The point is that being challenged by an American tech company raised the issue of face for the Chinese Central Government. To "lose" a confrontation with Google was simply not possible for the leadership; to do anything but "win" by forcing Google to "obey the law" (which is a relative term in China) would be to lose face.
So Google predestined the outcome by going public.
Alternatively, if Google had gone privately, hat in hand, to "friendly" fixers in the top rungs of the CCP or Central Government, the outcome might have been different.
But perhaps not, because China's leadership is making it clear that it wants a Chinternet, not the Internet, within its borders. The Central Government has erected, at vast expense, a Great Firewall of thousands of technicians who monitor and selectively block or impede thousands of sites--even down to my architect-friend's Chinese-language version of his entirely harmless and apolitical architecture site.
China is blocking any coverage of Google's banishment except for official sources. Is there any clearer way to stress that all communication within China proceeds at the Central Government's pleasure?
I often note that if you don't have sources within local government, then you know nothing about China. In cases such as Google, the Great Firewall, exchange rates, or closing down the country to battle SARS, then the Central Government does wield extraordinary powers. Yet in the actual lived experience of doing business, all the action is local.
Thus the Central Government issues various environmental statutes, but how, when and where they are actually enforced is entirely a local matter. Ditto for food safety, development, lending, land stolen from peasants, etc. etc. etc.
Thus when Westerners go to China and end up in fancy restaurants drinking with locals, or being ushered into Central Government offices, their grasp of China on the ground is mostly illusory. Let me repeat: if you don't have sources within local government, then you know nothing about China.
I will illustrate with one example of dozens known to me personally (yes, from sources in local government). A multinational pharmaceutical company opened a large, costly plant in China to manufacture medications for the Chinese market in China. Within weeks, reports trickled in that the medications didn't work and Chinese consumers were angry. It turned out that local entrepreneurs had begun shipping sugar pills in the exact containers used by the pharmaceutical giant--worthless counterfeit pills, identical in shape, size, feel, and packaging, were being shipped all over China.
The pharmaceutical giant closed the plant. What choice did they have?
This was of course hushed up; only the local government and the managers knew the truth.
The pharmaceutical giant had learned a painful but important lesson: not only can you prosper without doing in business in China, your business in China will fail if your products can be counterfeited, pirated or copied. Your recourse is zero.
China is organized at the Central State and local government levels around building China, Inc. To the degree that Western and other Asian firms can help build China, Inc., then they are encouraged to set up shop and invest their billions. To the degree they challenge China, Inc. or the Central Government, they are unwelcome and will be cut off at the knees, either openly or via subversion.
What Google is announcing to the world is profound: you can stop doing business in China and prosper. The notion that "you have to be in China or you're doomed" has been upended. There are plenty of other markets, and Western firms are learning (if they haven't already learned from painful experience) that their capital and trade secrets are there to serve China, Inc. Once the knowledge is in Chinese firms' hands, then the Westerners are either junior partners or left in the dust of piracy.
Google is simply the highest-profile company to publicly say, Take This Dictatorship and Shove It. Yes, they still hope to sell their Android phones and advert services, and perhaps they will do well in these other ventures--if they establish strong local partners with access to the Powers That Be.
But in its push to construct a Chinternet free of troublesome Western-controlled information and ideas, China's leadership should be careful what they wish for. Establishing a simulacrum Internet is akin to establishing a simulacrum of free-market capitalism; the consequences of a system built on obfuscation, manipulated "news" and statistics, cronyism, and what amounts to fraud and corruption are not controllable.
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