Google's Plan for China Isn't Just Evil - It's Bad for Business

By Josh Rogin, The Washington Post | Updated: 10 August 2018 18:01 IST

Google is proposing a new Faustian bargain with the Chinese government that isn't just morally wrong; it's also terrible for business. Experience has shown that American tech companies that sell their souls for access to the Chinese market also end up losing their shirts.

Ever since the Intercept revealed that Google has been secretly working with Beijing to build a censored search engine, code-named Dragonfly, the company has faced unprecedented public criticism and Internal angst. Members of Congress and Google's own employees are demanding explanations from an unusually silent leadership team led by chief executive Sundar Pichai, the reported mastermind behind Google's multifaceted expansion into China, which includes partnering on artificial intelligence.

It's shocking to learn that the company whose motto was "Don't be evil" has been caught compiling user data to create blacklists. If Google does launch a censored search engine, it will be complicit in mass surveillance, broad Orwellian social control and the suppression of free speech. The scheme is a "coup for the Chinese government" and spells trouble for any company that wants to do business in China without compromising core values, lawmakers wrote to Pichai on August 3.

But that's not the only reason Google's foray into China is so disastrous. The company would be placing its people and its assets at huge risk by putting its future in the hands of the Chinese government. The record shows that rarely works out well.

The lure of the huge Chinese Internet market is tantalising, but the reality is much different. Beijing has a state policy of stealing intellectual property from any foreign business within its borders and giving it to China's own national champion companies, which obviously destroys fair competition.

The Trump administration's drive to stop China's forced technology transfer and intellectual property theft was the impetus for the current trade war. Having one of the United States' largest tech giants strike a side deal with Beijing undermines the entire effort.

Moreover, U.S. tech companies that cave to Beijing's demands don't get rewarded with kindness; more often, it's the opposite. This year, Apple agreed to place iCloud servers and data within the government's reach. This week, Chinese state media threatened to punish Apple in retaliation for the Trump administration's tariffs by cutting off its access to cheap, Chinese labour.

In 2015, Qualcomm agreed to pay an almost $1 billion fine to China and lower its royalty rates for Chinese manufacturers - at huge cost to the company. In thanks, last month the Chinese government effectively killed Qualcomm's bid to acquire Dutch chipmaker NXP.

Sure, Beijing will allow American companies to make money in China - as long as they stay in the Communist Party's good graces and until China's own national champions are ready to take over. A core tenet of Beijing's "Made in China 2025" strategy is for Chinese tech companies to supplant U.S. firms, not to cooperate with them.

"Beijing's ultimate goal is for domestic companies to replace foreign companies as designers and manufacturers of key technology and products first at home, then abroad," the U.S.-China Economic and Security Review Commission wrote in its 2017 report.

For all these reasons, it's clear the U.S. tech industry's future is not inside China; it's in the rest of the world that is resisting Chinese tech domination. While China is huge as a market, India, Africa and Southeast Asia are big, too. In most countries, companies that protect data and don't cooperate with the Chinese government have the advantage.

What's strange is that Google already knows all this, because it largely pulled out of China after Chinese hackerspenetratedcompany servers in 2010 to spy on dissidents and steal U.S. national security information. At the time, co-founder Sergey Brin argued that the costs of cooperating with Chinese government censorship were not worth the benefits.

Brin, who lived his early childhood in the Soviet Union, also said he didn't want Google to support the spread of totalitarianism worldwide.

"One of the reasons I am glad we are making this move in China is that the China situation was really emboldening other countries to try and implement their own firewalls," he said.

Google built a culture in which doing good was prioritised to a degree that it attracted and earned the trust of the world's best minds. To sacrifice that trust in pursuit of limited profits would be the most serious business failure in Google history. Employee dissent recently caused Google to end a controversial contract with the Defense Department. If leadership ignores concerns about working with the Chinese government, those employees couldn't be blamed for walking out the door, taking Google's future with them.

The good news for Google is that it's not too late. The company's executives can correct their mistake by shuttering the Dragonfly project and repurposing all that data to thwarting the Great Firewall rather than reinforcing it. Then they should shift their broader focus to beating China, not joining it. There's still time for Google to save its soul - and its business.

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