Google's decision to effectively shut down its Chinese-language search engine is likely to stunt the development of the Internet in China and isolate local web users, analysts say.
The US Internet giant is the only major foreign search player in the world's largest online market, and its reduced presence leaves a web dominated by domestic companies, meaning less competition and less innovation, they say.
"It is becoming more like an echo chamber," said Jeremy Goldkorn, founder of media and advertising website Danwei.org.
"It is one step closer to this word ... Chinternet - or the Chinese Internet becoming more like an Intranet."
Google on Monday acted on its threat to stop censoring itself in China, redirecting mainland users of its Chinese-language search engine Google.cn to its Hong Kong site, which is not subject to mainland censorship laws.
But searches from mainland China of sensitive key words on the Google.com.hk site are still blocked, which analysts say means Beijing is filtering the results through its "Great Firewall" - meaning no improvement for users.
"There actually isn't that big a difference in terms of getting information," said Shaun Rein, managing director of China Market Research Group in Shanghai.
"When (Chinese web users) click on those sensitive links, it hits the firewall."
Chinese search engine Baidu already had 58.4 percent market share at the end of 2009, ahead of Google's 35.6 percent, according to research firm Analysys International.
The next nearest rival was Sogou, owned by local web portal Sohu, with one percent share - meaning Google's scaled-back presence, and possible move to leave the country altogether, would leave Baidu virtually unchallenged.
"It is always better to keep Baidu and the other search engines more honest by having competition from Google," Rein said.
David Wolf, chief executive of corporate advisory firm Wolf Group Asia in Beijing, agreed, saying: "Google has done great things here - it has pointed the way for search even as it has played a distant second to Baidu."
Google's shift to Hong Kong will ensure a faster service for users than if the company had redirected users to its US-based site, and it allows the company to tell shareholders and advertisers it is still in China, analysts said.
"We are still in China - that's the impression that they want to give people," Wolf said.
Google co-founder Sergey Brin told The New York Times that rerouting the Chinese service to Hong Kong did not receive a clear-cut stamp of approval by Beijing but "there was a sense that Hong Kong was the right step".
"There's a lot of lack of clarity," he said. "Our hope is that the newly begun Hong Kong service will continue to be available in mainland China."
"The story's not over yet," Brin added.
Analysts said the company's future in the market of nearly 400 million web users remained uncertain, adding to concerns about what China's Internet will look like without Google leading the way on innovation.
The row could backfire on Google if the communist leadership decides to cut off mainland access to the Hong Kong site entirely and force the company to shut up shop in China, they said.
"I find it difficult to believe that they are not going to be seen with extreme displeasure by various arms of the government," Goldkorn said.
"I could see that they might really have to get out of town."
Rein said the top leaders were unlikely to accept Google's decision, which came just over two months after its threat to leave the country because of censorship and cyberattacks it said originated from China.
"From a political standpoint they can't allow it to happen. It's a matter of face," Rein said.
"That would then mean Chinese Internet users are more and more closed off from the rest of the world."Reuse content