China warns Google to obey rules even if it pulls out

Google should obey Chinese government rules even if it decides to retreat from the country over hacking and censorship complaints, a Chinese government spokesman said today.

Investors sold off Google Inc shares a day earlier after signs the company could soon shut its Web search site in China, Google.cn, two months after saying it would not abide by Beijing's censorship rules and was alarmed by hacking from inside China.

Shares of Google fell nearly 3 per cent in regular trading on Monday to close at $563.18. Shares of Baidu, the No.1 search engine in China, rose 4.8 per cent to $576.84.

Google has not unveiled any plans, leaving users to guess whether the company may seek to unilaterally do away with the Chinese-mandated filters that censor content on google.cn or announce it is shutting down the site.

In what appeared to be a reminder that China would not welcome any abrupt steps, a spokesman for the Ministry of Commerce said Google should follow rules even if it decides not to stay in the country.

"On entering the Chinese market in 2007, it clearly stated that it would respect Chinese law," the spokesman, Yao Jian, told reporters in answer to a question about Google.

Google opened its Chinese search portal in 2006.

"We hope that whether Google Inc continues operating in China or makes other choices, it will respect Chinese legal regulations," Yao told a regular news conference.

"Even if it pulls out, it should handle things according to the rules and appropriately handle remaining issues," he said.

Yao said those rules included one that a foreign company report to the Commerce Ministry about plans to pull out.

If Google does decide to leave China, it could unnerve other foreign investors in the country. But Chinese Foreign Ministry spokesman Qin Gang downplayed the significance of such an action.

"I think this would just be the individual act of one company, and will not affect China's investment environment," Qin told a regular news briefing. "It will not change the fact that most foreign companies, US ones included, have a good business in China and generate large profits."

Google's chief executive, Eric Schmidt, said last week he hoped to have an outcome soon from talks with Chinese officials on offering an uncensored search engine in that country of 384 million Internet users.

Many experts doubt China's ruling Communist Party would compromise on censorship. The Financial Times reported at the weekend the talks had reached an impasse and Google was "99.9 per cent" certain to shut Google.cn.

A Google spokesperson said on Monday that talks with Chinese authorities had not ended, but added that the company was adamant about not accepting self-censorship.

China requires Internet operators to block words and images the ruling Communist Party deems unacceptable.

Internationally popular websites Facebook, Twitter and YouTube are entirely blocked in China, which uses a filtering "firewall" to block Internet users from other overseas website content banned by authorities.