising flow of foreign investment, which first began with Deng Xiaoping's economic reforms of 1978. The PRC is experiencing one of the fastest periods of economic growth in history. The nation's gross domestic product has more than quadrupled in the last two decades and plans for another quadrupling in the next two decades appear well on track (BBC). For those in the business of providing internet related services and technology, China represents an unparalleled goldmine of opportunity. Yet, as anyone familiar with the internet market knows, the web is a tumultuous and competitive place and today's leaders can be tomorrow's laggards if investors lose faith, or a particular technology misfires.

In the burgeoning Chinese market, competition amongst well-financed multi-national and domestic corporations is fierce. All involved understand that establishing an early position of both market dominance and good favour with the government will be vital toward long-term profitability. Yet China is a country where the term free market is still being defined and where the power of 'guanxi', or informal personal connections (Kalathil 498), can place western notions of business ethics on shaky ground. Furthermore, any businesses wishing to operate in China must do so with the blessings of the Communist Party of China (CPC), a ruling party known for its pervasive corruption and widespread human rights abuses.

While many in the business community laud China's booming economy and its government's willingness to accept foreign investment, well regarded human rights organizations such as Amnesty International, Reporters Without Borders, and Human Rights Watch (HRW) uniformly condemn ongoing CPC human rights abuses. Under Party rule, China has become infamous for its brutally repressive and invasive social policies. In a statement to the United Nations Commission on Human Rights, HRW cited the Chinese government for frequent and widespread violations of its citizens' "rights to free expression, association and assembly, religion and belief; for repression of minorities in Tibet, Xinjiang, and Inner Mongolia; and for continuing rights abuses related to the HIV/AIDS epidemic" (HRW).

Supporting the HRW's statement are numerous well articulated and fact based condemnations from members of the international press, various governments and international organizations, and a variety of watchdog groups similar to HRW. Although an in-depth discussion of the CPC's long history of human rights abuses is beyond the scope of this case study, it is of vital importance that the reader understands the media's role in carrying out Party policy. Driven by CPC scrutiny, the underlying function of the media in the PRC is to deliver messages that support and enforce the Party's ideological hegemony. This process, referred to as 'thought work', has been in practice since Mao's Cultural Revolution of 1966 (Kalathil 491). With the notable exception of the assorted websites and newspapers run by underground dissidents, all media in China is under some form of government control. Lin observes, "it is well known that in contemporary China, the media system is actually part of the whole political system" (Lin, Jie 117). Whether it is by censoring, guiding, monitoring or spinning the stories that make their way to the Chinese public, the media is an integral part of the Party's power structure.

Although the practice of 'thought control' is nothing new to the media market in China, the process by which it is carried out has changed dramatically in recent years. In the late 1970s, Chinese media transitioned from being a simple, state-owned and operated tool of Party propaganda to a more complicated state-owned and commercially operated model (Lin 117). While still under Party control and partial state funding, Chinese media outlets began to operate as businesses, striving to generate profit from sales and advertising. As China's economy boomed throughout the 70s, 80s, and 90s, the early 2000s saw the CPC take further steps toward media reform and continued open market prosperity. Aside from developing a more inviting attitude toward foreign satellite television and online media sources, in July 2003 the government enacted the General Administration of Press and Publication. This piece of legislation ended government subsidies to all but five Chinese publications and effectively privatized most of China's print publications.

While the face of media in China may have changed, the CPC maintains an unwavering grip on media operations. Lin notes, "the Party's 'opening up' (does) not equal to the Party's 'giving up' of its control and use of (the) media" (Lin, Mu 180). What has emerged is a set of conflicting Party priorities. On one hand, the CPC wants to reap the economic benefits of an open and competitive media market and on the other hand, they are unwilling to relinquish the power over popular opinion that media control affords them. In the past, when Party officials governed a largely isolated China with state-owned media, the process of 'thought work' was straightforward, but now, as China embraces internet technology and foreign investment, the task has become more complicated. In order to carry out their 'thought work', the Party must rely on cooperation from groups outside of the government. The result is a strangely conflicted market where media outlets must offer something unique, in order to be competitive, yet they must also be careful not to upset Party officials by offering content that runs contrary to Party edicts. To ensure corporate cooperation with their media guidelines, the CPC utilizes "broad economic incentives, regulations and coercive action, and tacit understandings with entrepreneurs in the internet sector" (Kalathil 492). However, the Party's position essentially offers a choice; participate in, and profit from, a restricted market or be left on the sidelines.

Nowhere are the CPC's efforts to enlist its third party partners in 'thought work' more evident than in China's online media market. Along with both foreign and domestic print, radio, and television media providers, all online sources are heavily censored and carefully monitored. This censoring begins at the highest level of web access with the PRC's Golden Shield, or the Great Firewall of China as it is referred to outside of the PRC. The Golden Shield is a government administrated, bi-directional firewall that attempts to prevent objectionable content from either leaving or entering the PRC via the internet.

As with their traditional media counterparts, online media outlets who run afoul with Party policy may be subject to police harassment, forcibly shut down, or coerced into 'giving up' anonymous sources. Furthermore, "decrees issued in 2000 forbid internet content providers (ICPs) from posting information that 'undermines social stability'" (493). ICPs are also required to keep detailed information of all users who connect to their sites within the past 60 days and such information must be submitted to the government upon request. Those managing private websites must hire censors known as 'cleaning ladies' (493) to screen for offensive material. As human rights advocates point out, actions taken to exercise such media control routinely violate Articles 12, 18, and 19 of the U.N.'s Universal Declaration of Human Rights, which relate to individual rights to privacy; and freedom of thought, opinion and expression. Not only do these restrictions limit the actions of existing companies, they also discourage the formation of new companies that may seek to provide more objective news and information (493). When one examines the state of media in China, it soon becomes apparent that, as much as Party officials trumpet efforts toward media reform, the media in China continues to function "as the mouthpiece of the government" (Lin, Jie 118).

Statement of Case

Like its competitors such as Yahoo, AOL, and Microsoft, the California based internet search and web services provider, Google Inc. has begun doing business in China. Although in July 2004, the company made a 5 million dollar investment in the Chinese search engine Baidu, January 25, 2006 marks Google's official foray into the Chinese market. On this date, Google launched Google.cn a Chinese language version of its popular search engine. In order for Google.cn to operate, the computers that host the website had to be physically located in China. Subsequently, Google was forced to adhere to Party policy and censor search results on topics deemed sensitive by the CPC. While guidance on what constitutes sensitive topics is vague, Kalathil has found that such matters are typically, "issues deemed unpalatable and embarrassing to the central government" (Kalathil 491). Past examples of censored topics include the continuing spread of HIV, the 2003 SARS outbreak, Taiwanese or Tibetan independence, the Tiananmen Square massacre, the activities of Falun Gong, and any direct criticisms of the CPC. One of the best examples of the Party's own guidance on what material it deemed inappropriate is the August 2001 list of 'Seven No's'. This decree banned "media involvement in seven broad areas including revelation of state secrets, interference in the work of party and government, and negation of 'the guiding role of Marxism'" (Kalathil 491).

From the user's perspective, Google's censorship meant that when someone accessed Google.cn from inside China's borders and searched on a censored term they were shown only links to sites that towed the Party line and a message that read, "based on local law, some of the results of this search are not allowed to be displayed". Figures 1 and 2 demonstrate the different results one gets upon searching for the term 'Tiananmen' in the search engine's graphics database, Google Images. Figures 1 shows results from Google.com while Figure 2 shows results from Google.cn. The differences are striking.

Figure 1 - A Search on the Term 'Tiananmen' from Google.com
Figure 1 - A Search on the Term 'Tiananmen' from Google.com

Figure 2 - A Search on the Term 'Tiananmen' from Google.cn
Figure 2 - A Search on the Term 'Tiananmen' from Google.cn

Google's move to censor search results on Google.cn sent a wave of controversy through the press. Those in the technology sector, the investment community, government, academia, and human rights groups were quick to comment on the situation. While numerous opinions were voiced, arguments tended to fall into one of three categories. The first of these categories argued that Google's launch of Google.cn was a good thing because it meant that the people of China would benefit from increased and improved accessibility to the tremendous amount of information available on the internet. This position essentially holds that access to censored data is better than access to no data at all. The second category approaches Google's move in strictly business terms. Supporters of this position argued that Google's chief responsibilities were to its shareholders and that entering the Chinese market would help strengthen the company's already dominant position in the world's internet search market. The final group of arguments condemned Google's actions. This camp felt that by kowtowing to Party wishes and showing only a selection of information available on a certain topic, Google was helping the CPC to manufacture and guide public opinion. When followed to its natural conclusion, this line of thinking suggests that Google's complicity in government censorship ultimately makes the company complicit in the more nefarious acts of China's government. If a Chinese user were to search on 'Tiananmen Massacre' and, thanks to Google's filtering, come up with nothing, by denying the existence of the massacre, is Google then complicit in the act?

Statement of Issue

As with many ethical dilemmas, the morality of Google's decision to do business in China cannot be assessed with a yes or no answer; there are simply too many different perspectives and too many unknown variables to consider. While there is clearly some level of CPC complicity on Google's part, one cannot help but think that, censored or not, Google.cn will have an overall positive effect on the people of China. Furthermore, one must accept the existence of 'grey areas' and acknowledge that, like so many areas of life, matters of business, politics, and international relations do not exist in a binary world, rather they evolve and are shaped over time. Thus, participants in these domains must be afforded a certain degree of leeway while they strive to develop new models of operation. Though similarly, one must account for those whose "relativism… conveniently forgets ethics when the payoff is sufficient" (Donaldson 362) and work to set standards of moral behaviour that can be applied to even the most novel and uncertain situations.

With these concerns in mind and with the desire to create a more relevant case study, I suggest then that the statement of issue in this case must not evaluate whether Google's move into China was morally permissible. Rather it must accept Google's move into the PRC and the previously discussed 'grey areas' and offer ethical guidance on the options that now lie before Google regarding its operations in China. I therefore offer the following statement of issue for this case.

Although it could be argued that Google's move into China has had a positive effect on the people of China, the shareholders of the company, and the corporation itself, in order to operate in China, Google has adhered to CPC policy and censored its content. Subsequently, Google has both knowingly contributed to Party efforts to limit its people's freedoms and indirectly helped to facilitate the CPC's human rights abuses. With these facts in mind, what is Google's most morally acceptable course of action regarding its business in China?

List of Options for Action

Those in charge of Google face a number of options concerning the future of the company's operations in the PRC. However, for the purposes of this case study, I have selected the following two options because I believe that from an ethical perspective, they will provide the most interesting discussion.

Option 1: Pull Out

Due to the fact that some level of complicity with the CPC is unavoidable if Google continues operations in China, the company should abandon business activities in China until such a time when the government improves its human rights record and supports a truly free media.

Option 2: Comply, Protest, Build Guidelines, and Create Change

Based on the assumption that by pressing the limits of CPC policy and helping the people of China experience the web, Google will effect a positive change in the PRC, Google should continue to operate in China. However, Google should also make its opposition to government policy known and frequently challenge the interpretation of CPC policy. While the positive effect that Google's involvement in China temporarily offsets the company's complicity in CPC censorship, Google must join other industry leaders in creating a set of ethical guidelines to ensure that their future activity in the PRC evolves to ethically acceptable levels.

Statement of Other Relevant Facts and the Consequences for Each Option

Option 1: Pull Out

According to Google, a primary reason for starting operations in China was to improve the quality of service to the Chinese market. Speaking shortly before the launch of Google.cn, the company's senior policy counsel, Andrew McLaughlin, stated that Google users in the PRC "struggle with a service that, to be blunt, isn't very good" (McLaughlin). McLaughlin went on to add that "Google.com appears to be down around 10% of the time (and) even when users can reach it, the website is slow, and sometimes produces results that when clicked on, stall out the user's browser." However, in a May 2006 shareholder meeting, Google cofounder, Sergey Brin conceded that more than 99% of searches originating in China were still performed on Google.com (Don't Be Evil). This meant that 4 months after the launch of the censored site, nearly all Chinese users were either unfamiliar with Google.cn or were happier with the slower, unreliable, yet unfiltered version of Google that those outside the PRC enjoy.

The fact that the uncensored version of Google remains so heavily used in China seems to indicate that Google could discontinue its operations in China and still offer its users an acceptable level of service. The consequences of this option would appear to eliminate Google's complicity in CPC censorship and allow Google to continue to build its Chinese market. However, one cannot forget about the Great Firewall of China. Although the data that Brin mentioned suggests that for some reason the firewall permits the majority of requests for the uncensored version of Google, there is no reason to expect this pattern to continue. It is quite possible that based on government directive or technological innovation, the CPC could decide to completely block Google's uncensored site. While currently, Google could pull out of China and still maintain a Chinese audience, from a user perspective, the likelihood that Google will remain accessible, let alone improve its performance, seems dubious.

A further matter to contend with is that if no acceptable version of Google existed, the administrators of the Great Firewall could decide to redirect Chinese user requests for Google to another website. In one swoop, the CPC could lay waste to Google's Chinese market and leave Chinese web users wondering if Google were in on the decision to send their searches elsewhere. Such was the case in 2002 when Chinese users found their Google search requests redirected to Baidu, the same heavily censored Chinese search engine that Google would make an investment in only 2 years later.

For those concerned with maintaining absolute ethical purity, pulling out of China may seem like the only option for Google to choose. However, it bears mentioning that for a company whose mission is "to organize the world's information and make it universally accessible and useful" (Google), pulling out of China may be interpreted by Chinese users as Western abandonment and hypocrisy. Moreover, while human rights advocates ask why a powerful American company like Google won't fight abroad for the same freedoms that make America great, those in the business world may interpret the move as a sign of managerial weakness on Google's part.

From the company's perspective, if Google were to end its operations in China it seems fairly certain that they would have to resign themselves to life without the Chinese market. Unless Google's departure from China was accompanied by other such moves from its competitors, which seems unlikely, China's developing web market would continue without Google. A quick survey of the current state of China's online media market confirms the industry's desire to maintain the status quo. Kalathil argues that many in the industry are content to leave Party policy unchallenged by offering material that revolves around "sports, entertainment, (and) health news" or, in other words, "consumer-friendly, apolitical fillers from which (site owners) can generate profits" (Kalathil 494). Furthermore, since statistics indicate that many "internet users simply seek local information and entertainment news, internet companies can justify soft content by arguing that they are merely fulfilling user demand" (494). In short, as long as content providers continue to make profits while playing by Party rules, nobody seems likely to rock the boat. Thus, a move out of China would have costly consequences for Google.

Option 2: Comply, Protest, Build Guidelines, and Create

When Google launched the censored Google.cn, McLaughlin stated "(we are) not going to offer some Google products, such as (Google's email service) Gmail or Blogger (Google's web journal service) on Google.cn until we're comfortable that we can do so in a manner that respects our users' interests in the privacy of their personal communications" (McLaughlin). While adhering to CPC policy by censoring search results, Google was able to bring public attention to China's media censorship and indirectly show their disapproval of it. Tactics such as this, where Google complies with only basic interpretations of Party rules, while publicly stating reasons for withholding other areas of service make up the essence of Option 2. This course of action holds that through industry created guidelines, operational transparency, and gentle resistance, Google can achieve an ethically sound course of action while maintaining operations in China. It should be noted that key elements of Option 2 are based on the work of Jonathan Zittrain, a professor at the Oxford Internet Institute in England and an authority on Chinese web censorship.

The overriding theme of this strategy is for Google to take a proactive position in its dealings with CPC censorship as well as the various stakeholders, both domestically and abroad, who are concerned with Google.cn. The most important component of Option 2 is for Google to work with other western companies to establish a set of guidelines to ensure consistent and morally just behaviour when working abroad. If all involved followed these guidelines, they would no doubt bring a measure of clarity to the 'grey areas' of business in the PRC. Zittrain likens this approach to the implementation of the Sullivan Principles, a set of standards used by foreign companies working in apartheid era South Africa. Langberg notes, "although controversial at the time, the Sullivan Principles are now widely regarded as contributing to the collapse of apartheid in the early 1990s" (Langberg).

By notifying users when certain results have been omitted from a search and by deciding not to offer certain services, Google has already taken steps toward operational transparency and gentle resistance. Option 2 prescribes that actions of this sort be increased with the dual purpose of publicizing the existence of Party censorship and pushing the boundaries of Party tolerance. Zittrain remarks, "I think that the practice of telling people when information has been censored can… go some distance to ameliorating the censorship" (RConversation). Examples of tactics that Google could employ as part of Option 2 would be to publish a list of topics currently banned by Chinese law and to help fund the creation and management of professional ethics associations in the PRC.

By proactively working to lessen CPC censorship while maintaining operations in China, Option 2 offers a balanced and morally acceptable path both from the perspective of Google's shareholders and executive. By following industry-accepted guidelines, the company would be allowed to profit, compete and grow, while contributing to a more open culture in the PRC. However, from the perspective of the average Chinese internet user, it is difficult to speculate on the consequences of Option 2 without first hand experience.

Particularly in the short-term, Option 2 hinges on the so called 'net positive' effect, which suggests that, while Google's censored search results could have a negative effect for the few, the majority of internet users will benefit from the increased access to information that Google.cn will provide. Kirk Hanson, who helped establish China's first business ethics center and is head of the Markkula Center for Applied Ethics at Santa Clara University, argues that "even partial access to the internet brings liberalization" (Langberg). While this is probably true, one must be careful not to mistake internet access as a whole with merely Google access. The citizens of the PRC already have partial access to the internet and as Amnesty International contends, "if every company operating in China is complying with the same standards of repression, it is hard to understand how using a different company's search page to find the exact same limited information provides any added benefits to Chinese users" (Kumar). Although Option 2 is sure to help shareholders and company executive sleep better at night, only time will tell if the people of China see Google a liberating force or an agent of Party repression.

Statement of Relevant Moral Principles

When considering this case, it is easy to feel overwhelmed with relevant moral principles. Among others, one ought to consider the obvious censorship issue; the struggle between isolationism and paternalism; and corporate responsibilities to shareholders, employees, and the countries in which they operate. While this discussion cannot give each of these principles the attention they deserve, a closer look at a frequently invoked notion of shareholder obligations, the dangers of paternalism, and Shue's 'no-harm' policy will give the reader a basic understanding of the moral principles at work in this case.

Milton Friedman's argument that a company's sole responsibility is to its shareholder is a principle often used to absolve corporations of their ethical responsibilities. However, it is important not to take this position out of context. Friedman contends, "there is one and only one social responsibility of business… to increase its profits so long as it stays within the rules of the game" (Friedman). The case of Google's operations in China clearly fails the one condition of Friedman's principle. For at this time, business in China lacks clearly defined rules, at least insofar as they could immediately be understood by western businesses. While the validity of Friedman's position could be reassessed following the implementation of the guidelines prescribed under Option 2, it has no bearing on Google's immediate situation.

An individual's right to freedom, particularly freedom of expression; freedom of thought; and freedom from censorship, is probably the most frequently invoked moral principle in this debate. Yet, although western thinking holds this right to be self-evident, it is important to consider the origin of such thinking. The United States Bill of Rights, where champions of individual rights often begin their argument, is based on Lockean constructs that define government as existing solely for the defense of individual liberties. While the western perspective vehemently defends an individual's freedoms, the priorities of China's political structure stem from the desire to create a "strong state (that exists) to ensure a stable society and prosperous economy" (Wikipedia). While many of the CPC's actions are deplorable and wrong, we must not assume that the origins of all Chinese political thought are also wrong. Even under the best intentions, foreign morality offered without due consideration for the its audience can quickly slip into the realm of paternalism.

For a different perspective on the Google case, consider Henry Shue's 'no-harm' principle, which holds "no individuals or institutions, including corporations, may ignore the universal duty to avoid depriving persons of their basic rights" (Shue 170). The details of this case suggest that, at the very least, Google is complicit in the CPC's efforts to deprive the citizens of China of their basic freedoms. Thus under the 'no-harm' principle, one would expect Google to accept Option 1 and cease operations in China. However, supporters of Option 2 and the 'net-positive' effect could offer a convincing rebuttal to this position by suggesting that Google's involvement in China is not only not doing any harm, it is enhancing basic rights in the country. As Donaldson points out, the difficulty in the 'no-harm' principle is that "the language of rights and harm is sufficiently vague so as to leave shrouded in uncertainty a formidable list of issues" (Donaldson 360).

Statement of Decision

The role of business ethics should be to guide and inform new and uncertain situations as they unfold, rather than to fuel the espousal of restrictive moral judgments offered only in hindsight. The most morally permissible option in Google's case must surely be the one that guides progress rather than hinders it. With this in mind, I find that Option 2 is Google's most morally acceptable course of action regarding its business in China. I believe that by taking into consideration the interests of all involved, Option 2 will make the best of, and improve upon, an imperfect, though unavoidable situation.

Justification of Decision

Complicity is a term that I have used frequently in this discussion. I have argued that by continuing operations in China, Google is complicit in Party censorship. Furthermore, I think that under these circumstances, one could make a case for Google's passive complicity in the CPC's various human rights abuses. While my position would be strengthened by empirical evidence and first-hand accounts from Chinese web users, neither of which seem available, I contend that groups such as Amnesty International underestimate both Google's technical superiority and the positive effect that the company's continuing operation will have on the PRC. By offering a more intuitive interface and more relevant search results, Google has become the most popular search engine in the world. While admittedly Google.cn will be limited by CPC censorship, Party restrictions will not completely take away all that has made Google a world leader. By operating in China, Google will be providing a superior means to access the web, and not simply more of the same. Aside from the positive effects of Google's technology on the people of China, by uniting with its competitors to challenge Party policy, Google will help to both ease censorship and increase international scrutiny on the CPC. While one could not expect change overnight, I am a proponent of the 'net-positive' effect and I find my position strengthened by Zittrain's reference to the Sullivan Principles.

I believe that if Google were to pull out of China, the results would be a deeply divided internet market, a victory for the CPC, and more of the same for the people of China. Most importantly though, I believe that Option 1 hinges on a moot point, which is the idea that Google and companies like it, can operate without having to deal with the likes of the CPC. The genie got out of the bottle the day the CPC accepted the first dollar of foreign investment. And today, the internet has inextricably linked the world together to such a degree that many businesses involved with the web have little choice about who may use their services. In the company's very existence, Google is complicit with the CPC in staying in China and in leaving China. By "allowing a degree of liberalization while making sure to set the broad rules of the game" (Kalathil 490), the CPC have set about trying to mould China's online media market to their favour. Rather than lament what cannot be, Google stands obliged to meet the challenge of China, and all that it entails, head on.

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