China renews Google’s licence for operating in mainland China.

When Google decided to give the Chinese authorities an ultimatum by stopping censoring Chinese search results, many observers thought they were mad. It looked like they were abandoning the world biggest market. Google must have known that the Chinese Communist Party will not give up on censorship. This is, after all, partly what keeps them in power.

We guess Google knew as much. But the Chinese hacker attack on Google’s servers told them that they had to draw the line somewhere, and for the “Do no evil” company all this censorship was damaging for both morale and image. So when the Chinese refused to give in, they redirected the google.cn search engine to the Hong Kong version of Google. Hong Kong is outside the normal Chinese jurisdiction, due to its colonial past.

Google now risked losing the google.cn domain altogether. As the Financial Times says: “Without the licence, it seemed likely Google would end up closing all its operations in China.”

Google reached out a hand. It stopped redirecting search results directly. Instead it put up a separate page, where mainland China users had to click on a link to get to the Hong Kong results. This didn’t make much of a difference in real terms. Google continued to lead Chinese searchers to uncensored results in Hong Kong, but it gave the Chinese authorities a way to save face.

The Chinese took it. Google’s licence and Chinese domain name has been renewed. Google can still market many of its services in China. This especially applies to non-search products and services, like the Chrome OS and the Android mobile phone operating system.

For the Chinese a complete Google withdrawal would be a publicity disaster. The country is trying actively to attract foreign high tech companies. They also know that Google has broad support in the new Chinese middle class — several hundred million people the Communists need to keep happy.

Google on the other hand, with founder Sergey Brin (who grew up in Soviet Russia), takes a long term “Chinese approach” to the problem. Historically speaking nearly all countries with a strong middle class ends up as democracies. There may come a day when a democratic China stop the censorship. At that point in time Google will come out as the moral victor. That means a lot, also business-wise.